HomeStreet, Inc. Reports Second Quarter 2013 Results
and Declares Special Cash Dividend
Net Income of $12.1 million; Return on Equity of 17.2%
SEATTLE – July 29, 2013 – (BUSINESS WIRE) – HomeStreet, Inc. (NASDAQ:HMST) (the “Company” or “HomeStreet”), the parent company of HomeStreet Bank (the “Bank”), today announced net income of $12.1 million, or $0.82 per diluted share, for the second quarter of 2013, compared to net income of $10.9 million, or $0.74 per share, for the first quarter of 2013 and $18.7 million, or $1.26 per share, for the second quarter of 2012.
| • | Financial performance |
| ◦ | Second quarter 2013: |
| ▪ | Pre-tax income of $17.9 million, up 9.0% from the first quarter of 2013 and down 21.3% from the second quarter of 2012. |
| ▪ | Net interest margin of 3.10%, up from 2.85% in the second quarter of 2012. |
| ▪ | Return on average equity of 17.2% and return on average assets of 1.86%. |
| ◦ | Year-to-date 2013: |
| ▪ | Pre-tax income of $34.2 million, down 16.4% from the first half of 2012. |
| ▪ | Net interest margin of 2.96%, up from 2.68% in the first half of 2012. |
| ▪ | The Company's estimated annual effective income tax rate for the quarter was 32.4% as compared to 20.8% for 2012. The prior year effective income tax rate reflects the benefit of the full reversal of deferred tax asset valuation allowances. |
| ▪ | Return on average equity of 16.6% and return on average assets of 1.81%. |
| • | Mortgage Banking segment second quarter results: |
| ▪ | Mortgage Banking segment net income of $10.7 million, down 22.1% from the first quarter of 2013 and down 59.0% from the second quarter of 2012. |
| ▪ | Single family mortgage interest rate lock commitments of $1.42 billion, up 37.4% from the first quarter of 2013 and up 9.2% from the second quarter of 2012. |
| ▪ | Single family mortgage closed loan production of $1.31 billion, up 9.7% from the first quarter of 2013 and up 22.3% from the second quarter of 2012. |
| ▪ | Net gain on single family mortgage origination and sale activities of $51.7 million, down 0.6% from the first quarter of 2013 and up 13.0% from the second quarter of 2012. |
| ▪ | The portfolio of single family loans serviced for others increased to $10.40 billion at quarter end, up 7.2% from $9.70 billion at March 31, 2013. |
| ▪ | During the quarter, HomeStreet became the number one originator by volume of purchase mortgages in the five-county Puget Sound region, our core market area. This ranking is based on the combined results for HomeStreet and our affiliate, Windermere Mortgage Services Series LLC. |
| • | Commercial and Consumer Banking segment second quarter results: |
| ▪ | Commercial and Consumer Banking segment net income of $1.3 million, returning to profitability for the first time since the economic downturn of 2008. |
| ▪ | Loans held for investment of $1.42 billion at June 30, 2013 increased $57.5 million, or 4.2%, from March 31, 2013. New loan commitments totaled $210.7 million. |
| ▪ | Transaction and savings deposits increased to $1.33 billion, or 67.7% of total deposits, up from $1.16 billion, or 60.1% of total deposits, at March 31, 2013. |
| ▪ | Classified assets and nonperforming assets ended the quarter at 2.69% and 1.50% of total assets, respectively, down from 3.28% and 2.05% of total assets at December 31, 2012. |
• | Other Highlights: |
| ▪ | The Company has declared a special cash dividend of $0.11 per share payable to shareholders of record as of August 5, 2013. |
| ▪ | On July 26, 2013, HomeStreet announced agreements to purchase two community banks: Fortune Bank and Yakima National Bank. Fortune Bank provides a full range of financial services to smaller businesses and professionals and also specializes in U.S. Small Business Administration (“SBA”) loans with locations in Seattle and Bellevue, Washington. Yakima National Bank has a Central and Eastern Washington market with retail banking locations in Yakima, Selah, Sunnyside and Kennewick. On July 9, 2013, the Company announced an agreement to purchase two Puget Sound area branches from AmericanWest Bank, located on Bainbridge Island and in West Seattle. These acquisitions, all of which are subject to regulatory approval and the approval of their respective shareholders, are anticipated to close in the fourth quarter of 2013 and, once completed, would bring our retail deposit branch network to 19 in the Puget Sound region and 29 overall. These acquisitions are expected to increase loans and deposits by approximately $220 million and $280 million, respectively. |
“Our second quarter earnings improved from first quarter 2013, despite the challenge of rising interest rates for our mortgage banking business,” said CEO Mark K. Mason. “During the quarter, mortgage profit margins declined as lenders competed for loans in a market with sharply declining refinancing loan volume. Anticipating these changes, we continue to focus on retail purchase mortgage origination and expansion of our market and market share through hiring high volume purchase focused mortgage originators. As a result, HomeStreet is now the number one-ranked originator of purchase mortgages by volume in the Puget Sound area, our core market. We also made strong progress in the quarter toward our goal of diversifying our business. In the quarter, our commercial and consumer banking segment completed another strong origination quarter and more importantly attained profitability in the quarter, recognizing segment net income of $1.3 million. Additionally, to accelerate our diversification and growth, we recently entered into agreements to acquire Fortune Bank, Yakima National Bank and two retail deposit branches from AmericanWest Bank. Beyond the additional customers, loans and deposits, these acquisitions bring two teams of seasoned community bankers and two talented executives in David Straus and Jeff Newgard to help us grow our franchise in Puget Sound and expand in Central and Eastern Washington.”
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Results of Operations
Net Interest Income
Net interest income in the second quarter of 2013 was $17.4 million, up $2.2 million, or 14.3%, from the first quarter of 2013 and $2.6 million, or 17.7%, from the second quarter of 2012. In the second quarter of 2013 net interest margin, on a tax equivalent basis, increased to 3.10% from 2.81% in the first quarter of 2013, and was up from 2.85% in the second quarter of 2012. The Company's net interest margin for the first quarter of 2013, excluding the impact of a $1.4 million prior period interest expense correction, was 3.06%. Improvement in the margin from the second quarter of 2012 primarily resulted from a 47 basis point decline in our cost of funds. This improvement was partially offset by a 16 basis point decline in our yield on interest-earning assets, largely due to lower yields on our single family adjustable-rate mortgage loans.
Total average interest-earning assets increased from the comparative periods in 2012 primarily as a result of higher average balance of portfolio loans, loans held for sale and investment securities, being partially offset by a decrease in cash and cash equivalents which had been used to fund loans held for sale. The increase in average balances of portfolio loans and loans held for sale reflects our continued growth in loan production volume across all of our business lines. Total average interest-bearing deposit balances declined from the prior periods mostly as a result of a decline in higher-cost certificates of deposit, partially offset by an increase in transaction and savings deposits.
Noninterest Income
Noninterest income in the second quarter of 2013 was $57.6 million, down $1.4 million, or 2.4%, from $58.9 million in the first quarter of 2013 and up $706 thousand, or 1.2%, from $56.9 million in the second quarter of 2012. The decrease from the prior quarter was primarily driven by lower mortgage loan origination and sale revenue and lower mortgage servicing income.
The increase from the second quarter of 2012 was primarily driven by increased net gain on mortgage loan origination and sale activities, primarily resulting from increased single family loan production volume. Partially offsetting this increase to noninterest income was a decrease in mortgage servicing income, primarily resulting from a reduction in income recognized from MSR risk management activities.
Noninterest Expense
Noninterest expense of $56.7 million in the second quarter of 2013 increased $913 thousand, or 1.6%, from the first quarter of 2013, and $9.8 million, or 20.8%, from $47.0 million in the second quarter of 2012. The increase from the second quarter of 2012 is primarily the result of increased mortgage loan production commissions and incentives related to the 22.3% increase in closed loan production in second quarter 2013 verses second quarter 2012. Additionally, higher marketing and other general and administrative expenses, resulting from the Company's growth in retail deposit branches and increased mortgage and commercial loan production personnel, were partially offset by a decrease in other real estate owned ("OREO") expenses. At June 30, 2013, our full-time equivalent employees had increased 43.4% from June 30, 2012 and our retail deposit branch system had increased 15% to 23 branches.
Income Taxes
The Company's income tax expense was $5.8 million for the quarter. The Company's estimated annual effective income tax rate for the quarter was 32.4% as compared to 20.8% for 2012. The prior year effective income tax rate reflected the benefit of the full reversal of deferred tax asset valuation allowances.
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Change in Business Segments
Commencing with the second quarter of 2013, the Company realigned its business segments and organized them into two lines of business: Mortgage Banking and Commercial and Consumer Banking.
Mortgage Banking originates and purchases single family residential mortgage loans for sale in the secondary market and manages the Company's single family mortgage servicing rights.
Commercial and Consumer Banking provides traditional banking services to consumers and businesses through the Company's retail banking network, including deposit products; residential, consumer and commercial portfolio loans; investment products; insurance products and cash management services. This segment originates loans for investment and multifamily loans for sale, and manages the Company's loans held for investment portfolio, multifamily mortgage servicing rights, deposits and other assets and liabilities not related to the single family mortgage banking business.
Mortgage Banking Segment
Mortgage Banking segment net income was $10.7 million for the second quarter of 2013, down 22.1% from the first quarter of 2013 and down 59.0% from the second quarter of 2012. For the first half of 2013, mortgage banking net income was $24.5 million, a decrease of 47.2% from the first half of 2012.
Mortgage Production
Single family mortgage interest rate lock commitments, net of estimated fall out, totaled $1.42 billion in the second quarter of 2013, an increase of $387.5 million, or 37.4%, from $1.04 billion in the first quarter of 2013 and up $119.9 million, or 9.2%, from the second quarter of 2012. Increased interest rate lock commitments in the second quarter of 2013 as compared to the first quarter of 2013 and the second quarter of 2012 primarily reflects an increase in purchase mortgage origination activity and the continued expansion of our mortgage production personnel, which grew by 3.5% during the second quarter of 2013. These increases were partially offset by a reduction in the origination of refinancing mortgages resulting in part from the significant increase in mortgage interest rates in the quarter. Second quarter interest rate lock commitments were comprised of 59% purchases and 41% refinance transactions compared to 50% purchases and 50% refinances in the first quarter 2013.
Single family closed loan volume designated for sale was $1.31 billion in the second quarter, up $115.1 million, or 9.7%, from $1.19 billion in the first quarter of 2013 and up $238.6 million, or 22.3%, from $1.07 billion in the second quarter of 2012. At June 30, 2013, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $1.13 billion, compared to a total of $909.5 million at March 31, 2013.
Net gain on single family mortgage loan origination and sale activities in the second quarter of 2013 was $51.7 million, a decrease of $315 thousand, or 0.6%, from the first quarter of 2013 and up $6.0 million, or 13.0%, from the second quarter of 2012. The decrease from the prior quarter is primarily the result of increased price competition resulting from lower industry application volume and the shift to a purchase mortgage-dominated market. In addition, due to the impact of changes in the FHA mortgage insurance program, we experienced a reduction in Federal Housing Administration (FHA)-insured mortgage loan originations that historically have had higher profit margins on their origination and sale. Additionally, net gain on mortgage loan origination and sale activities for the first quarter of 2013 included an increase of $4.3 million related to a change in accounting estimate that resulted from a change in the application of our methodology used to value interest rate lock commitments.
Due to differences in the timing of revenue recognition between components of the gain on loan origination and sale activities, the Company analyzes the profitability of these activities using a 'Composite Margin,' which is comprised of the ratios of the components to their respective populations of interest rate lock
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commitments and closed loans. The Composite Margin for the second quarter of 2013 was 380 basis points, down from 461 basis points in the first quarter of 2013 (see the Mortgage Banking Activity table for details).
Mortgage Servicing
Single family mortgage servicing income of $1.9 million in the second quarter of 2013 decreased $883 thousand, or 32.1%, from the first quarter of 2013 and $4.9 million, or 72.5% from the second quarter of 2012. The decrease from the first quarter of 2013 was primarily driven by higher decay rates in the quarter on the Company's single family mortgage servicing rights (MSRs) resulting from higher prepayments in the quarter and shorter anticipated remaining lives as well as the changes in the FHA mortgage insurance program, causing these borrowers to refinance into conventional mortgages.
The decrease from the prior year period largely reflected a reduction in sensitivity to interest rates for MSRs, which has enabled the Company to reduce the notional amount of derivative instruments used to economically hedge MSRs. The lower notional amount of derivative instruments, along with lower effective yields on derivative instruments utilized to hedge MSRs, resulted in lower net gains from MSR risk management, which negatively impacted mortgage servicing income.
Single family mortgage servicing fees collected in the second quarter of 2013 increased $421 thousand, or 6.2%, from the first quarter of 2013 and $1.3 million, or 21.6%, from the second quarter of 2012 resulting from growth in the portfolio of single family loans serviced for others. The portfolio of single family loans serviced for others increased to $10.40 billion at quarter end compared to $9.70 billion at March 31, 2013.
Commercial and Consumer Banking Segment
Commercial and Consumer Banking segment net income was $1.3 million for the second quarter of 2013, improving from a net loss of $2.9 million in the first quarter of 2013 and from a net loss of $7.5 million in the second quarter of 2012. For the first half of 2013, Commercial and Consumer banking had a net loss of $1.5 million, improving from a net loss of $7.9 million for the first half of 2012.
Loans held for investment
Loans held for investment, net, were $1.42 billion at June 30, 2013, an increase of $57.5 million, or 4.2%, from March 31, 2013 and an increase of $107.5 million, or 8.2%, from December 31, 2012. New loan commitments totaled $210.7 million for the second quarter of 2013, up 83.5% from $114.8 million in the first quarter of 2013. This increase was partially offset by a decrease in commercial real estate loans, as unscheduled payoffs were greater than loan originations during the quarter.
Asset Quality
Classified assets of $74.7 million, or 2.69% of total assets at June 30, 2013, decreased by $15.4 million, or 17.0%, from $90.1 million, or 3.59% of total assets, at March 31, 2013. Nonperforming assets (NPAs) of $41.7 million, or 1.50% of total assets at June 30, 2013, decreased by $12.1 million, or 22.6%, from $53.8 million at March 31, 2013.
Nonaccrual loans of $29.7 million, or 2.06% of total loans at June 30, 2013, decreased from $32.1 million, or 2.32% of total loans at March 31, 2013, primarily driven by a decrease in nonaccrual commercial construction and single family loans. OREO balances of $11.9 million at June 30, 2013 declined from $21.7 million at March 31, 2013, primarily as a result of the sale of commercial real estate properties. Delinquent loans of $87.7 million, or 6.06% of total loans at June 30, 2013, decreased from $92.6 million, or 6.66% of total loans at March 31, 2013. Excluding FHA-insured and Department of Veterans' Affairs (VA)-guaranteed single family mortgage loans, delinquent loans were $34.3 million, or 2.52% of total non-FHA/VA loans at June 30, 2013 as compared to 2.94% at March 31, 2013.
5
The allowance for credit losses was $27.9 million at June 30, 2013 as compared to $28.6 million at March 31, 2013. The allowance for loan losses as a percentage of loans held for investment declined to 1.92% of total loans at June 30, 2013 compared to 2.05% of total loans at March 31, 2013, reflecting the improved credit quality of the Company's loan portfolio. A provision for credit losses of $400 thousand was recorded for the second quarter of 2013, compared to $2.0 million recorded in both the first quarter of 2013 and the second quarter of 2012. Net charge-offs in the quarter decreased to $1.1 million, down from $1.2 million in the first quarter of 2013 and $10.3 million in the second quarter of 2012. Of the $1.1 million in charge-offs during the quarter, $494 thousand had been specifically reserved in prior quarters.
Deposits
Deposit balances were $1.96 billion at June 30, 2013 as compared to $1.93 billion at March 31, 2013 and $1.90 billion at June 30, 2012. Certificates of deposit decreased $119.6 million, or 22.9%, from the prior quarter as a result of the managed reduction of these higher-cost deposits and replacement with transaction and savings deposits, which increased $167.2 million, or 14.4%, from March 31, 2013. The improvement in the composition of deposits was primarily the result of our successful efforts to attract transaction and savings deposit balances through our branch network and convert customers with maturing certificates of deposit to transaction and savings deposits.
Capital
Regulatory capital ratios for the Bank are as follows:
| Jun. 30, 2013 | Dec. 31, 2012 | Jun. 30, 2012 | Well-capitalized ratios | |||||||||
| Tier 1 leverage capital (to average assets) | 11.89 | % | 11.78 | % | 10.20 | % | 5.00 | % | ||||
| Tier 1 risk-based capital (to risk-weighted assets) | 17.89 | % | 18.05 | % | 15.83 | % | 6.00 | % | ||||
| Total risk-based capital (to risk-weighted assets) | 19.15 | % | 19.31 | % | 17.09 | % | 10.00 | % | ||||
Special Cash Dividend Declaration
HomeStreet, Inc.'s board of directors has approved a special cash dividend of $0.11 per common share, payable on August 15, 2013 to shareholders of record as of the close of business on August 5, 2013.
Conference Call
HomeStreet, Inc. will conduct a quarterly earnings conference call on Monday, July 29, 2013 at 10:00 a.m. PST (1:00 p.m. EST). The Company will discuss second quarter 2013 results and provide an update on recent activities. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may join the call by dialing 1-888-317-6016 shortly before 10:00 a.m. PST. A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10030147.
About HomeStreet, Inc.
HomeStreet, Inc. (NASDAQ:HMST) is a diversified financial services company headquartered in Seattle, Washington, and the holding company for HomeStreet Bank, a Washington state-chartered, FDIC-insured savings bank. HomeStreet Bank offers Commercial and Consumer banking, investment and insurance products and services in Washington, Oregon and Hawaii. HomeStreet Bank conducts lending activities in Washington, Oregon, Hawaii, Idaho, California, Arizona, Utah and Alaska. For more information, visit http://ir.homestreet.com. Information contained in or linked from our website is not incorporated into, and does not form a part of, this release.
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Forward-Looking Statements
This report to shareholders contains forward-looking statements concerning HomeStreet, Inc. and HomeStreet Bank and their operations, performance, financial conditions and likelihood of success. 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 competitiveness of the banking industry. 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 the control of the Company. 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, implied or projected by, such forward-looking statements. Among other things, our ability to expand our banking operations geographically and across market sectors, grow our franchise and capitalize on market opportunities, and generate positive net income and cash flow, may be limited due to future risks and uncertainties including, but not limited to, changes in general economic conditions that impact our markets and our business, actions by the Federal Reserve affecting monetary and fiscal policy, regulatory and legislative actions that may constrain our ability to do business, significant increases in the competition we face in our industry and market and the extent of our success in problem asset resolution efforts. 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, a decrease in interest rates, an increase in competition for such loans, unfavorable changes in general economic conditions, including housing prices, the job market, consumer confidence and spending habits either nationally or in the regional and local market areas in which the Company does business and legislative or regulatory actions or reform (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act). Further, our ability to pay cash dividends in the future is dependent upon a variety of factors, including our net income, liquidity, capital resources, regulatory and financial condition, and our compliance with the terms of our trust preferred securities and applicable banking laws and regulations. A discussion of the factors that we recognize to pose 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 fiscal year ended December 31, 2012. These factors are updated from time to time in our filings with the Securities and Exchange Commission, and readers of this release are cautioned to review those disclosures in conjunction with the discussions herein.
Information contained herein, other than information at December 31, 2012 and for the twelve months then ended, is unaudited. All financial data should be read in conjunction with the notes to the consolidated financial statements of HomeStreet, Inc., and subsidiaries as of and for the fiscal year ended December 31, 2012, as contained in the Company's Annual Report on Form 10-K for such fiscal year.
Source: HomeStreet, Inc.
| Contact: | Investor Relations & Media: | |
| HomeStreet, Inc. | ||
| Terri Silver, 206-389-6303 | ||
| terri.silver@homestreet.com | ||
| http://ir.homestreet.com | ||
7
HomeStreet, Inc. and Subsidiaries
Summary Financial Data
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
| (dollars in thousands, except share data) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | |||||||||||||||||||||
| Income statement data (for the period ended): | ||||||||||||||||||||||||||||
| Net interest income | $ | 17,415 | $ | 15,235 | $ | 16,591 | $ | 16,520 | $ | 14,799 | $ | 32,650 | $ | 27,631 | ||||||||||||||
| Provision for loan losses | 400 | 2,000 | 4,000 | 5,500 | 2,000 | 2,400 | 2,000 | |||||||||||||||||||||
| Noninterest income | 57,556 | 58,943 | 71,932 | 69,091 | 56,850 | 116,499 | 96,998 | |||||||||||||||||||||
| Noninterest expense | 56,712 | 55,799 | 55,966 | 45,934 | 46,954 | 112,511 | 81,691 | |||||||||||||||||||||
| Net income before taxes | 17,859 | 16,379 | 28,557 | 34,177 | 22,695 | 34,238 | 40,938 | |||||||||||||||||||||
| Income tax expense | 5,791 | 5,439 | 7,060 | 12,186 | 4,017 | 11,230 | 2,301 | |||||||||||||||||||||
| Net income | $ | 12,068 | $ | 10,940 | $ | 21,497 | $ | 21,991 | $ | 18,678 | $ | 23,008 | $ | 38,637 | ||||||||||||||
Basic earnings per common share (1) | $ | 0.84 | $ | 0.76 | $ | 1.50 | $ | 1.53 | $ | 1.31 | $ | 1.60 | $ | 3.15 | ||||||||||||||
Diluted earnings per common share(1) | $ | 0.82 | $ | 0.74 | $ | 1.46 | $ | 1.50 | $ | 1.26 | $ | 1.56 | $ | 3.03 | ||||||||||||||
Common shares outstanding (1) | 14,406,676 | 14,400,206 | 14,382,638 | 14,354,972 | 14,325,214 | 14,406,676 | 14,325,214 | |||||||||||||||||||||
| Weighted average common shares | ||||||||||||||||||||||||||||
| Basic | 14,376,580 | 14,359,691 | 14,371,120 | 14,335,950 | 14,252,120 | 14,368,135 | 12,272,342 | |||||||||||||||||||||
| Diluted | 14,785,481 | 14,804,129 | 14,714,166 | 14,699,032 | 14,824,064 | 14,794,805 | 12,772,198 | |||||||||||||||||||||
| Book value per share | $ | 18.62 | $ | 18.78 | $ | 18.34 | $ | 16.82 | $ | 15.05 | $ | 18.62 | $ | 15.05 | ||||||||||||||
Tangible book value per share (2) | $ | 18.60 | $ | 18.75 | $ | 18.31 | $ | 16.79 | $ | 15.02 | $ | 18.60 | $ | 15.02 | ||||||||||||||
| Financial position (at period end): | ||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 21,645 | $ | 18,709 | $ | 25,285 | $ | 22,051 | $ | 75,063 | $ | 21,645 | $ | 75,063 | ||||||||||||||
| Investment securities available for sale | 538,164 | 415,238 | 416,329 | 414,050 | 415,610 | 538,164 | 415,610 | |||||||||||||||||||||
| Loans held for sale | 471,191 | 430,857 | 620,799 | 535,908 | 415,189 | 471,191 | 415,189 | |||||||||||||||||||||
| Loans held for investment, net | 1,416,439 | 1,358,982 | 1,308,974 | 1,268,703 | 1,235,253 | 1,416,439 | 1,235,253 | |||||||||||||||||||||
| Mortgage servicing rights | 137,385 | 111,828 | 95,493 | 81,512 | 78,240 | 137,385 | 78,240 | |||||||||||||||||||||
| Other real estate owned | 11,949 | 21,664 | 23,941 | 17,003 | 40,618 | 11,949 | 40,618 | |||||||||||||||||||||
| Total assets | 2,776,124 | 2,508,251 | 2,631,230 | 2,511,269 | 2,427,203 | 2,776,124 | 2,427,203 | |||||||||||||||||||||
| Deposits | 1,963,123 | 1,934,704 | 1,976,835 | 1,981,814 | 1,904,749 | 1,963,123 | 1,904,749 | |||||||||||||||||||||
| FHLB advances | 409,490 | 183,590 | 259,090 | 131,597 | 65,590 | 409,490 | 65,590 | |||||||||||||||||||||
| Repurchase agreements | — | — | — | — | 100,000 | — | 100,000 | |||||||||||||||||||||
| Shareholders’ equity | 268,321 | 270,405 | 263,762 | 241,499 | 215,614 | 268,321 | 215,614 | |||||||||||||||||||||
| Financial position (averages): | ||||||||||||||||||||||||||||
| Investment securities available for sale | $ | 512,475 | $ | 422,761 | $ | 418,261 | $ | 411,916 | $ | 431,875 | $ | 467,865 | $ | 406,502 | ||||||||||||||
| Loans held for investment | 1,397,219 | 1,346,100 | 1,297,615 | 1,270,652 | 1,304,740 | 1,371,801 | 1,321,646 | |||||||||||||||||||||
| Total interest-earning assets | 2,321,195 | 2,244,563 | 2,244,727 | 2,187,059 | 2,143,380 | 2,283,090 | 2,116,785 | |||||||||||||||||||||
| Total interest-bearing deposits | 1,527,732 | 1,543,645 | 1,609,075 | 1,625,437 | 1,640,159 | 1,535,644 | 1,672,764 | |||||||||||||||||||||
| FHLB advances | 307,296 | 147,097 | 122,516 | 112,839 | 79,490 | 227,639 | 68,704 | |||||||||||||||||||||
| Repurchase agreements | 10,913 | — | 558 | 18,478 | 52,369 | 5,487 | 26,185 | |||||||||||||||||||||
| Total interest-bearing liabilities | 1,917,098 | 1,752,599 | 1,794,006 | 1,818,611 | 1,833,875 | 1,835,302 | 1,829,510 | |||||||||||||||||||||
| Shareholders’ equity | 280,783 | 274,355 | 262,163 | 231,361 | 207,344 | 277,588 | 174,070 | |||||||||||||||||||||
8
HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
| (dollars in thousands, except share data) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | |||||||||||||||||||||
| Financial performance: | ||||||||||||||||||||||||||||
Return on average common shareholders’ equity (2) | 17.19 | % | 15.95 | % | 32.80 | % | 38.02 | % | 36.03 | % | 16.58 | % | 44.39 | % | ||||||||||||||
Return on average tangible common shareholders' equity(3) | 17.22 | % | 15.97 | % | 32.85 | % | 38.09 | % | 36.11 | % | 16.60 | % | 44.50 | % | ||||||||||||||
| Return on average assets | 1.86 | % | 1.75 | % | 3.46 | % | 3.60 | % | 3.15 | % | 1.81 | % | 3.30 | % | ||||||||||||||
Net interest margin (4) | 3.10 | % | 2.81 | % | (5) | 3.06 | % | 3.12 | % | 2.85 | % | 2.96 | % | (5) | 2.68 | % | ||||||||||||
Efficiency ratio (6) | 75.65 | % | 75.22 | % | 63.22 | % | 53.65 | % | 65.53 | % | 75.44 | % | 65.55 | % | ||||||||||||||
| Asset quality: | ||||||||||||||||||||||||||||
| Allowance for credit losses | $ | 27,858 | $ | 28,594 | $ | 27,751 | $ | 27,627 | $ | 27,125 | $ | 27,858 | $ | 27,125 | ||||||||||||||
| Allowance for loan losses/total loans | 1.92 | % | 2.05 | % | 2.06 | % | 2.12 | % | 2.13 | % | 1.92 | % | 2.13 | % | ||||||||||||||
| Allowance for loan losses/nonaccrual loans | 93.11 | % | 88.40 | % | 92.20 | % | 71.80 | % | 81.28 | % | 93.11 | % | 81.28 | % | ||||||||||||||
| Total classified assets | $ | 74,721 | $ | 90,076 | $ | 86,270 | $ | 102,385 | $ | 137,165 | $ | 74,721 | $ | 137,165 | ||||||||||||||
| Classified assets/total assets | 2.69 | % | 3.59 | % | 3.28 | % | 4.08 | % | 5.66 | % | 2.69 | % | 5.66 | % | ||||||||||||||
Total nonaccrual loans(7) | $ | 29,701 | $ | 32,133 | $ | 29,892 | $ | 38,247 | $ | 33,107 | $ | 29,701 | $ | 33,107 | ||||||||||||||
| Nonaccrual loans/total loans | 2.06 | % | 2.32 | % | 2.24 | % | 2.95 | % | 2.62 | % | 2.06 | % | 2.62 | % | ||||||||||||||
| Other real estate owned | $ | 11,949 | $ | 21,664 | $ | 23,941 | $ | 17,003 | $ | 40,618 | $ | 11,949 | $ | 40,618 | ||||||||||||||
| Total nonperforming assets | $ | 41,650 | $ | 53,797 | $ | 53,833 | $ | 55,250 | $ | 73,725 | $ | 41,650 | $ | 73,725 | ||||||||||||||
| Nonperforming assets/total assets | 1.50 | % | 2.14 | % | 2.05 | % | 2.20 | % | 3.04 | % | 1.50 | % | 3.04 | % | ||||||||||||||
| Net charge-offs | $ | 1,136 | $ | 1,157 | $ | 3,876 | $ | 4,998 | $ | 10,277 | $ | 2,293 | $ | 17,675 | ||||||||||||||
| Regulatory capital ratios for the Bank: | ||||||||||||||||||||||||||||
| Tier 1 leverage capital (to average assets) | 11.89 | % | 11.97 | % | 11.78 | % | 10.86 | % | 10.20 | % | 11.89 | % | 10.20 | % | ||||||||||||||
| Tier 1 risk-based capital (to risk-weighted assets) | 17.89 | % | 19.21 | % | 18.05 | % | 16.76 | % | 15.83 | % | 17.89 | % | 15.83 | % | ||||||||||||||
| Total risk-based capital (to risk-weighted assets) | 19.15 | % | 20.47 | % | 19.31 | % | 18.01 | % | 17.09 | % | 19.15 | % | 17.09 | % | ||||||||||||||
| Other data: | ||||||||||||||||||||||||||||
| Full-time equivalent employees (ending) | 1,309 | 1,218 | 1,099 | 998 | 913 | 1,309 | 913 | |||||||||||||||||||||
| (1) | Share and per share data shown after giving effect to the 2-for-1 forward stock splits effective March 6, 2012 and November 5, 2012. |
| (2) | Net earnings available to common shareholders (annualized) divided by average common shareholders’ equity. |
| (3) | Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. Other companies may define or calculate these measures differently. Tangible book value is calculated by dividing shareholders' common equity less average goodwill and intangible assets, net (excluding MSRs) by the number of common shares outstanding. The return on average tangible common shareholders' equity is calculated by dividing net earnings available to common shareholders (annualized) by average shareholders' common equity less average goodwill and intangible assets, net (excluding MSRs). For additional information on these ratios and for corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures in this earnings release. |
| (4) | Net interest income divided by total average interest-earning assets on a tax equivalent basis. |
| (5) | Net interest margin for the first quarter of 2013 included $1.4 million in interest expense related to the correction of the cumulative effect of an error in prior years, resulting from the under accrual of interest due on the TruPS for which the Company had deferred the payment of interest. Excluding the impact of the prior period interest expense correction, the net interest margin was 3.06% for the quarter ended March 31, 2013 and 3.08% for the six months ended June 30, 2013. |
| (6) | Noninterest expense divided by total net revenue (net interest income and noninterest income). |
| (7) | Generally, loans are placed on nonaccrual status when they are 90 or more days past due. |
9
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Operations
| Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||
| (in thousands, except share data) | 2013 | 2012 | Change | 2013 | 2012 | Change | ||||||||||||||||
| Interest income: | ||||||||||||||||||||||
| Loans | $ | 17,446 | $ | 17,351 | 1 | % | $ | 35,495 | $ | 33,832 | 5 | |||||||||||
| Investment securities available for sale | 2,998 | 2,449 | 22 | 5,657 | 4,688 | 21 | ||||||||||||||||
| Other | 24 | 56 | (57 | ) | 54 | 192 | (72 | ) | ||||||||||||||
| 20,468 | 19,856 | 3 | 41,206 | 38,712 | 6 | |||||||||||||||||
| Interest expense: | ||||||||||||||||||||||
| Deposits | 2,367 | 4,198 | (44 | ) | 5,856 | 9,077 | (35 | ) | ||||||||||||||
| Federal Home Loan Bank advances | 387 | 535 | (28 | ) | 680 | 1,209 | (44 | ) | ||||||||||||||
| Securities sold under agreements to repurchase | 11 | 50 | (78 | ) | 11 | 50 | (78 | ) | ||||||||||||||
| Long-term debt | 283 | 271 | 4 | 1,999 | 736 | 172 | ||||||||||||||||
| Other | 5 | 3 | 67 | 10 | 9 | 11 | ||||||||||||||||
| 3,053 | 5,057 | (40 | ) | 8,556 | 11,081 | (23 | ) | |||||||||||||||
| Net interest income | 17,415 | 14,799 | 18 | 32,650 | 27,631 | 18 | ||||||||||||||||
| Provision for credit losses | 400 | 2,000 | (80 | ) | 2,400 | 2,000 | 20 | |||||||||||||||
| Net interest income after provision for credit losses | 17,015 | 12,799 | 33 | 30,250 | 25,631 | 18 | ||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||
| Net gain on mortgage loan origination and sale activities | 52,424 | 46,799 | 12 | 106,379 | 76,347 | 39 | ||||||||||||||||
| Mortgage servicing income | 2,183 | 7,091 | (69 | ) | 5,255 | 14,964 | (65 | ) | ||||||||||||||
| Income from Windermere Mortgage Services Series LLC | 993 | 1,394 | (29 | ) | 1,613 | 2,560 | (37 | ) | ||||||||||||||
| Loss on debt extinguishment | — | (939 | ) | NM | — | (939 | ) | NM | ||||||||||||||
| Depositor and other retail banking fees | 761 | 771 | (1 | ) | 1,482 | 1,506 | (2 | ) | ||||||||||||||
| Insurance commissions | 190 | 177 | 7 | 370 | 359 | 3 | ||||||||||||||||
| Gain on sale of investment securities available for sale | 238 | 911 | (74 | ) | 190 | 952 | (80 | ) | ||||||||||||||
| Other | 767 | 646 | 19 | 1,210 | 1,249 | (3 | ) | |||||||||||||||
| 57,556 | 56,850 | 1 | 116,499 | 96,998 | 20 | |||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||
| Salaries and related costs | 38,579 | 28,224 | 37 | 73,641 | 49,575 | 49 | ||||||||||||||||
| General and administrative | 10,270 | 6,832 | 50 | 21,200 | 12,156 | 74 | ||||||||||||||||
| Legal | 599 | 724 | (17 | ) | 1,210 | 1,159 | 4 | |||||||||||||||
| Consulting | 763 | 322 | 137 | 1,459 | 677 | 116 | ||||||||||||||||
| Federal Deposit Insurance Corporation assessments | 143 | 717 | (80 | ) | 710 | 1,957 | (64 | ) | ||||||||||||||
| Occupancy | 3,381 | 2,092 | 62 | 6,183 | 3,881 | 59 | ||||||||||||||||
| Information services | 3,574 | 1,994 | 79 | 6,570 | 3,717 | 77 | ||||||||||||||||
| Other real estate owned expense and other adjustments | (597 | ) | 6,049 | NM | 1,538 | 8,569 | (82 | ) | ||||||||||||||
| 56,712 | 46,954 | 21 | 112,511 | 81,691 | 38 | |||||||||||||||||
| Income before income taxes | 17,859 | 22,695 | (21 | ) | 34,238 | 40,938 | (16 | ) | ||||||||||||||
| Income tax expense (benefit) | 5,791 | 4,017 | 44 | 11,230 | 2,301 | 388 | ||||||||||||||||
| NET INCOME | $ | 12,068 | $ | 18,678 | (35 | ) | $ | 23,008 | $ | 38,637 | (40 | ) | ||||||||||
| Basic income per share | $ | 0.84 | $ | 1.31 | (36 | ) | $ | 1.60 | $ | 3.15 | (49 | ) | ||||||||||
| Diluted income per share | $ | 0.82 | $ | 1.26 | (35 | ) | $ | 1.56 | $ | 3.03 | (49 | ) | ||||||||||
| Basic weighted average number of shares outstanding | 14,376,580 | 14,252,120 | 1 | 14,368,135 | 12,272,342 | 17 | ||||||||||||||||
| Diluted weighted average number of shares outstanding | 14,785,481 | 14,824,064 | — | 14,794,805 | 12,772,198 | 16 | ||||||||||||||||
10
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Operation
| Quarter ended | ||||||||||||||||||||
| (in thousands, except share data) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Interest income: | ||||||||||||||||||||
| Loans | $ | 17,446 | $ | 18,049 | $ | 18,713 | $ | 18,512 | $ | 17,351 | ||||||||||
| Investment securities available for sale | 2,998 | 2,659 | 2,186 | 2,517 | 2,449 | |||||||||||||||
| Other | 24 | 30 | 27 | 24 | 56 | |||||||||||||||
| 20,468 | 20,738 | 20,926 | 21,053 | 19,856 | ||||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Deposits | 2,367 | 3,489 | 3,756 | 3,908 | 4,198 | |||||||||||||||
| Federal Home Loan Bank advances | 387 | 292 | 282 | 297 | 535 | |||||||||||||||
| Securities sold under agreements to repurchase | 11 | — | 1 | 19 | 50 | |||||||||||||||
| Long-term debt | 283 | 1,717 | 292 | 305 | 271 | |||||||||||||||
| Other | 5 | 5 | 4 | 4 | 3 | |||||||||||||||
| 3,053 | 5,503 | 4,335 | 4,533 | 5,057 | ||||||||||||||||
| Net interest income | 17,415 | 15,235 | 16,591 | 16,520 | 14,799 | |||||||||||||||
| Provision for credit losses | 400 | 2,000 | 4,000 | 5,500 | 2,000 | |||||||||||||||
| Net interest income after provision for credit losses | 17,015 | 13,235 | 12,591 | 11,020 | 12,799 | |||||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Net gain on mortgage loan origination and sale activities | 52,424 | 53,955 | 68,881 | 65,336 | 46,799 | |||||||||||||||
| Mortgage servicing income | 2,183 | 3,072 | 651 | 506 | 7,091 | |||||||||||||||
| Income from Windermere Mortgage Services Series LLC | 993 | 620 | 516 | 1,188 | 1,394 | |||||||||||||||
| Loss on debt extinguishment | — | — | — | — | (939 | ) | ||||||||||||||
| Depositor and other retail banking fees | 761 | 721 | 800 | 756 | 771 | |||||||||||||||
| Insurance commissions | 190 | 180 | 193 | 192 | 177 | |||||||||||||||
| Gain (loss) on sale of investment securities available for sale | 238 | (48 | ) | 141 | 397 | 911 | ||||||||||||||
| Other | 767 | 443 | 750 | 716 | 646 | |||||||||||||||
| 57,556 | 58,943 | 71,932 | 69,091 | 56,850 | ||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||
| Salaries and related costs | 38,579 | 35,062 | 38,680 | 31,573 | 28,224 | |||||||||||||||
| General and administrative | 10,270 | 10,930 | 8,534 | 7,148 | 6,832 | |||||||||||||||
| Legal | 599 | 611 | 325 | 312 | 724 | |||||||||||||||
| Consulting | 763 | 696 | 1,291 | 1,069 | 322 | |||||||||||||||
| Federal Deposit Insurance Corporation assessments | 143 | 567 | 803 | 794 | 717 | |||||||||||||||
| Occupancy | 3,381 | 2,802 | 2,425 | 2,279 | 2,092 | |||||||||||||||
| Information services | 3,574 | 2,996 | 2,739 | 2,411 | 1,994 | |||||||||||||||
| Other real estate owned expense and other adjustments | (597 | ) | 2,135 | 1,169 | 348 | 6,049 | ||||||||||||||
| 56,712 | 55,799 | 55,966 | 45,934 | 46,954 | ||||||||||||||||
| Income before income tax expense | 17,859 | 16,379 | 28,557 | 34,177 | 22,695 | |||||||||||||||
| Income tax expense (benefit) | 5,791 | 5,439 | 7,060 | 12,186 | 4,017 | |||||||||||||||
| NET INCOME | $ | 12,068 | $ | 10,940 | $ | 21,497 | $ | 21,991 | $ | 18,678 | ||||||||||
| Basic income per share | $ | 0.84 | $ | 0.76 | $ | 1.50 | $ | 1.53 | $ | 1.31 | ||||||||||
| Diluted income per share | $ | 0.82 | $ | 0.74 | $ | 1.46 | $ | 1.50 | $ | 1.26 | ||||||||||
| Basic weighted average number of shares outstanding | 14,376,580 | 14,359,691 | 14,371,120 | 14,335,950 | 14,252,120 | |||||||||||||||
| Diluted weighted average number of shares outstanding | 14,785,481 | 14,804,129 | 14,714,166 | 14,699,032 | 14,824,064 | |||||||||||||||
11
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
| (in thousands, except share data) | Jun. 30, 2013 | Dec. 31, 2012 | % Change | ||||||||
| Assets: | |||||||||||
| Cash and cash equivalents (including interest-bearing instruments of $7,568 and $12,414) | $ | 21,645 | $ | 25,285 | (14 | )% | |||||
| Investment securities available for sale | 538,164 | 416,329 | 29 | ||||||||
| Loans held for sale (includes $459,981 and $607,578 carried at fair value) | 471,191 | 620,799 | (24 | ) | |||||||
| Loans held for investment (net of allowance for loan losses of $27,655 and $27,561) | 1,416,439 | 1,308,974 | 8 | ||||||||
| Mortgage servicing rights (includes $128,146 and $87,396 carried at fair value) | 137,385 | 95,493 | 44 | ||||||||
| Other real estate owned | 11,949 | 23,941 | (50 | ) | |||||||
| Federal Home Loan Bank stock, at cost | 35,708 | 36,367 | (2 | ) | |||||||
| Premises and equipment, net | 18,362 | 15,232 | 21 | ||||||||
| Accounts receivable and other assets | 125,281 | 88,810 | 41 | ||||||||
| Total assets | $ | 2,776,124 | $ | 2,631,230 | 6 | ||||||
| Liabilities and shareholders’ equity: | |||||||||||
| Liabilities: | |||||||||||
| Deposits | $ | 1,963,123 | $ | 1,976,835 | (1 | ) | |||||
| Federal Home Loan Bank advances | 409,490 | 259,090 | 58 | ||||||||
| Accounts payable and other liabilities | 73,333 | 69,686 | 5 | ||||||||
| Long-term debt | 61,857 | 61,857 | — | ||||||||
| Total liabilities | 2,507,803 | 2,367,468 | 6 | ||||||||
| Shareholders’ equity: | |||||||||||
| Preferred stock, no par value | |||||||||||
| Authorized 10,000 shares | |||||||||||
| Issued and outstanding, 0 shares and 0 shares | — | — | — | ||||||||
| Common stock, no par value | |||||||||||
| Authorized 160,000,000 | |||||||||||
| Issued and outstanding, 14,406,676 shares and 14,382,638 shares | 511 | 511 | — | ||||||||
| Additional paid-in capital | 91,054 | 90,189 | 1 | ||||||||
| Retained earnings | 185,300 | 163,872 | 13 | ||||||||
| Accumulated other comprehensive income | (8,544 | ) | 9,190 | (193 | ) | ||||||
| Total shareholders’ equity | 268,321 | 263,762 | 2 | ||||||||
| Total liabilities and shareholders’ equity | $ | 2,776,124 | $ | 2,631,230 | 6 | ||||||
12
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Financial Condition
| (in thousands, except share data) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 21,645 | $ | 18,709 | $ | 25,285 | $ | 22,051 | $ | 75,063 | ||||||||||
| Investment securities available for sale | 538,164 | 415,238 | 416,329 | 414,050 | 415,610 | |||||||||||||||
| Loans held for sale | 471,191 | 430,857 | 620,799 | 535,908 | 415,189 | |||||||||||||||
| Loans held for investment, net | 1,416,439 | 1,358,982 | 1,308,974 | 1,268,703 | 1,235,253 | |||||||||||||||
| Mortgage servicing rights | 137,385 | 111,828 | 95,493 | 81,512 | 78,240 | |||||||||||||||
| Other real estate owned | 11,949 | 21,664 | 23,941 | 17,003 | 40,618 | |||||||||||||||
| Federal Home Loan Bank stock, at cost | 35,708 | 36,037 | 36,367 | 36,697 | 37,027 | |||||||||||||||
| Premises and equipment, net | 18,362 | 16,893 | 15,232 | 13,060 | 10,226 | |||||||||||||||
| Accounts receivable and other assets | 125,281 | 98,043 | 88,810 | 122,285 | 119,977 | |||||||||||||||
| Total assets | $ | 2,776,124 | $ | 2,508,251 | $ | 2,631,230 | $ | 2,511,269 | $ | 2,427,203 | ||||||||||
| Liabilities and shareholders’ equity: | ||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Deposits | $ | 1,963,123 | $ | 1,934,704 | $ | 1,976,835 | $ | 1,981,814 | $ | 1,904,749 | ||||||||||
| Federal Home Loan Bank advances | 409,490 | 183,590 | 259,090 | 131,597 | 65,590 | |||||||||||||||
| Securities sold under agreements to repurchase | — | — | — | — | 100,000 | |||||||||||||||
| Accounts payable and other liabilities | 73,333 | 57,695 | 69,686 | 94,502 | 79,393 | |||||||||||||||
| Long-term debt | 61,857 | 61,857 | 61,857 | 61,857 | 61,857 | |||||||||||||||
| Total liabilities | 2,507,803 | 2,237,846 | 2,367,468 | 2,269,770 | 2,211,589 | |||||||||||||||
| Shareholders’ equity: | ||||||||||||||||||||
| Preferred stock, no par value | ||||||||||||||||||||
| Authorized 10,000 shares | — | — | — | — | — | |||||||||||||||
| Common stock, no par value | ||||||||||||||||||||
| Authorized 160,000,000 | 511 | 511 | 511 | 511 | 511 | |||||||||||||||
| Additional paid-in capital | 91,054 | 90,687 | 90,189 | 89,264 | 88,637 | |||||||||||||||
| Retained earnings | 185,300 | 173,229 | 163,872 | 142,375 | 120,384 | |||||||||||||||
| Accumulated other comprehensive income | (8,544 | ) | 5,978 | 9,190 | 9,349 | 6,082 | ||||||||||||||
| Total shareholders’ equity | 268,321 | 270,405 | 263,762 | 241,499 | 215,614 | |||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,776,124 | $ | 2,508,251 | $ | 2,631,230 | $ | 2,511,269 | $ | 2,427,203 | ||||||||||
13
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis)
| Quarter Ended June 30, | ||||||||||||||||||||||
| 2013 | 2012 | |||||||||||||||||||||
| (in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | ||||||||||||||||
| Assets: | ||||||||||||||||||||||
Interest-earning assets (1): | ||||||||||||||||||||||
| Cash & cash equivalents | $ | 21,929 | $ | 13 | 0.24 | % | $ | 95,599 | $ | 52 | 0.22 | % | ||||||||||
| Investment securities | 512,475 | 3,561 | 2.78 | % | 431,875 | 2,856 | 2.65 | % | ||||||||||||||
| Loans held for sale | 389,572 | 3,469 | 3.56 | % | 311,166 | 2,919 | 3.76 | % | ||||||||||||||
| Loans held for investment | 1,397,219 | 14,005 | 4.01 | % | 1,304,740 | 14,466 | 4.44 | % | ||||||||||||||
| Total interest-earning assets | 2,321,195 | 21,048 | 3.63 | % | 2,143,380 | 20,293 | 3.79 | % | ||||||||||||||
Noninterest-earning assets (2) | 278,739 | 229,170 | ||||||||||||||||||||
| Total assets | $ | 2,599,934 | $ | 2,372,550 | ||||||||||||||||||
| Liabilities and shareholders’ equity: | ||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||
| Interest-bearing demand accounts | $ | 238,328 | 233 | 0.39 | % | $ | 150,709 | 124 | 0.33 | % | ||||||||||||
| Savings accounts | 112,937 | 114 | 0.40 | % | 83,547 | 92 | 0.44 | % | ||||||||||||||
| Money market accounts | 783,135 | 973 | 0.50 | % | 595,579 | 814 | 0.55 | % | ||||||||||||||
| Certificate accounts | 393,332 | 1,047 | 1.07 | % | 810,324 | 3,168 | 1.57 | % | ||||||||||||||
| Total interest-bearing deposits | 1,527,732 | 2,367 | 0.62 | % | 1,640,159 | 4,198 | 1.03 | % | ||||||||||||||
| FHLB advances | 307,296 | 387 | 0.50 | % | 79,490 | 535 | 2.94 | % | ||||||||||||||
| Securities sold under agreements to repurchase | 10,913 | 11 | 0.40 | % | 52,369 | 50 | 0.35 | % | ||||||||||||||
| Long-term debt | 61,857 | 283 | 1.81 | % | 61,857 | 271 | 1.75 | % | ||||||||||||||
| Other borrowings | 9,300 | 5 | 0.22 | % | — | 3 | — | % | ||||||||||||||
| Total interest-bearing liabilities | 1,917,098 | 3,053 | 0.64 | % | 1,833,875 | 5,057 | 1.11 | % | ||||||||||||||
| Noninterest-bearing liabilities | 402,053 | 331,331 | ||||||||||||||||||||
| Total liabilities | 2,319,151 | 2,165,206 | ||||||||||||||||||||
| Shareholders’ equity | 280,783 | 207,344 | ||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,599,934 | $ | 2,372,550 | ||||||||||||||||||
Net interest income (3) | $ | 17,995 | $ | 15,236 | ||||||||||||||||||
| Net interest spread | 2.99 | % | 2.68 | % | ||||||||||||||||||
| Impact of noninterest-bearing sources | 0.11 | % | 0.17 | % | ||||||||||||||||||
| Net interest margin | 3.10 | % | 2.85 | % | ||||||||||||||||||
| (1) | The average balances of nonaccrual assets and related income, if any, are included in their respective categories. |
| (2) | Includes loan balances that have been foreclosed and are now reclassified to other real estate owned. |
| (3) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $580 thousand and $437 thousand for the quarters ended June 30, 2013 and June 30, 2012, respectively. The estimated federal statutory tax rate was 35% for the periods presented. |
14
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis)
| Six Months Ended June 30, | ||||||||||||||||||||||
| 2013 | 2012 | |||||||||||||||||||||
| (in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | ||||||||||||||||
| Assets: | ||||||||||||||||||||||
Interest-earning assets (1): | ||||||||||||||||||||||
| Cash & cash equivalents | $ | 22,312 | $ | 30 | 0.26 | % | $ | 150,522 | $ | 186 | 0.25 | % | ||||||||||
| Investment securities | 467,865 | 6,723 | 2.87 | % | 406,502 | 5,345 | 2.63 | % | ||||||||||||||
| Loans held for sale | 421,112 | 7,214 | 3.43 | % | 238,115 | 4,461 | 3.75 | % | ||||||||||||||
| Loans held for investment | 1,371,801 | 28,341 | 4.14 | % | 1,321,646 | 29,443 | 4.46 | % | ||||||||||||||
| Total interest-earning assets | 2,283,090 | 42,308 | 3.71 | % | 2,116,785 | 39,435 | 3.73 | % | ||||||||||||||
Noninterest-earning assets (2) | 264,795 | 225,257 | ||||||||||||||||||||
| Total assets | $ | 2,547,885 | $ | 2,342,042 | ||||||||||||||||||
| Liabilities and shareholders’ equity: | ||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||
| Interest-bearing demand accounts | $ | 210,032 | 391 | 0.38 | % | $ | 144,416 | 239 | 0.33 | % | ||||||||||||
| Savings accounts | 109,234 | 218 | 0.40 | % | 78,635 | 176 | 0.45 | % | ||||||||||||||
| Money market accounts | 739,652 | 1,830 | 0.50 | % | 560,385 | 1,534 | 0.55 | % | ||||||||||||||
| Certificate accounts | 476,726 | 3,417 | 1.45 | % | 889,328 | 7,128 | 1.61 | % | ||||||||||||||
| Total interest-bearing deposits | 1,535,644 | 5,856 | 0.77 | % | 1,672,764 | 9,077 | 1.09 | % | ||||||||||||||
| FHLB advances | 227,639 | 680 | 0.60 | % | 68,704 | 1,209 | 3.52 | % | ||||||||||||||
| Securities sold under agreements to repurchase | 5,487 | 11 | 0.40 | % | 26,185 | 50 | 0.38 | % | ||||||||||||||
| Long-term debt | 61,857 | 1,999 | 6.43 | % | (3) | 61,857 | 736 | 2.38 | % | |||||||||||||
| Other borrowings | 4,675 | 10 | 0.42 | % | — | 9 | — | % | ||||||||||||||
| Total interest-bearing liabilities | 1,835,302 | 8,556 | 0.94 | % | 1,829,510 | 11,081 | 1.22 | % | ||||||||||||||
| Noninterest-bearing liabilities | 434,995 | 338,462 | ||||||||||||||||||||
| Total liabilities | 2,270,297 | 2,167,972 | ||||||||||||||||||||
| Shareholders’ equity | 277,588 | 174,070 | ||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,547,885 | $ | 2,342,042 | ||||||||||||||||||
Net interest income (4) | $ | 33,752 | $ | 28,354 | ||||||||||||||||||
| Net interest spread | 2.77 | % | 2.51 | % | ||||||||||||||||||
| Impact of noninterest-bearing sources | 0.19 | % | 0.17 | % | ||||||||||||||||||
| Net interest margin | 2.96 | % | 2.68 | % | ||||||||||||||||||
| (1) | The average balances of nonaccrual assets and related income, if any, are included in their respective categories. |
| (2) | Includes loan balances that have been foreclosed and are now reclassified to other real estate owned. |
| (3) | Net interest margin for the first quarter of 2013 included $1.4 million in interest expense related to the correction of the cumulative effect of an error in prior years, resulting from the under accrual of interest due on the TruPS for which the Company had deferred the payment of interest. Excluding the impact of the prior period interest expense correction, the net interest margin was 3.08% for the six months ended June 30, 2013. |
| (4) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.1 million and $723 thousand for the six months ended June 30, 2013 and June 30, 2012, respectively. The estimated federal statutory tax rate was 35% for the periods presented. |
15
HomeStreet, Inc. and Subsidiaries
Five Quarter Investment Securities Available for Sale
| (in thousands, except for duration data) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Mortgage-backed securities: | ||||||||||||||||||||
| Residential | $ | 120,939 | $ | 69,448 | $ | 62,853 | $ | 63,365 | $ | 48,136 | ||||||||||
| Commercial | 13,892 | 14,407 | 14,380 | 14,532 | 14,602 | |||||||||||||||
| Municipal bonds | 147,675 | 131,047 | 129,175 | 128,595 | 126,681 | |||||||||||||||
| Collateralized mortgage obligations: | ||||||||||||||||||||
| Residential | 137,543 | 150,113 | 170,199 | 167,513 | 185,970 | |||||||||||||||
| Commercial | 17,533 | 19,795 | 9,043 | 9,110 | 9,165 | |||||||||||||||
| Corporate debt securities | 70,973 | — | — | — | — | |||||||||||||||
| U.S. Treasury | 29,609 | 30,428 | 30,679 | 30,935 | 31,056 | |||||||||||||||
| $ | 538,164 | $ | 415,238 | $ | 416,329 | $ | 414,050 | $ | 415,610 | |||||||||||
| Weighted average duration in years | 5.5 | 5.0 | 4.9 | 5.0 | 5.1 | |||||||||||||||
Five Quarter Loans Held for Investment
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Consumer loans | ||||||||||||||||||||
| Single family | $ | 772,450 | $ | 730,553 | $ | 673,865 | $ | 602,164 | $ | 537,174 | ||||||||||
| Home equity | 132,218 | 132,537 | 136,746 | 141,343 | 147,587 | |||||||||||||||
| 904,668 | 863,090 | 810,611 | 743,507 | 684,761 | ||||||||||||||||
| Commercial loans | ||||||||||||||||||||
| Commercial real estate | 382,345 | 387,819 | 361,879 | 360,919 | 370,064 | |||||||||||||||
| Multifamily | 26,120 | 21,859 | 17,012 | 36,912 | 47,069 | |||||||||||||||
| Construction/land development | 61,125 | 43,600 | 71,033 | 77,912 | 83,797 | |||||||||||||||
| Commercial business | 73,202 | 73,851 | 79,576 | 80,056 | 79,980 | |||||||||||||||
| 542,792 | 527,129 | 529,500 | 555,799 | 580,910 | ||||||||||||||||
| 1,447,460 | 1,390,219 | 1,340,111 | 1,299,306 | 1,265,671 | ||||||||||||||||
| Net deferred loan fees and discounts | (3,366 | ) | (2,832 | ) | (3,576 | ) | (3,142 | ) | (3,508 | ) | ||||||||||
| 1,444,094 | 1,387,387 | 1,336,535 | 1,296,164 | 1,262,163 | ||||||||||||||||
| Allowance for loan losses | (27,655 | ) | (28,405 | ) | (27,561 | ) | (27,461 | ) | (26,910 | ) | ||||||||||
| $ | 1,416,439 | $ | 1,358,982 | $ | 1,308,974 | $ | 1,268,703 | $ | 1,235,253 | |||||||||||
16
HomeStreet, Inc. and Subsidiaries
Five Quarter Credit Quality Activity
Allowance for Credit Losses (roll-forward)
| Quarter ended | ||||||||||||||||||||
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Beginning balance | $ | 28,594 | $ | 27,751 | $ | 27,627 | $ | 27,125 | $ | 35,402 | ||||||||||
| Provision for credit losses | 400 | 2,000 | 4,000 | 5,500 | 2,000 | |||||||||||||||
| (Charge-offs), net of recoveries | (1,136 | ) | (1,157 | ) | (3,876 | ) | (4,998 | ) | (10,277 | ) | ||||||||||
| Ending balance | $ | 27,858 | $ | 28,594 | $ | 27,751 | $ | 27,627 | $ | 27,125 | ||||||||||
| Components: | ||||||||||||||||||||
| Allowance for loan losses | $ | 27,655 | $ | 28,405 | $ | 27,561 | $ | 27,461 | $ | 26,910 | ||||||||||
| Allowance for unfunded commitments | 203 | 189 | 190 | 166 | 215 | |||||||||||||||
| Allowance for credit losses | $ | 27,858 | $ | 28,594 | $ | 27,751 | $ | 27,627 | $ | 27,125 | ||||||||||
| Allowance as a % of loans held for investment | 1.92 | % | 2.05 | % | 2.06 | % | 2.12 | % | 2.13 | % | ||||||||||
| Allowance as a % of nonaccrual loans | 93.11 | % | 88.40 | % | 92.20 | % | 71.80 | % | 81.28 | % | ||||||||||
Nonperforming Assets (NPAs) roll-forward
| Quarter ended | ||||||||||||||||||||
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Beginning balance | $ | 53,797 | $ | 53,833 | $ | 55,250 | $ | 73,725 | $ | 107,215 | ||||||||||
| Additions | 4,340 | 6,511 | 9,973 | 20,703 | 13,208 | |||||||||||||||
| Reductions: | ||||||||||||||||||||
| Charge-offs | (1,136 | ) | (1,157 | ) | (3,876 | ) | (4,441 | ) | (10,277 | ) | ||||||||||
| OREO sales | (6,746 | ) | (2,117 | ) | (2,028 | ) | (25,946 | ) | (9,804 | ) | ||||||||||
| OREO writedowns and other adjustments | 300 | (638 | ) | (1,216 | ) | (2,623 | ) | (5,578 | ) | |||||||||||
| Principal paydown, payoff advances and other adjustments | (7,423 | ) | (2,529 | ) | (1,807 | ) | (4,794 | ) | (12,037 | ) | ||||||||||
| Transferred back to accrual status | (1,482 | ) | (106 | ) | (2,463 | ) | (1,374 | ) | (9,002 | ) | ||||||||||
| Total reductions | (16,487 | ) | (6,547 | ) | (11,390 | ) | (39,178 | ) | (46,698 | ) | ||||||||||
| Net additions/(reductions) | (12,147 | ) | (36 | ) | (1,417 | ) | (18,475 | ) | (33,490 | ) | ||||||||||
| Ending balance | $ | 41,650 | $ | 53,797 | $ | 53,833 | $ | 55,250 | $ | 73,725 | ||||||||||
17
HomeStreet, Inc. and Subsidiaries
Five Quarter Nonperforming Assets by Loan Class
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Loans accounted for on a nonaccrual basis: | ||||||||||||||||||||
| Consumer | ||||||||||||||||||||
| Single family | $ | 14,494 | $ | 15,282 | $ | 13,304 | $ | 12,900 | $ | 7,530 | ||||||||||
| Home equity | 3,367 | 2,917 | 2,970 | 1,024 | 1,910 | |||||||||||||||
| 17,861 | 18,199 | 16,274 | 13,924 | 9,440 | ||||||||||||||||
| Commercial | ||||||||||||||||||||
| Commercial real estate | 6,051 | 6,122 | 6,403 | 16,186 | 14,265 | |||||||||||||||
| Construction/land development | 4,051 | 5,974 | 5,042 | 5,848 | 9,373 | |||||||||||||||
| Commercial business | 1,738 | 1,838 | 2,173 | 2,289 | 29 | |||||||||||||||
| 11,840 | 13,934 | 13,618 | 24,323 | 23,667 | ||||||||||||||||
| Total loans on nonaccrual | $ | 29,701 | $ | 32,133 | $ | 29,892 | $ | 38,247 | $ | 33,107 | ||||||||||
| Nonaccrual loans as a % of total loans | 2.06 | % | 2.32 | % | 2.24 | % | 2.95 | % | 2.62 | % | ||||||||||
| Other real estate owned: | ||||||||||||||||||||
| Consumer | ||||||||||||||||||||
| Single family | $ | 4,468 | $ | 4,069 | $ | 4,071 | $ | 2,787 | $ | 3,142 | ||||||||||
| Commercial | ||||||||||||||||||||
| Commercial real estate | 1,184 | 8,440 | 10,283 | 3,489 | 3,184 | |||||||||||||||
| Construction/land development | 6,297 | 9,155 | 9,587 | 10,727 | 34,292 | |||||||||||||||
| 7,481 | 17,595 | 19,870 | 14,216 | 37,476 | ||||||||||||||||
| Total other real estate owned | $ | 11,949 | $ | 21,664 | $ | 23,941 | $ | 17,003 | $ | 40,618 | ||||||||||
| Nonperforming assets: | ||||||||||||||||||||
| Consumer | ||||||||||||||||||||
| Single family | $ | 18,962 | $ | 19,351 | $ | 17,375 | $ | 15,687 | $ | 10,672 | ||||||||||
| Home equity | 3,367 | 2,917 | 2,970 | 1,024 | 1,910 | |||||||||||||||
| 22,329 | 22,268 | 20,345 | 16,711 | 12,582 | ||||||||||||||||
| Commercial | ||||||||||||||||||||
| Commercial real estate | 7,235 | 14,562 | 16,686 | 19,675 | 17,449 | |||||||||||||||
| Construction/land development | 10,348 | 15,129 | 14,629 | 16,575 | 43,665 | |||||||||||||||
| Commercial business | 1,738 | 1,838 | 2,173 | 2,289 | 29 | |||||||||||||||
| 19,321 | 31,529 | 33,488 | 38,539 | 61,143 | ||||||||||||||||
| Total nonperforming assets | $ | 41,650 | $ | 53,797 | $ | 53,833 | $ | 55,250 | $ | 73,725 | ||||||||||
| Nonperforming assets as a % of total assets | 1.50 | % | 2.14 | % | 2.05 | % | 2.20 | % | 3.04 | % | ||||||||||
18
HomeStreet, Inc. and Subsidiaries
Delinquencies by Loan Class
| (in thousands) | 30-59 days past due | 60-89 days past due | 90 days or more past due | Total past due | Current | Total loans | ||||||||||||||||||
| June 30, 2013 | ||||||||||||||||||||||||
| Total loans held for investment | $ | 8,204 | $ | 4,955 | $ | 74,533 | $ | 87,692 | $ | 1,359,768 | $ | 1,447,460 | ||||||||||||
| Less: FHA/VA loans(1) | 5,407 | 3,120 | 44,832 | 53,359 | 32,435 | 85,794 | ||||||||||||||||||
| Total loans, excluding FHA/VA loans | $ | 2,797 | $ | 1,835 | $ | 29,701 | $ | 34,333 | $ | 1,327,333 | $ | 1,361,666 | ||||||||||||
| Loans by segment and class, excluding FHA/VA loans: | ||||||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||||||
| Single family residential | $ | 2,536 | $ | 1,670 | $ | 14,494 | $ | 18,700 | $ | 667,956 | $ | 686,656 | ||||||||||||
| Home equity | 261 | 165 | 3,367 | 3,793 | 128,425 | 132,218 | ||||||||||||||||||
| 2,797 | 1,835 | 17,861 | 22,493 | 796,381 | 818,874 | |||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||
| Commercial real estate | — | — | 6,051 | 6,051 | 376,294 | 382,345 | ||||||||||||||||||
| Multifamily residential | — | — | — | — | 26,120 | 26,120 | ||||||||||||||||||
| Construction/land development | — | — | 4,051 | 4,051 | 57,074 | 61,125 | ||||||||||||||||||
| Commercial business | — | — | 1,738 | 1,738 | 71,464 | 73,202 | ||||||||||||||||||
| — | — | 11,840 | 11,840 | 530,952 | 542,792 | |||||||||||||||||||
| $ | 2,797 | $ | 1,835 | $ | 29,701 | $ | 34,333 | $ | 1,327,333 | $ | 1,361,666 | |||||||||||||
| December 31, 2012 | ||||||||||||||||||||||||
| Total loans held for investment | $ | 12,703 | $ | 4,974 | $ | 70,550 | $ | 88,227 | $ | 1,251,884 | $ | 1,340,111 | ||||||||||||
Less: FHA/VA loans(1) | 6,839 | 3,700 | 40,658 | 51,197 | 24,257 | 75,454 | ||||||||||||||||||
| Total loans, excluding FHA/VA loans | $ | 5,864 | $ | 1,274 | $ | 29,892 | $ | 37,030 | $ | 1,227,627 | $ | 1,264,657 | ||||||||||||
| Loans by segment and class, excluding FHA/VA loans: | ||||||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||||||
Single family (1) | $ | 5,077 | $ | 1,032 | $ | 13,304 | $ | 19,413 | $ | 578,998 | $ | 598,411 | ||||||||||||
| Home equity | 787 | 242 | 2,970 | 3,999 | 132,747 | 136,746 | ||||||||||||||||||
| 5,864 | 1,274 | 16,274 | 23,412 | 711,745 | 735,157 | |||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||
| Commercial real estate | — | — | 6,403 | 6,403 | 355,476 | 361,879 | ||||||||||||||||||
| Multifamily | — | — | — | — | 17,012 | 17,012 | ||||||||||||||||||
| Construction/land development | — | — | 5,042 | 5,042 | 65,991 | 71,033 | ||||||||||||||||||
| Commercial business | — | — | 2,173 | 2,173 | 77,403 | 79,576 | ||||||||||||||||||
| — | — | 13,618 | 13,618 | 515,882 | 529,500 | |||||||||||||||||||
| $ | 5,864 | $ | 1,274 | $ | 29,892 | $ | 37,030 | $ | 1,227,627 | $ | 1,264,657 | |||||||||||||
| (1) | Represents loans whose repayments are insured by the FHA or guaranteed by the VA. |
19
HomeStreet, Inc. and Subsidiaries
Troubled Debt Restructurings (TDRs)
Troubled Debt Restructurings by Accrual and Nonaccrual Status
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Accrual | ||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||
| Single family | $ | 71,438 | $ | 69,792 | $ | 67,483 | $ | 67,647 | $ | 73,743 | ||||||||||
| Home equity | 2,326 | 2,338 | 2,288 | 2,705 | 2,538 | |||||||||||||||
| 73,764 | 72,130 | 69,771 | 70,352 | 76,281 | ||||||||||||||||
| Commercial loans | ||||||||||||||||||||
| Commercial real estate | 21,617 | 21,046 | 21,071 | 16,540 | 16,539 | |||||||||||||||
| Multifamily | 3,198 | 3,211 | 3,221 | 6,030 | 6,038 | |||||||||||||||
| Construction/land development | 3,718 | 4,487 | 6,365 | 13,802 | 7,875 | |||||||||||||||
| Commercial business | 129 | 137 | 147 | 154 | 162 | |||||||||||||||
| 28,662 | 28,881 | 30,804 | 36,526 | 30,614 | ||||||||||||||||
| $ | 102,426 | $ | 101,011 | $ | 100,575 | $ | 106,878 | $ | 106,895 | |||||||||||
| Nonaccrual | ||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||
| Single family | $ | 4,536 | $ | 4,593 | $ | 3,931 | $ | 6,210 | $ | 1,395 | ||||||||||
| Home equity | 121 | 134 | 465 | 64 | 231 | |||||||||||||||
| 4,657 | 4,727 | 4,396 | 6,274 | 1,626 | ||||||||||||||||
| Commercial loans | ||||||||||||||||||||
| Commercial real estate | — | 770 | 770 | 7,716 | 9,037 | |||||||||||||||
| Construction/land development | 4,051 | 4,625 | 5,042 | 5,845 | 9,370 | |||||||||||||||
| Commercial business | — | — | — | 22 | 29 | |||||||||||||||
| 4,051 | 5,395 | 5,812 | 13,583 | 18,436 | ||||||||||||||||
| $ | 8,708 | $ | 10,122 | $ | 10,208 | $ | 19,857 | $ | 20,062 | |||||||||||
| Total | ||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||
| Single family | $ | 75,974 | $ | 74,385 | $ | 71,414 | $ | 73,857 | $ | 75,138 | ||||||||||
| Home equity | 2,447 | 2,472 | 2,753 | 2,769 | 2,769 | |||||||||||||||
| 78,421 | 76,857 | 74,167 | 76,626 | 77,907 | ||||||||||||||||
| Commercial loans | ||||||||||||||||||||
| Commercial real estate | 21,617 | 21,816 | 21,841 | 24,256 | 25,576 | |||||||||||||||
| Multifamily | 3,198 | 3,211 | 3,221 | 6,030 | 6,038 | |||||||||||||||
| Construction/land development | 7,769 | 9,112 | 11,407 | 19,647 | 17,245 | |||||||||||||||
| Commercial business | 129 | 137 | 147 | 176 | 191 | |||||||||||||||
| 32,713 | 34,276 | 36,616 | 50,109 | 49,050 | ||||||||||||||||
| $ | 111,134 | $ | 111,133 | $ | 110,783 | $ | 126,735 | $ | 126,957 | |||||||||||
20
HomeStreet, Inc. and Subsidiaries
Troubled Debt Restructurings (TDRs)
Troubled Debt Restructurings - Re-Defaults
| Quarter ended | ||||||||||||||||||||
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
Recorded investment of re-defaults(1) | ||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||
| Single family | $ | 133 | $ | 1,423 | $ | 1,386 | $ | 5,123 | $ | 1,364 | ||||||||||
| Home equity | — | 22 | — | — | — | |||||||||||||||
| 133 | 1,445 | 1,386 | 5,123 | 1,364 | ||||||||||||||||
| Commercial loans | ||||||||||||||||||||
| Commercial real estate | — | 770 | — | 7,716 | — | |||||||||||||||
| Commercial business | — | — | — | — | 29 | |||||||||||||||
| — | 770 | — | 7,716 | 29 | ||||||||||||||||
| $ | 133 | $ | 2,215 | $ | 1,386 | $ | 12,839 | $ | 1,393 | |||||||||||
| (1) | Represents TDRs that have defaulted in the current period within 12 months of their modification date. Defaulted TDRs are reported in the table above based on a payment default definition of 60 days past due for the consumer loans portfolio segment and 90 days past due for the commercial loans portfolio segment. |
21
HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Banking Operations
Mortgage Servicing Income
| Quarter ended | ||||||||||||||||||||
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Servicing income, net: | ||||||||||||||||||||
| Servicing fees and other | $ | 7,955 | $ | 7,607 | $ | 7,523 | $ | 7,168 | $ | 6,705 | ||||||||||
Changes in fair value of single family MSRs due to modeled amortization (1) | (6,569 | ) | (5,106 | ) | (6,280 | ) | (5,360 | ) | (4,052 | ) | ||||||||||
| Amortization of multifamily MSRs | (423 | ) | (490 | ) | (463 | ) | (598 | ) | (462 | ) | ||||||||||
| 963 | 2,011 | 780 | 1,210 | 2,191 | ||||||||||||||||
| Risk management, single family MSRs: | ||||||||||||||||||||
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2) | 14,725 | 3,579 | 2,489 | (5,565 | ) | (15,354 | ) | |||||||||||||
| Net gain (loss) from derivatives economically hedging MSR | (13,505 | ) | (2,518 | ) | (2,618 | ) | 4,861 | 20,254 | ||||||||||||
| 1,220 | 1,061 | (129 | ) | (704 | ) | 4,900 | ||||||||||||||
| Mortgage servicing income | $ | 2,183 | $ | 3,072 | $ | 651 | $ | 506 | $ | 7,091 | ||||||||||
| (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. |
Loans Serviced for Others
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Single family | ||||||||||||||||||||
| U.S. government agency MBS | $ | 10,063,558 | $ | 9,352,404 | $ | 8,508,458 | $ | 7,724,562 | $ | 7,061,232 | ||||||||||
| Other | 341,055 | 348,992 | 362,230 | 385,107 | 407,750 | |||||||||||||||
| 10,404,613 | 9,701,396 | 8,870,688 | 8,109,669 | 7,468,982 | ||||||||||||||||
| Commercial | ||||||||||||||||||||
| Multifamily | 720,368 | 737,007 | 727,118 | 760,820 | 772,473 | |||||||||||||||
| Other | 51,058 | 52,825 | 53,235 | 53,617 | 56,840 | |||||||||||||||
| 771,426 | 789,832 | 780,353 | 814,437 | 829,313 | ||||||||||||||||
| Total loans serviced for others | $ | 11,176,039 | $ | 10,491,228 | $ | 9,651,041 | $ | 8,924,106 | $ | 8,298,295 | ||||||||||
22
HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Banking Operations (continued)
Single Family Capitalized Mortgage Servicing Rights
| Quarter ended | ||||||||||||||||||||
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Beginning balance | $ | 102,678 | $ | 87,396 | $ | 73,787 | $ | 70,585 | $ | 79,381 | ||||||||||
| Additions and amortization: | ||||||||||||||||||||
| Originations | 17,306 | 16,806 | 17,397 | 14,121 | 10,598 | |||||||||||||||
| Purchases | 6 | 3 | 3 | 6 | 12 | |||||||||||||||
Changes due to modeled amortization (1) | (6,569 | ) | (5,106 | ) | (6,280 | ) | (5,360 | ) | (4,052 | ) | ||||||||||
| Net additions and amortization | 10,743 | 11,703 | 11,120 | 8,767 | 6,558 | |||||||||||||||
Changes in fair value due to changes in model inputs and/or assumptions (2) | 14,725 | 3,579 | 2,489 | (5,565 | ) | (15,354 | ) | |||||||||||||
| Ending balance | $ | 128,146 | $ | 102,678 | $ | 87,396 | $ | 73,787 | $ | 70,585 | ||||||||||
| Ratio of MSR carrying value to related loans serviced for others | 1.23 | % | 1.03 | % | 0.99 | % | 0.91 | % | 0.95 | % | ||||||||||
MSR servicing fee multiple (3) | 4.05 | 3.36 | 3.13 | 2.81 | 2.82 | |||||||||||||||
| Weighted-average note rate (loans serviced for others) | 4.14 | % | 4.24 | % | 4.34 | % | 4.52 | % | 4.69 | % | ||||||||||
| Weighted-average servicing fee (loans serviced for others) | 0.30 | % | 0.31 | % | 0.31 | % | 0.33 | % | 0.34 | % | ||||||||||
| (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. |
| (3) | Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others. |
Commercial Multifamily Capitalized Mortgage Servicing Rights
| Quarter ended | ||||||||||||||||||||
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Beginning balance | $ | 9,150 | $ | 8,097 | $ | 7,725 | $ | 7,655 | $ | 7,420 | ||||||||||
| Originations | 512 | 1,543 | 835 | 668 | 697 | |||||||||||||||
| Amortization | (423 | ) | (490 | ) | (463 | ) | (598 | ) | (462 | ) | ||||||||||
| Ending balance | $ | 9,239 | $ | 9,150 | $ | 8,097 | $ | 7,725 | $ | 7,655 | ||||||||||
| Ratio of MSR carrying value to related loans serviced for others | 1.20 | % | 1.16 | % | 1.04 | % | 0.95 | % | 0.92 | % | ||||||||||
MSR servicing fee multiple (1) | 2.93 | 2.89 | 2.70 | 2.47 | 2.45 | |||||||||||||||
| Weighted-average note rate (loans serviced for others) | 5.25 | % | 5.25 | % | 5.38 | % | 5.48 | % | 5.54 | % | ||||||||||
| Weighted-average servicing fee (loans serviced for others) | 0.41 | % | 0.40 | % | 0.38 | % | 0.38 | % | 0.38 | % | ||||||||||
| (1) | Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others. |
23
HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Banking Operations (continued)
Mortgage Banking Activity
| Quarter ended | ||||||||||||||||||||||
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||||
| Production volumes: | ||||||||||||||||||||||
Single family mortgage closed loan volume (1)(2) | $ | 1,307,286 | $ | 1,192,156 | $ | 1,518,971 | $ | 1,368,238 | $ | 1,068,656 | ||||||||||||
Single family mortgage interest rate lock commitments(1) | 1,423,290 | 1,035,822 | 1,254,954 | 1,313,182 | 1,303,390 | |||||||||||||||||
Single family mortgage loans sold(1) | 1,229,686 | 1,360,344 | 1,434,947 | 1,238,879 | 962,704 | |||||||||||||||||
| Multifamily mortgage originations | $ | 14,790 | $ | 49,119 | $ | 40,244 | $ | 20,209 | $ | 35,908 | ||||||||||||
| Multifamily mortgage loans sold | 15,386 | 50,587 | 33,689 | 26,515 | 27,178 | |||||||||||||||||
| Net gain on mortgage loan origination and sale activities: | ||||||||||||||||||||||
| Single family: | ||||||||||||||||||||||
Servicing value and secondary marketing gains(3) | $ | 43,448 | $ | 44,235 | $ | 58,154 | $ | 56,142 | $ | 40,548 | ||||||||||||
Provision for repurchase losses(4) | — | — | (123 | ) | (526 | ) | (1,930 | ) | ||||||||||||||
| Net gain from secondary marketing activities | 43,448 | 44,235 | 58,031 | 55,616 | 38,618 | |||||||||||||||||
| Loan origination and funding fees | 8,267 | 7,795 | 9,219 | 8,680 | 7,142 | |||||||||||||||||
| Total single family | 51,715 | 52,030 | 67,250 | 64,296 | 45,760 | |||||||||||||||||
| Multifamily | 709 | 1,925 | 1,631 | 1,040 | 1,039 | |||||||||||||||||
| Total net gain on mortgage loan origination and sale activities | $ | 52,424 | $ | 53,955 | $ | 68,881 | $ | 65,336 | $ | 46,799 | ||||||||||||
| Composite Margin (in basis points): | ||||||||||||||||||||||
Servicing value and secondary marketing gains / interest rate lock commitments(5) | 305 | 385 | (7 | ) | 452 | (8 | ) | 424 | 296 | |||||||||||||
Loan origination and funding fees / retail mortgage originations(6) | 75 | 76 | 71 | 77 | 84 | |||||||||||||||||
| Composite Margin | 380 | 461 | (7 | ) | 523 | (8 | ) | 501 | 380 | |||||||||||||
| (1) | Includes loans originated by Windermere Mortgage Series Services LLC ("WMS") and purchased by HomeStreet, Inc. |
| (2) | Represents single family mortgage production volume designated for sale during each respective period. |
| (3) | Comprised of gains and losses on interest rate lock commitments (which considers the value of servicing), single family loans held for sale, forward sale commitments used to economically hedge secondary market activities, and the estimated fair value of the repurchase or indemnity obligation recognized on new loan sales. |
| (4) | Represents changes in estimated probable future repurchase losses on previously sold loans. |
| (5) | Servicing value and secondary marketing gains have been aggregated and are stated as a percentage of interest rate lock commitments. In previous quarters, the value of originated mortgage servicing rights was presented as a separate component of the composite margin and stated as a percentage of mortgage loans sold. Prior periods have been revised to conform to the current presentation. |
| (6) | Loan origination and funding fees is stated as a percentage of mortgage originations from the retail channel and excludes mortgage loans purchased from WMS. |
| (7) | Excludes the impact of a $4.3 million upward adjustment related to a change in accounting estimate that resulted from a change in the application of the valuation methodology used to value the Company's interest rate lock commitments. Including the impact of this cumulative effect adjustment, the secondary marketing gain margin and Composite Margin were 427 and 503 basis points, respectively, in the first quarter of 2013. |
| (8) | Excludes the impact of a $1.3 million correction that was recorded in secondary marketing gains in the fourth quarter of 2012 for the cumulative effect of an error in prior years related to the fair value measurement of loans held for sale. Including the impact of this correction, the secondary marketing gain margin and Composite Margin were 462 and 533 basis points, respectively, in the fourth quarter of 2012. |
24
HomeStreet, Inc. and Subsidiaries
Five Quarter Deposits
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Deposits by Product: | ||||||||||||||||||||
| Noninterest-bearing accounts - checking and savings | $ | 121,281 | $ | 83,202 | $ | 83,563 | $ | 77,149 | $ | 64,404 | ||||||||||
| Interest-bearing transaction and savings deposits: | ||||||||||||||||||||
| NOW accounts | 279,670 | 236,744 | 174,699 | 172,086 | 170,098 | |||||||||||||||
| Statement savings accounts due on demand | 115,817 | 108,627 | 103,932 | 104,239 | 88,104 | |||||||||||||||
| Money market accounts due on demand | 813,608 | 734,647 | 683,906 | 675,363 | 630,798 | |||||||||||||||
| Total interest-bearing transaction and savings deposits | 1,209,095 | 1,080,018 | 962,537 | 951,688 | 889,000 | |||||||||||||||
| Total transaction and savings deposits | 1,330,376 | 1,163,220 | 1,046,100 | 1,028,837 | 953,404 | |||||||||||||||
| Certificates of deposit | 403,636 | 523,208 | 655,467 | 684,604 | 755,646 | |||||||||||||||
| Noninterest-bearing accounts - other | 229,111 | 248,276 | 275,268 | 268,373 | 195,699 | |||||||||||||||
| Total deposits | $ | 1,963,123 | $ | 1,934,704 | $ | 1,976,835 | $ | 1,981,814 | $ | 1,904,749 | ||||||||||
| Percent of total deposits: | ||||||||||||||||||||
| Noninterest-bearing accounts - checking and savings | 6.2 | % | 4.3 | % | 4.2 | % | 3.9 | % | 3.4 | % | ||||||||||
| Interest-bearing transaction and savings deposits: | ||||||||||||||||||||
| NOW accounts | 14.2 | 12.2 | 8.8 | 8.7 | 8.9 | |||||||||||||||
| Statement savings accounts due on demand | 5.9 | 5.6 | 5.3 | 5.3 | 4.6 | |||||||||||||||
| Money market accounts due on demand | 41.4 | 38.0 | 34.6 | 34.1 | 33.1 | |||||||||||||||
| Total interest-bearing transaction and savings deposits | 61.5 | 55.8 | 48.7 | 48.1 | 46.6 | |||||||||||||||
| Total transaction and savings deposits | 67.7 | 60.1 | 52.9 | 52.0 | 50.0 | |||||||||||||||
| Certificates of deposit | 20.6 | 27.0 | 33.2 | 34.5 | 39.7 | |||||||||||||||
| Noninterest-bearing accounts - other | 11.7 | 12.9 | 13.9 | 13.5 | 10.3 | |||||||||||||||
| Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
25
HomeStreet, Inc. and Subsidiaries
Business Segments
Mortgage Banking Segment
| Quarter ended | ||||||||||||||||||||
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Net interest income | $ | 3,728 | $ | 4,154 | $ | 4,477 | $ | 4,424 | $ | 3,287 | ||||||||||
| Noninterest income | 56,019 | 56,553 | 69,403 | 66,617 | 54,597 | |||||||||||||||
| Noninterest expense | 43,240 | 40,100 | 39,573 | 32,632 | 27,935 | |||||||||||||||
| Income before income taxes | 16,507 | 20,607 | 34,307 | 38,409 | 29,949 | |||||||||||||||
| Income tax expense | 5,760 | 6,814 | 8,433 | 14,090 | 3,757 | |||||||||||||||
| Net income | $ | 10,747 | $ | 13,793 | $ | 25,874 | $ | 24,319 | $ | 26,192 | ||||||||||
Efficiency ratio (1) | 72.37 | % | 66.05 | % | 53.56 | % | 45.93 | % | 48.26 | % | ||||||||||
(1) | Noninterest expense divided by total net revenue (net interest income and noninterest income). |
Commercial and Consumer Banking Segment
| Quarter ended | ||||||||||||||||||||
| (in thousands) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | |||||||||||||||
| Net interest income | $ | 13,687 | $ | 11,081 | $ | 12,114 | $ | 12,096 | $ | 11,512 | ||||||||||
| Provision for loan losses | 400 | 2,000 | 4,000 | 5,500 | 2,000 | |||||||||||||||
| Noninterest income | 1,537 | 2,390 | 2,529 | 2,474 | 2,253 | |||||||||||||||
| Noninterest expense | 13,472 | 15,699 | 16,393 | 13,302 | 19,019 | |||||||||||||||
| Income (loss) before income taxes | 1,352 | (4,228 | ) | (5,750 | ) | (4,232 | ) | (7,254 | ) | |||||||||||
| Income tax expense (benefit) | 31 | (1,375 | ) | (1,373 | ) | (1,904 | ) | 260 | ||||||||||||
| Net income (loss) | $ | 1,321 | $ | (2,853 | ) | $ | (4,377 | ) | $ | (2,328 | ) | $ | (7,514 | ) | ||||||
Pre-tax pre-provision profit (loss) (1) | $ | 1,752 | $ | (2,228 | ) | $ | (1,750 | ) | $ | 1,268 | $ | (5,254 | ) | |||||||
Efficiency ratio (2) | 88.49 | % | 116.54 | % | 111.95 | % | 91.30 | % | 138.17 | % | ||||||||||
(1) | Pre-tax pre-provision profit is total net revenue (net interest income and noninterest income) less noninterest expense. The Company believes that this financial measure is useful in assessing the ability of a lending institution to generate income in excess of its provision for loan losses. |
(2) | Noninterest expense divided by total net revenue (net interest income and noninterest income). |
26
HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures
Tangible common shareholders' equity is calculated by deducting goodwill and intangible assets (excluding mortgage servicing rights) from shareholders' equity. Tangible common shareholders' equity is considered a non-GAAP financial measure and should be viewed in conjunction with shareholders' equity. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although we believe these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.
Tangible book value is calculated by dividing tangible common shareholders' equity by the number of common shares outstanding. The return on average tangible common shareholders' equity is calculated by dividing net earnings available to common shareholders (annualized) by average tangible common shareholders' equity.
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
| (dollars in thousands, except share data) | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sept. 30, 2012 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | |||||||||||||||||||||
| Shareholders' equity | $ | 268,321 | $ | 270,405 | $ | 263,762 | $ | 241,499 | $ | 215,614 | $ | 268,321 | $ | 215,614 | ||||||||||||||
| Less: Goodwill | (424 | ) | (424 | ) | (424 | ) | (424 | ) | (424 | ) | (424 | ) | (424 | ) | ||||||||||||||
| Tangible common shareholders' equity | $ | 267,897 | $ | 269,981 | $ | 263,338 | $ | 241,075 | $ | 215,190 | $ | 267,897 | $ | 215,190 | ||||||||||||||
| Book value per share | $ | 18.62 | $ | 18.78 | $ | 18.34 | $ | 16.82 | $ | 15.05 | $ | 18.62 | $ | 15.05 | ||||||||||||||
| Impact of goodwill | (0.02 | ) | (0.03 | ) | (0.03 | ) | (0.03 | ) | (0.03 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||||
| Tangible book value per share | $ | 18.60 | $ | 18.75 | $ | 18.31 | $ | 16.79 | $ | 15.02 | $ | 18.60 | $ | 15.02 | ||||||||||||||
| Average shareholders' equity | $ | 280,783 | $ | 274,355 | $ | 262,163 | $ | 231,361 | $ | 207,344 | $ | 277,588 | $ | 174,070 | ||||||||||||||
| Less: Average goodwill | (424 | ) | (424 | ) | (424 | ) | (424 | ) | (424 | ) | (424 | ) | (424 | ) | ||||||||||||||
| Average tangible shareholders' equity | $ | 280,359 | $ | 273,931 | $ | 261,739 | $ | 230,937 | $ | 206,920 | $ | 277,164 | $ | 173,646 | ||||||||||||||
| Return on average common shareholders’ equity | 17.19 | % | 15.95 | % | 32.80 | % | 38.02 | % | 36.03 | % | 16.58 | % | 44.39 | % | ||||||||||||||
| Impact of goodwill | 0.03 | % | 0.02 | % | 0.05 | % | 0.07 | % | 0.08 | % | 0.02 | % | 0.11 | % | ||||||||||||||
Return on average tangible common shareholders' equity | 17.22 | % | 15.97 | % | 32.85 | % | 38.09 | % | 36.11 | % | 16.60 | % | 44.50 | % | ||||||||||||||
27