HomeStreet Reports First Quarter 2022 Results
Fully diluted EPS $1.01 | ROAE: 11.6% ROATE: 12.2% | ROAA: 1.10% |
SEATTLE – April 25, 2022 – (BUSINESS WIRE) – HomeStreet, Inc. (Nasdaq:HMST) (including its consolidated subsidiaries, the "Company" or "HomeStreet"), the parent company of HomeStreet Bank, today announced the financial results for the quarter ended March 31, 2022. As we present non-GAAP measures in this release, the reader should refer to the non-GAAP reconciliations set forth below under the section “Non-GAAP Financial Measures.”
“During the first quarter of 2022, our focus on growth resulted in a $331 million increase in our loans held for investment, which supports future growth in our net interest income” said Mark K. Mason, HomeStreet’s Chairman of the Board, President, and Chief Executive Officer. “Continued improvement in our loan portfolio credit quality and reduced uncertainty related to the pandemic resulted in a $9 million recovery in our provision for credit losses. Expected declines in gain on sale revenues resulting from lower single family loans originated for sale and our decision to not sell multifamily portfolio loans in the quarter resulted in lower earnings when compared to the fourth quarter of 2021. Our efficiency ratio, which increased due to the decline in revenues, is expected to significantly improve in future periods due to anticipated increasing levels of net interest income and stable noninterest expenses. Overall, assuming continued strong loan originations, we anticipate meaningful earnings growth going forward as a result of our portfolio growth focus and operating leverage.”
Operating Results | First quarter 2022 compared to fourth quarter 2021 •Net income: $20.0 million compared to $29.4 million •Earnings per fully diluted share: $1.01 compared to $1.43 •Net interest margin: 3.27% compared to 3.34% •Return on Average Equity ("ROAE"): 11.6% compared to 16.1% •Return on Average Tangible Equity ("ROATE"): 12.2% compared to 17.0% •Return on average assets ("ROAA"): 1.10% compared to 1.59% •Efficiency ratio: 77.0% compared to 62.2% |
Financial Position | First quarter 2022 compared to fourth quarter 2021 •Loan portfolio originations: $747 million in the first quarter •Loans held for investment increased $331 million in the first quarter •Commercial and consumer noninterest-bearing deposits increased 2% •Period ending cost of deposits: 0.16% compared to 0.15% •Tangible book value per share: $30.47 compared to $34.04 | |||||||
“Loan originations were strong in the current quarter with $747 million of loan originations,” added Mr. Mason. “Our loans held for investment increased at an annualized rate of 24% during the first quarter and our loan pipelines are near record levels. Total deposits increased at an annualized rate of 8% while noninterest bearing deposits continue to increase as a percentage of total deposits."
1
Other | •Completed $100 million subordinated notes offering in January 2022 •Repurchased a total of 1,471,485 shares of our common stock at an average price of $50.97 per share during the first quarter of 2022 •Declared and paid a cash dividend of $0.35 per share in the first quarter |
Mr. Mason concluded “The completion of our $100 million subordinated notes offering in January 2022 provided funds to allow us to complete the repurchase of $75 million of stock during the first quarter, equivalent to a reduction of over 7% of our outstanding shares at the beginning of the year. Additionally, in the first quarter, we increased our quarterly dividend by 40% to $0.35 per share. We anticipate continuing to efficiently retain capital for growth while returning excess capital to shareholders."
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Conference Call
HomeStreet, Inc. (Nasdaq:HMST), the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Tuesday, April 26, 2022 at 1:00 p.m. ET. Mark K. Mason, CEO and President, and John M. Michel, CFO, will discuss first quarter 2022 results and provide an update on recent events. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may register in advance at the following URL: https://www.incommglobalevents.com/registration/q4inc/10496/homestreet-q1-2022-earnings-call/ or may join the call by dialing directly at 1-844-200-6205 (1-929-526-1599 internationally) shortly before 1:00 p.m. ET using Access Code 121471.
A rebroadcast will be available approximately one hour after the conference call by dialing 1-866-813-9403 and entering passcode 479950.
About HomeStreet
HomeStreet, Inc. (Nasdaq:HMST) is a diversified financial services company headquartered in Seattle, Washington, serving consumers and businesses in the Western United States and Hawaii. The Company is principally engaged in real estate lending, including mortgage banking activities, and commercial and consumer banking. Its principal subsidiaries are HomeStreet Bank and HomeStreet Capital Corporation. HomeStreet Bank is the winner of the 2022 "Best Small Bank" in Washington Newsweek magazine award. Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com. HomeStreet Bank is a member of the FDIC and is an Equal Housing Lender.
Contact: | Executive Vice President and Chief Financial Officer | |||||||
HomeStreet, Inc. | ||||||||
John Michel (206) 515-2291 | ||||||||
john.michel@homestreet.com | ||||||||
http://ir.homestreet.com |
3
HomeStreet, Inc. and Subsidiaries
Summary Financial Data
For the Quarter Ended | |||||||||||||||||||||||||||||||||||||||||
(in thousands, except per share data and FTE data) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||||||||||||||||||||||
Select Income Statement Data: | |||||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 54,546 | $ | 57,084 | $ | 57,484 | $ | 57,972 | $ | 54,517 | |||||||||||||||||||||||||||||||
Provision for credit losses | (9,000) | (6,000) | (5,000) | (4,000) | — | ||||||||||||||||||||||||||||||||||||
Noninterest income | 15,558 | 28,620 | 24,298 | 28,224 | 38,833 | ||||||||||||||||||||||||||||||||||||
Noninterest expense | 54,473 | 53,971 | 51,949 | 52,815 | 56,608 | ||||||||||||||||||||||||||||||||||||
Income: | |||||||||||||||||||||||||||||||||||||||||
Before income taxes | 24,631 | 37,733 | 34,833 | 37,381 | 36,742 | ||||||||||||||||||||||||||||||||||||
Total | 19,951 | 29,432 | 27,170 | 29,157 | 29,663 | ||||||||||||||||||||||||||||||||||||
Net income per share - diluted | 1.01 | 1.43 | 1.31 | 1.37 | 1.35 | ||||||||||||||||||||||||||||||||||||
Selected Performance Ratios: | |||||||||||||||||||||||||||||||||||||||||
Return on average equity - annualized | 11.6 | % | 16.1 | % | 14.8 | % | 16.3 | % | 16.4 | % | |||||||||||||||||||||||||||||||
Return on average tangible equity - annualized (1) | 12.2 | % | 17.0 | % | 15.6 | % | 17.2 | % | 17.3 | % | |||||||||||||||||||||||||||||||
Return on average assets - annualized | 1.10 | % | 1.59 | % | 1.48 | % | 1.59 | % | 1.65 | % | |||||||||||||||||||||||||||||||
Efficiency ratio (1) | 77.0 | % | 62.2 | % | 62.8 | % | 62.8 | % | 60.0 | % | |||||||||||||||||||||||||||||||
Net interest margin | 3.27 | % | 3.34 | % | 3.42 | % | 3.45 | % | 3.29 | % | |||||||||||||||||||||||||||||||
Other data: | |||||||||||||||||||||||||||||||||||||||||
Full-time equivalent employees ("FTE") | 962 | 970 | 983 | 997 | 1,013 | ||||||||||||||||||||||||||||||||||||
4
HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)
As of | |||||||||||||||||||||||||||||||||||||||||
(in thousands, except share and per share data) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||||||||||||||||||||||
Selected Balance Sheet Data: | |||||||||||||||||||||||||||||||||||||||||
Loans held for sale | $ | 59,150 | $ | 176,131 | $ | 395,112 | $ | 225,241 | $ | 390,223 | |||||||||||||||||||||||||||||||
Loans held for investment, net | 5,826,546 | 5,495,726 | 5,299,741 | 5,332,626 | 5,227,727 | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses ("ACL") | 37,944 | 47,123 | 54,516 | 59,897 | 64,047 | ||||||||||||||||||||||||||||||||||||
Investment securities | 1,083,640 | 1,006,691 | 983,038 | 1,007,658 | 1,049,105 | ||||||||||||||||||||||||||||||||||||
Total assets | 7,510,894 | 7,204,091 | 7,372,451 | 7,167,951 | 7,265,191 | ||||||||||||||||||||||||||||||||||||
Deposits | 6,270,535 | 6,146,509 | 6,359,660 | 6,086,527 | 6,131,233 | ||||||||||||||||||||||||||||||||||||
Borrowings | 273,000 | 41,000 | — | 50,000 | 84,500 | ||||||||||||||||||||||||||||||||||||
Long-term debt | 224,137 | 126,026 | 125,979 | 125,932 | 125,885 | ||||||||||||||||||||||||||||||||||||
Total shareholders' equity | 601,231 | 715,339 | 710,376 | 708,731 | 701,463 | ||||||||||||||||||||||||||||||||||||
Other Data: | |||||||||||||||||||||||||||||||||||||||||
Book value per share | $ | 32.15 | $ | 35.61 | $ | 34.74 | $ | 34.09 | $ | 32.84 | |||||||||||||||||||||||||||||||
Tangible book value per share (1) | $ | 30.47 | $ | 34.04 | $ | 33.18 | $ | 32.53 | $ | 31.31 | |||||||||||||||||||||||||||||||
Equity to assets | 8.0 | % | 9.9 | % | 9.6 | % | 9.9 | % | 9.7 | % | |||||||||||||||||||||||||||||||
Tangible common equity to tangible assets (1) | 7.6 | % | 9.5 | % | 9.2 | % | 9.5 | % | 9.2 | % | |||||||||||||||||||||||||||||||
Shares outstanding at end of period | 18,700,536 | 20,085,336 | 20,446,648 | 20,791,659 | 21,360,514 | ||||||||||||||||||||||||||||||||||||
Loans to deposit ratio | 94.5 | % | 93.0 | % | 90.4 | % | 92.3 | % | 92.7 | % | |||||||||||||||||||||||||||||||
Credit Quality: | |||||||||||||||||||||||||||||||||||||||||
ACL to total loans (2) | 0.66 | % | 0.88 | % | 1.06 | % | 1.18 | % | 1.34 | % | |||||||||||||||||||||||||||||||
ACL to nonaccrual loans | 320.3 | % | 386.2 | % | 307.8 | % | 287.5 | % | 297.3 | % | |||||||||||||||||||||||||||||||
Nonaccrual loans to total loans | 0.20 | % | 0.22 | % | 0.33 | % | 0.39 | % | 0.41 | % | |||||||||||||||||||||||||||||||
Nonperforming assets to total assets | 0.17 | % | 0.18 | % | 0.26 | % | 0.31 | % | 0.32 | % | |||||||||||||||||||||||||||||||
Nonperforming assets | $ | 12,581 | $ | 12,936 | $ | 19,196 | $ | 22,319 | $ | 23,025 | |||||||||||||||||||||||||||||||
Regulatory Capital Ratios: | |||||||||||||||||||||||||||||||||||||||||
Bank | |||||||||||||||||||||||||||||||||||||||||
Tier 1 leverage ratio | 10.30 | % | 10.11 | % | 10.17 | % | 9.95 | % | 10.01 | % | |||||||||||||||||||||||||||||||
Total risk-based capital | 13.23 | % | 13.77 | % | 13.71 | % | 14.36 | % | 14.84 | % | |||||||||||||||||||||||||||||||
Company | |||||||||||||||||||||||||||||||||||||||||
Tier 1 leverage ratio | 8.99 | % | 9.94 | % | 10.00 | % | 9.78 | % | 9.83 | % | |||||||||||||||||||||||||||||||
Total risk-based capital | 12.65 | % | 12.66 | % | 13.01 | % | 13.59 | % | 14.05 | % | |||||||||||||||||||||||||||||||
(1)For additional information on these non-GAAP financial measures and for corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures in this earnings release.
(2)The reserve rate is calculated excluding balances related to loans that are insured by the FHA or guaranteed by the VA or SBA, including Paycheck Protection Program ("PPP") loan balances.
5
HomeStreet, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data) | March 31, 2022 | December 31, 2021 | |||||||||||||||
ASSETS | |||||||||||||||||
Cash and cash equivalents | $ | 73,862 | $ | 65,214 | |||||||||||||
Investment securities | 1,083,640 | 1,006,691 | |||||||||||||||
Loans held for sale | 59,150 | 176,131 | |||||||||||||||
Loans held for investment, (net of allowance for credit losses of $37,944 and $47,123) | 5,826,546 | 5,495,726 | |||||||||||||||
Mortgage servicing rights | 111,657 | 100,999 | |||||||||||||||
Premises and equipment, net | 56,269 | 58,154 | |||||||||||||||
Other real estate owned | 735 | 735 | |||||||||||||||
Goodwill and other intangibles | 31,464 | 31,709 | |||||||||||||||
Other assets | 267,571 | 268,732 | |||||||||||||||
Total assets | $ | 7,510,894 | $ | 7,204,091 | |||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||
Deposits | $ | 6,270,535 | $ | 6,146,509 | |||||||||||||
Borrowings | 273,000 | 41,000 | |||||||||||||||
Long-term debt | 224,137 | 126,026 | |||||||||||||||
Accounts payable and other liabilities | 141,991 | 175,217 | |||||||||||||||
Total liabilities | 6,909,663 | 6,488,752 | |||||||||||||||
Shareholders' equity: | |||||||||||||||||
Common stock, no par value; 160,000,000 shares authorized | |||||||||||||||||
18,700,536 and 20,085,336 shares issued and outstanding | 223,718 | 249,856 | |||||||||||||||
Retained earnings | 408,442 | 444,343 | |||||||||||||||
Accumulated other comprehensive income (loss) | (30,929) | 21,140 | |||||||||||||||
Total shareholders' equity | 601,231 | 715,339 | |||||||||||||||
Total liabilities and shareholders' equity | $ | 7,510,894 | $ | 7,204,091 | |||||||||||||
6
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Income Statements
Quarter Ended | |||||||||||||||||||||||||||||||||||||||||
(in thousands, except share and per share data) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||||||||||||||||||||||
Interest income: | |||||||||||||||||||||||||||||||||||||||||
Loans | $ | 52,954 | $ | 55,403 | $ | 56,117 | $ | 57,078 | $ | 53,568 | |||||||||||||||||||||||||||||||
Investment securities | 5,966 | 5,469 | 5,130 | 5,010 | 5,951 | ||||||||||||||||||||||||||||||||||||
Cash, Fed Funds and other | 108 | 97 | 141 | 159 | 172 | ||||||||||||||||||||||||||||||||||||
Total interest income | 59,028 | 60,969 | 61,388 | 62,247 | 59,691 | ||||||||||||||||||||||||||||||||||||
Interest expense: | |||||||||||||||||||||||||||||||||||||||||
Deposits | 2,284 | 2,481 | 2,507 | 2,773 | 3,650 | ||||||||||||||||||||||||||||||||||||
Borrowings | 2,198 | 1,404 | 1,397 | 1,502 | 1,524 | ||||||||||||||||||||||||||||||||||||
Total interest expense | 4,482 | 3,885 | 3,904 | 4,275 | 5,174 | ||||||||||||||||||||||||||||||||||||
Net interest income | 54,546 | 57,084 | 57,484 | 57,972 | 54,517 | ||||||||||||||||||||||||||||||||||||
Provision for credit losses | (9,000) | (6,000) | (5,000) | (4,000) | — | ||||||||||||||||||||||||||||||||||||
Net interest income after provision for credit losses | 63,546 | 63,084 | 62,484 | 61,972 | 54,517 | ||||||||||||||||||||||||||||||||||||
Noninterest income: | |||||||||||||||||||||||||||||||||||||||||
Net gain on loan origination and sale activities | 8,274 | 20,079 | 17,509 | 21,271 | 33,459 | ||||||||||||||||||||||||||||||||||||
Loan servicing income | 3,304 | 2,540 | 2,014 | 1,931 | 748 | ||||||||||||||||||||||||||||||||||||
Deposit fees | 2,075 | 2,156 | 2,091 | 1,997 | 1,824 | ||||||||||||||||||||||||||||||||||||
Other | 1,905 | 3,845 | 2,684 | 3,025 | 2,802 | ||||||||||||||||||||||||||||||||||||
Total noninterest income | 15,558 | 28,620 | 24,298 | 28,224 | 38,833 | ||||||||||||||||||||||||||||||||||||
Noninterest expense: | |||||||||||||||||||||||||||||||||||||||||
Compensation and benefits | 32,031 | 30,627 | 31,175 | 34,378 | 35,835 | ||||||||||||||||||||||||||||||||||||
Information services | 7,062 | 7,278 | 6,902 | 6,949 | 6,784 | ||||||||||||||||||||||||||||||||||||
Occupancy | 6,365 | 5,662 | 5,705 | 5,973 | 6,492 | ||||||||||||||||||||||||||||||||||||
General, administrative and other | 9,015 | 10,404 | 8,167 | 5,515 | 7,497 | ||||||||||||||||||||||||||||||||||||
Total noninterest expense | 54,473 | 53,971 | 51,949 | 52,815 | 56,608 | ||||||||||||||||||||||||||||||||||||
Income before income taxes | 24,631 | 37,733 | 34,833 | 37,381 | 36,742 | ||||||||||||||||||||||||||||||||||||
Income tax expense | 4,680 | 8,301 | 7,663 | 8,224 | 7,079 | ||||||||||||||||||||||||||||||||||||
Net income | $ | 19,951 | $ | 29,432 | $ | 27,170 | $ | 29,157 | $ | 29,663 | |||||||||||||||||||||||||||||||
Net income per share: | |||||||||||||||||||||||||||||||||||||||||
Basic | $ | 1.02 | $ | 1.45 | $ | 1.32 | $ | 1.38 | $ | 1.37 | |||||||||||||||||||||||||||||||
Diluted | $ | 1.01 | $ | 1.43 | $ | 1.31 | $ | 1.37 | $ | 1.35 | |||||||||||||||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||||||||
Basic | 19,585,753 | 20,251,824 | 20,613,290 | 21,057,473 | 21,637,671 | ||||||||||||||||||||||||||||||||||||
Diluted | 19,791,913 | 20,522,475 | 20,819,601 | 21,287,974 | 21,961,828 |
7
HomeStreet, Inc. and Subsidiaries
Consolidated Income Statements
Quarter Ended March 31, | |||||||||||||||||||||||
(in thousands, except share and per share data) | 2022 | 2021 | |||||||||||||||||||||
Interest income: | |||||||||||||||||||||||
Loans | $ | 52,954 | $ | 53,568 | |||||||||||||||||||
Investment securities | 5,966 | 5,951 | |||||||||||||||||||||
Cash, Fed Funds and other | 108 | 172 | |||||||||||||||||||||
Total interest income | 59,028 | 59,691 | |||||||||||||||||||||
Interest expense: | |||||||||||||||||||||||
Deposits | 2,284 | 3,650 | |||||||||||||||||||||
Borrowings | 2,198 | 1,524 | |||||||||||||||||||||
Total interest expense | 4,482 | 5,174 | |||||||||||||||||||||
Net interest income | 54,546 | 54,517 | |||||||||||||||||||||
Provision for credit losses | (9,000) | — | |||||||||||||||||||||
Net interest income after provision for credit losses | 63,546 | 54,517 | |||||||||||||||||||||
Noninterest income: | |||||||||||||||||||||||
Net gain on loan origination and sale activities | 8,274 | 33,459 | |||||||||||||||||||||
Loan servicing income | 3,304 | 748 | |||||||||||||||||||||
Deposit fees | 2,075 | 1,824 | |||||||||||||||||||||
Other | 1,905 | 2,802 | |||||||||||||||||||||
Total noninterest income | 15,558 | 38,833 | |||||||||||||||||||||
Noninterest expense: | |||||||||||||||||||||||
Compensation and benefits | 32,031 | 35,835 | |||||||||||||||||||||
Information services | 7,062 | 6,784 | |||||||||||||||||||||
Occupancy | 6,365 | 6,492 | |||||||||||||||||||||
General, administrative and other | 9,015 | 7,497 | |||||||||||||||||||||
Total noninterest expense | 54,473 | 56,608 | |||||||||||||||||||||
Income before income taxes | 24,631 | 36,742 | |||||||||||||||||||||
Income tax expense | 4,680 | 7,079 | |||||||||||||||||||||
Net income | $ | 19,951 | $ | 29,663 | |||||||||||||||||||
Net income per share: | |||||||||||||||||||||||
Basic | $ | 1.02 | $ | 1.37 | |||||||||||||||||||
Diluted | $ | 1.01 | $ | 1.35 | |||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||
Basic | 19,585,753 | 21,637,671 | |||||||||||||||||||||
Diluted | 19,791,913 | 21,961,828 |
8
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields (Taxable-equivalent basis) and Rates
(in thousands, except yield/rate) | Quarter Ended | |||||||||||||||||||||||||||||||
Average Balances: | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||
Investment securities | $ | 1,028,971 | $ | 990,273 | $ | 994,593 | $ | 1,032,995 | $ | 1,065,423 | ||||||||||||||||||||||
Loans | 5,691,316 | 5,767,597 | 5,577,149 | 5,664,187 | 5,605,868 | |||||||||||||||||||||||||||
Total interest earning assets | 6,786,205 | 6,840,317 | 6,719,258 | 6,783,707 | 6,739,335 | |||||||||||||||||||||||||||
Total assets | 7,363,589 | 7,356,957 | 7,264,933 | 7,342,275 | 7,310,408 | |||||||||||||||||||||||||||
Deposits: Interest-bearing | 4,513,631 | 4,591,239 | 4,525,730 | 4,577,504 | 4,589,126 | |||||||||||||||||||||||||||
Deposits: Noninterest-bearing | 1,744,202 | 1,728,558 | 1,679,086 | 1,541,317 | 1,433,765 | |||||||||||||||||||||||||||
Borrowings | 64,557 | 25,711 | 32,167 | 179,543 | 203,621 | |||||||||||||||||||||||||||
Long-term debt | 204,553 | 125,995 | 125,948 | 125,901 | 125,854 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 4,782,741 | 4,742,945 | 4,683,845 | 4,882,948 | 4,918,601 | |||||||||||||||||||||||||||
Average Yield/Rate: | ||||||||||||||||||||||||||||||||
Investment securities | 2.59 | % | 2.50 | % | 2.34 | % | 2.20 | % | 2.47 | % | ||||||||||||||||||||||
Loans | 3.74 | % | 3.79 | % | 3.98 | % | 4.02 | % | 3.85 | % | ||||||||||||||||||||||
Total interest earning assets | 3.54 | % | 3.57 | % | 3.65 | % | 3.70 | % | 3.60 | % | ||||||||||||||||||||||
Deposits: Interest-bearing | 0.21 | % | 0.21 | % | 0.22 | % | 0.24 | % | 0.32 | % | ||||||||||||||||||||||
Total deposits | 0.15 | % | 0.16 | % | 0.16 | % | 0.18 | % | 0.25 | % | ||||||||||||||||||||||
Borrowings | 0.56 | % | 0.73 | % | 0.54 | % | 0.31 | % | 0.32 | % | ||||||||||||||||||||||
Long-term debt | 4.12 | % | 4.29 | % | 4.28 | % | 4.31 | % | 4.33 | % | ||||||||||||||||||||||
Total interest-bearing liabilities | 0.38 | % | 0.33 | % | 0.33 | % | 0.35 | % | 0.42 | % | ||||||||||||||||||||||
Net interest rate spread | 3.16 | % | 3.24 | % | 3.32 | % | 3.35 | % | 3.18 | % | ||||||||||||||||||||||
Net interest margin | 3.27 | % | 3.34 | % | 3.42 | % | 3.45 | % | 3.29 | % | ||||||||||||||||||||||
9
Results of Operations
First Quarter of 2022 Compared to the Fourth Quarter of 2021
Our net income and income before taxes were $20.0 million and $24.6 million, respectively, in the first quarter of 2022, as compared to $29.4 million and $37.7 million, respectively, in the fourth quarter of 2021. The $13.1 million decrease in income before taxes was due to lower net interest income, lower noninterest income and higher noninterest expenses, partially offset by a higher recovery of our allowance for credit losses.
Our effective tax rate was 19.0% in the first quarter of 2022 as compared to 22.0% in fourth quarter of 2021 and a statutory rate of 23.4%. Our effective tax rate was lower than our statutory rate due to the benefits of tax advantaged investments. Additionally, our effective tax rate in the first quarter of 2022 was lower than the fourth quarter of 2021 due to reductions in taxes on income related to excess tax benefits resulting from the vesting of stock awards during the first quarter.
Net interest income was $2.5 million lower in the first quarter of 2022 as compared to the fourth quarter of 2021 primarily due to lower average loan balances, a $0.7 million increase in interest expense related to the $100 million subordinated notes offering completed in January 2022 and a $0.6 million decrease in income from Paycheck Protection Program (“PPP”) loans. The lower average loan balances were primarily due to the sale of $244 million of multifamily loans in November of 2021 which was partially offset by the increase in loan balances during the first quarter.
As a result of the continued favorable performance of our loan portfolio, a stable low level of nonperforming assets and an improved outlook of the estimated impact of COVID-19 on our loan portfolio, we recorded a $9 million recovery of our allowance for credit losses in the first quarter of 2022, as compared to a $6 million recovery of our allowance for credit losses in the fourth quarter of 2021.
The decrease in noninterest income in the first quarter of 2022 as compared to the fourth quarter of 2021 was due to a $11.8 million decrease in gain on loan origination and sale activities and a $1.9 million decrease in other income which were partially offset by a $0.8 million increase in loan servicing income. The decrease in gain on loan origination and sale activities was due to a $4.4 million decrease in single family gain on loan origination and sale activities and a $7.4 million decrease in commercial real estate (“CRE”) and commercial gain on loan origination and sale activities. The decrease in single family gain on loan origination and sale activities was due to a decrease in rate lock volume and margins as a result of the effects of increasing interest rates. The decrease in CRE and commercial gain on loan origination and sale activities was primarily due to an 84% decrease in the volume of loans sold. The decrease in other income was due to a $1.0 million decrease in income realized from investments in community development entities and $0.6 million gain on sale of other real estate owned realized in the fourth quarter.
The $0.5 million increase in noninterest expense in the first quarter of 2022 as compared to the fourth quarter of 2021 was primarily due to higher compensation and benefits and occupancy costs, partially offset by lower
general, administrative and other costs. The higher level of compensation and benefit costs reflect a $1.0 million reversal of previously accrued medical benefits related to the positive experience in our self-insured medical program in the fourth quarter. Occupancy costs increased due to common area maintenance rent increases and accelerated depreciation in the first quarter of 2022. Legal costs, which are included in general, administrative and other costs, were $1.4 million lower in the first quarter of 2022 as compared to the fourth quarter of 2021 due to higher nonrecurring costs expended on litigation activities and legal matters in the fourth quarter.
10
First Quarter of 2022 Compared to the First Quarter of 2021
Our net income and income before taxes were $20.0 million and $24.6 million, respectively, in the first quarter of 2022, as compared to $29.7 million and $36.7 million, respectively, in the first quarter of 2021. The $12.1 million decrease in income before taxes was due to lower noninterest income, partially offset by a recovery of our allowance for credit losses in 2022 and lower noninterest expense.
Our effective tax rate during first quarter of 2022 was 19.0% as compared to 19.3% in the first quarter of 2021 and a statutory rate of 23.4%. Our effective tax rate for both periods was lower than our statutory rate due to the benefits of tax advantaged investments and reductions in taxes on income related to excess tax benefits resulting from the exercise and vesting of stock awards during the quarter.
Net interest income was stable in the first quarter of 2022 as compared to the first quarter of 2021 as increases in the average balance of loans was offset by a decrease in the net interest margin. Our net interest margin decreased slightly from 3.29% in the first quarter of 2021 compared to 3.27% in the first quarter of 2022 as a six basis point decrease in our yield on interest earning assets was offset by a four basis point decrease in the rate on interest-bearing liabilities. The decrease in yield on interest earning assets was primarily due to the prepayment and paydown of higher yielding loans and investments in our portfolios during 2021. Our cost of interest-bearing liabilities decreased due to decreases in market interest rates during 2021 which was partially offset by the impact of the $100 million subordinated notes offering completed in January 2022. The increase in the average balance of loans reflects the increases in our loans held for investment that occurred in 2021 and in the first quarter of 2022.
As a result of the favorable performance of our loan portfolio, a stable low level of nonperforming assets and an improved outlook of the estimated impact of COVID-19 on our loan portfolio, we recorded a $9 million recovery of our allowance for credit losses in the first quarter of 2022. We recorded no provision for credit losses in the first quarter of 2021.
The decrease in noninterest income for the first quarter of 2022 as compared to the first quarter of 2021 was due to decreases in gain on loan origination and sale activities, which was partially offset by higher loan servicing income. The $25.2 million decrease in gain on loan origination and sale activities was due to a $20.0 million decrease in single family gain on loan origination and sale activities and a $5.2 million decrease in CRE and commercial gain on loan origination and sale activities. The decrease in single family gain on loan origination and sale activities was due to a decrease in rate lock volume and margins as a result of the effects of increasing interest rates. The decrease in CRE and commercial gain on loan origination and sale activities was primarily due to an 81% decrease in the volume of loans sold. The $2.6 million increase in loan servicing income was primarily due to lower levels of prepayments and improved risk management results.
The $2.1 million decrease in noninterest expense in the first quarter of 2022 as compared to the first quarter of 2021 was due to lower compensation and benefit costs, partially offset by an increase in general, administrative and other expenses. The $3.8 million decrease in compensation and benefits expense is primarily due to reduced commission expense on lower loan origination volumes in our single family mortgage operations. The increase in general, administrative and other costs was due to charges related to nonrecurring costs expended on litigation activities and legal matters in the first quarter of 2022.
11
Financial Position
During the first quarter of 2022, our total assets increased $307 million due primarily to a $331 million increase in loans held for investment and a $77 million increase in investment securities which were partially offset by a decrease of $117 million in loans held for sale. Loans held for investment increased due to $747 million of originations, which were partially offset by prepayments and scheduled payments of $419 million. Total liabilities increased $421 million due to increases in deposits, borrowings and long-term debt. The $124 million increase in deposits was due to higher levels of business deposits and wholesale deposits. The increase in borrowings was due to an increased need for wholesale borrowings to fund loan growth. Long-term debt increased due to our $100 million subordinated notes offering completed in January 2022.
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Loans Held for Investment
(in thousands) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||||||
Non-owner occupied commercial real estate | $ | 699,277 | $ | 705,359 | $ | 754,031 | $ | 761,754 | $ | 766,002 | ||||||||||||||||||||||
Multifamily | 2,729,775 | 2,415,359 | 2,090,156 | 1,966,995 | 1,521,349 | |||||||||||||||||||||||||||
Construction/land development | 528,134 | 496,144 | 514,322 | 484,282 | 532,202 | |||||||||||||||||||||||||||
Total commercial real estate loans | 3,957,186 | 3,616,862 | 3,358,509 | 3,213,031 | 2,819,553 | |||||||||||||||||||||||||||
Commercial and industrial loans | ||||||||||||||||||||||||||||||||
Owner occupied commercial real estate | 464,356 | 457,706 | 450,350 | 457,504 | 473,273 | |||||||||||||||||||||||||||
Commercial business | 387,938 | 401,872 | 435,756 | 575,122 | 757,231 | |||||||||||||||||||||||||||
Total commercial and industrial loans | 852,294 | 859,578 | 886,106 | 1,032,626 | 1,230,504 | |||||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||||||||||
Single family (1) | 759,286 | 763,331 | 793,927 | 812,287 | 875,417 | |||||||||||||||||||||||||||
Home equity and other | 295,724 | 303,078 | 315,715 | 334,579 | 366,300 | |||||||||||||||||||||||||||
Total consumer loans | 1,055,010 | 1,066,409 | 1,109,642 | 1,146,866 | 1,241,717 | |||||||||||||||||||||||||||
Total | 5,864,490 | 5,542,849 | 5,354,257 | 5,392,523 | 5,291,774 | |||||||||||||||||||||||||||
Allowance for credit losses | (37,944) | (47,123) | (54,516) | (59,897) | (64,047) | |||||||||||||||||||||||||||
Net | $ | 5,826,546 | $ | 5,495,726 | $ | 5,299,741 | $ | 5,332,626 | $ | 5,227,727 |
(1)Includes $7.0 million, $7.3 million, $4.5 million, $5.2 million and $4.3 million of single family loans that are carried at fair value at March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, respectively.
Loan Roll-forward
(in thousands) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||
Loans - beginning balance | $ | 5,542,849 | $ | 5,354,257 | $ | 5,392,523 | $ | 5,291,774 | $ | 5,244,180 | ||||||||||||||||||||||
Originations and advances | 747,238 | 794,869 | 804,307 | 911,630 | 768,787 | |||||||||||||||||||||||||||
Transfers (to) from loans held for sale | (6,731) | (2,034) | (261,697) | 1,394 | (130,218) | |||||||||||||||||||||||||||
Payoffs, paydowns and other | (418,852) | (602,613) | (580,754) | (812,261) | (590,897) | |||||||||||||||||||||||||||
Charge-offs and transfers to OREO | (14) | (1,630) | (122) | (14) | (78) | |||||||||||||||||||||||||||
Loans - ending balance | $ | 5,864,490 | $ | 5,542,849 | $ | 5,354,257 | $ | 5,392,523 | $ | 5,291,774 | ||||||||||||||||||||||
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Loan Originations and Advances
(in thousands) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||||||
Non-owner occupied commercial real estate | $ | 23,632 | $ | 33,390 | $ | 30,065 | $ | 14,308 | $ | 8,404 | ||||||||||||||||||||||
Multifamily | 371,047 | 395,365 | 408,353 | 513,620 | 282,795 | |||||||||||||||||||||||||||
Construction/land development | 174,770 | 180,083 | 191,774 | 183,571 | 165,631 | |||||||||||||||||||||||||||
Total commercial real estate loans | 569,449 | 608,838 | 630,192 | 711,499 | 456,830 | |||||||||||||||||||||||||||
Commercial and industrial loans | ||||||||||||||||||||||||||||||||
Owner occupied commercial real estate | 20,534 | 27,323 | 11,879 | 8,709 | 33,155 | |||||||||||||||||||||||||||
Commercial business | 53,959 | 49,580 | 38,157 | 83,053 | 163,525 | |||||||||||||||||||||||||||
Total commercial and industrial loans | 74,493 | 76,903 | 50,036 | 91,762 | 196,680 | |||||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||||||||||
Single family | 70,067 | 73,035 | 93,602 | 78,182 | 95,544 | |||||||||||||||||||||||||||
Home equity and other | 33,229 | 36,093 | 30,477 | 30,187 | 19,733 | |||||||||||||||||||||||||||
Total consumer loans | 103,296 | 109,128 | 124,079 | 108,369 | 115,277 | |||||||||||||||||||||||||||
Total | $ | 747,238 | $ | 794,869 | $ | 804,307 | $ | 911,630 | $ | 768,787 |
Credit Quality
As of March 31, 2022, our ratio of nonperforming assets to total assets remained low at 0.17%, while our ratio of total loans delinquent over 30 days, including nonaccrual loans, to total loans was 0.42%.
Delinquencies
Past Due and Still Accruing | |||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | 30-59 days | 60-89 days | 90 days or more (1) | Nonaccrual | Total past due and nonaccrual (2) | Current | Total loans | ||||||||||||||||||||||||||||||||||||||||
March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Total loans held for investment | $ | 3,814 | $ | 1,852 | $ | 6,903 | $ | 11,846 | $ | 24,415 | $ | 5,840,075 | $ | 5,864,490 | |||||||||||||||||||||||||||||||||
% | 0.07 | % | 0.03 | % | 0.12 | % | 0.20 | % | 0.42 | % | 99.58 | % | 100.00 | % | |||||||||||||||||||||||||||||||||
December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Total loans held for investment | $ | 1,208 | $ | 894 | $ | 6,717 | $ | 12,201 | $ | 21,020 | $ | 5,521,829 | $ | 5,542,849 | |||||||||||||||||||||||||||||||||
% | 0.02 | % | 0.02 | % | 0.12 | % | 0.22 | % | 0.38 | % | 99.62 | % | 100.00 | % |
(1) FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss.
(2) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $11.0 million and $8.4 million at March 31, 2022 and December 31, 2021, respectively.
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Allowance for Credit Losses (roll-forward)
Quarter Ended | ||||||||||||||||||||||||||||||||
(in thousands) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||
Allowance for credit losses | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 47,123 | $ | 54,516 | $ | 59,897 | $ | 64,047 | $ | 64,294 | ||||||||||||||||||||||
Provision for credit losses | (9,223) | (5,952) | (5,348) | (4,145) | (371) | |||||||||||||||||||||||||||
Recoveries (charge-offs), net | 44 | (1,441) | (33) | (5) | 124 | |||||||||||||||||||||||||||
Ending balance | $ | 37,944 | $ | 47,123 | $ | 54,516 | $ | 59,897 | $ | 64,047 | ||||||||||||||||||||||
Allowance for unfunded commitments: | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 2,404 | $ | 2,452 | $ | 2,104 | $ | 1,959 | $ | 1,588 | ||||||||||||||||||||||
Provision for credit losses | 223 | (48) | 348 | 145 | 371 | |||||||||||||||||||||||||||
Ending balance | $ | 2,627 | $ | 2,404 | $ | 2,452 | $ | 2,104 | $ | 1,959 | ||||||||||||||||||||||
Provision for credit losses: | ||||||||||||||||||||||||||||||||
Allowance for credit losses - loans | $ | (9,223) | $ | (5,952) | $ | (5,348) | $ | (4,145) | $ | (371) | ||||||||||||||||||||||
Allowance for unfunded commitments | 223 | (48) | 348 | 145 | 371 | |||||||||||||||||||||||||||
Total | $ | (9,000) | $ | (6,000) | $ | (5,000) | $ | (4,000) | $ | — | ||||||||||||||||||||||
Allocation of Allowance for Credit Losses by Product Type
March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
(in thousands) | Balance | Rate (1) | Balance | Rate (1) | |||||||||||||||||||||||||||||||
Non-owner occupied commercial real estate | $ | 2,294 | 0.33 | % | $ | 7,509 | 1.06 | % | |||||||||||||||||||||||||||
Multifamily | 8,427 | 0.31 | % | 5,854 | 0.24 | % | |||||||||||||||||||||||||||||
Construction/land development | |||||||||||||||||||||||||||||||||||
Multifamily construction | 456 | 1.24 | % | 507 | 1.34 | % | |||||||||||||||||||||||||||||
Commercial real estate construction | 184 | 1.02 | % | 150 | 1.06 | % | |||||||||||||||||||||||||||||
Single family construction | 7,735 | 2.42 | % | 6,411 | 2.16 | % | |||||||||||||||||||||||||||||
Single family construction to perm | 990 | 0.64 | % | 1,055 | 0.71 | % | |||||||||||||||||||||||||||||
Total commercial real estate loans | 20,086 | 0.51 | % | 21,486 | 0.59 | % | |||||||||||||||||||||||||||||
Owner occupied commercial real estate | 3,536 | 0.76 | % | 5,006 | 1.10 | % | |||||||||||||||||||||||||||||
Commercial business | 6,910 | 1.83 | % | 12,273 | 3.39 | % | |||||||||||||||||||||||||||||
Total commercial and industrial | 10,446 | 1.24 | % | 17,279 | 2.11 | % | |||||||||||||||||||||||||||||
Single family | 3,762 | 0.58 | % | 4,394 | 0.68 | % | |||||||||||||||||||||||||||||
Home equity and other | 3,650 | 1.24 | % | 3,964 | 1.31 | % | |||||||||||||||||||||||||||||
Total consumer | 7,412 | 0.78 | % | 8,358 | 0.88 | % | |||||||||||||||||||||||||||||
Total | $ | 37,944 | 0.66 | % | $ | 47,123 | 0.88 | % |
(1) The ACL rate is calculated excluding balances related to loans that are insured by the FHA or guaranteed by the VA or SBA, including PPP loans.
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Production Volumes for Sale to the Secondary Market
Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||||||||||||||
Loan originations | ||||||||||||||||||||||||||||||||||||||||||||
Single family loans | $ | 238,505 | $ | 360,503 | $ | 414,102 | $ | 562,804 | $ | 623,889 | ||||||||||||||||||||||||||||||||||
Commercial and industrial and CRE loans | 12,312 | 105,163 | 34,464 | 42,435 | 113,304 | |||||||||||||||||||||||||||||||||||||||
Loans sold | ||||||||||||||||||||||||||||||||||||||||||||
Single family loans | 323,070 | 377,399 | 469,090 | 627,282 | 573,040 | |||||||||||||||||||||||||||||||||||||||
Commercial and industrial and CRE loans (1) | 49,137 | 307,430 | 69,810 | 138,421 | 257,717 | |||||||||||||||||||||||||||||||||||||||
Net gain on loan origination and sale activities | ||||||||||||||||||||||||||||||||||||||||||||
Single family loans | 6,169 | 10,578 | 14,249 | 15,836 | 26,187 | |||||||||||||||||||||||||||||||||||||||
Commercial and industrial and CRE loans (1) | 2,105 | 9,501 | 3,260 | 5,435 | 7,272 | |||||||||||||||||||||||||||||||||||||||
Total | $ | 8,274 | $ | 20,079 | $ | 17,509 | $ | 21,271 | $ | 33,459 |
(1) May include loans originated as held for investment.
Loan Servicing Income
Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||||||||||||||
Single family servicing income, net: | ||||||||||||||||||||||||||||||||||||||||||||
Servicing fees and other | $ | 3,871 | $ | 3,870 | $ | 3,878 | $ | 3,975 | $ | 3,935 | ||||||||||||||||||||||||||||||||||
Changes - amortization (1) | (3,425) | (4,216) | (4,579) | (5,181) | (5,693) | |||||||||||||||||||||||||||||||||||||||
Net | 446 | (346) | (701) | (1,206) | (1,758) | |||||||||||||||||||||||||||||||||||||||
Risk management, single family MSRs: | ||||||||||||||||||||||||||||||||||||||||||||
Changes in fair value due to assumptions (2) | 10,303 | 193 | 747 | (5,024) | 11,463 | |||||||||||||||||||||||||||||||||||||||
Net gain (loss) from derivatives hedging | (10,183) | (378) | (293) | 5,024 | (12,591) | |||||||||||||||||||||||||||||||||||||||
Subtotal | 120 | (185) | 454 | — | (1,128) | |||||||||||||||||||||||||||||||||||||||
Single family servicing income (loss) | 566 | (531) | (247) | (1,206) | (2,886) | |||||||||||||||||||||||||||||||||||||||
Commercial loan servicing income: | ||||||||||||||||||||||||||||||||||||||||||||
Servicing fees and other | 4,450 | 5,417 | 4,019 | 5,270 | 4,978 | |||||||||||||||||||||||||||||||||||||||
Amortization of capitalized MSRs | (1,712) | (2,346) | (1,758) | (2,133) | (1,344) | |||||||||||||||||||||||||||||||||||||||
Total | 2,738 | 3,071 | 2,261 | 3,137 | 3,634 | |||||||||||||||||||||||||||||||||||||||
Total loan servicing income | $ | 3,304 | $ | 2,540 | $ | 2,014 | $ | 1,931 | $ | 748 |
(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.
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Capitalized Mortgage Servicing Rights ("MSRs")
Quarter Ended | ||||||||||||||||||||||||||||||||
(in thousands) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||
Single Family MSRs | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 61,584 | $ | 61,206 | $ | 59,872 | $ | 62,352 | $ | 49,966 | ||||||||||||||||||||||
Additions and amortization: | ||||||||||||||||||||||||||||||||
Originations | 3,916 | 4,401 | 5,166 | 7,725 | 6,616 | |||||||||||||||||||||||||||
Changes - amortization (1) | (3,425) | (4,216) | (4,579) | (5,181) | (5,693) | |||||||||||||||||||||||||||
Net additions and amortization | 491 | 185 | 587 | 2,544 | 923 | |||||||||||||||||||||||||||
Change in fair value due to assumptions (2) | 10,303 | 193 | 747 | (5,024) | 11,463 | |||||||||||||||||||||||||||
Ending balance | $ | 72,378 | $ | 61,584 | $ | 61,206 | $ | 59,872 | $ | 62,352 | ||||||||||||||||||||||
Ratio to related loans serviced for others | 1.31 | % | 1.11 | % | 1.09 | % | 1.05 | % | 1.10 | % | ||||||||||||||||||||||
Multifamily and SBA MSRs | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 39,415 | $ | 39,625 | $ | 39,113 | $ | 39,626 | 35,774 | |||||||||||||||||||||||
Originations | 1,576 | 2,136 | 2,270 | 1,620 | 5,196 | |||||||||||||||||||||||||||
Amortization | (1,712) | (2,346) | (1,758) | (2,133) | (1,344) | |||||||||||||||||||||||||||
Ending balance | $ | 39,279 | $ | 39,415 | $ | 39,625 | $ | 39,113 | $ | 39,626 | ||||||||||||||||||||||
Ratio to related loans serviced for others | 1.93 | % | 1.94 | % | 1.92 | % | 1.92 | % | 2.02 | % |
(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.
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Deposits
(in thousands) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||
Deposits by Product: | ||||||||||||||||||||||||||||||||
Noninterest-bearing accounts - checking and savings | $ | 1,449,987 | $ | 1,433,566 | $ | 1,479,491 | $ | 1,316,698 | $ | 1,190,953 | ||||||||||||||||||||||
Interest-bearing transaction and savings deposits: | ||||||||||||||||||||||||||||||||
Interest-bearing demand deposit accounts | 591,148 | 513,810 | 555,716 | 557,677 | 557,900 | |||||||||||||||||||||||||||
Statement savings accounts | 309,462 | 302,389 | 305,395 | 293,563 | 287,028 | |||||||||||||||||||||||||||
Money market accounts | 2,800,215 | 2,806,313 | 2,796,524 | 2,650,564 | 2,665,875 | |||||||||||||||||||||||||||
Total interest-bearing transaction and savings deposits | 3,700,825 | 3,622,512 | 3,657,635 | 3,501,804 | 3,510,803 | |||||||||||||||||||||||||||
Total transaction and savings deposits | 5,150,812 | 5,056,078 | 5,137,126 | 4,818,502 | 4,701,756 | |||||||||||||||||||||||||||
Certificates of deposit | 915,481 | 906,928 | 995,475 | 1,022,967 | 1,178,714 | |||||||||||||||||||||||||||
Noninterest-bearing accounts - other | 204,242 | 183,503 | 227,059 | 245,058 | 250,763 | |||||||||||||||||||||||||||
Total deposits | $ | 6,270,535 | $ | 6,146,509 | $ | 6,359,660 | $ | 6,086,527 | $ | 6,131,233 | ||||||||||||||||||||||
Percent of total deposits: | ||||||||||||||||||||||||||||||||
Noninterest-bearing accounts - checking and savings | 23.1 | % | 23.3 | % | 23.3 | % | 21.6 | % | 19.4 | % | ||||||||||||||||||||||
Interest-bearing transaction and savings deposits: | ||||||||||||||||||||||||||||||||
Interest-bearing demand deposit accounts | 9.4 | % | 8.4 | % | 8.7 | % | 9.2 | % | 9.1 | % | ||||||||||||||||||||||
Statement savings accounts | 4.9 | % | 4.9 | % | 4.8 | % | 4.8 | % | 4.7 | % | ||||||||||||||||||||||
Money market accounts | 44.7 | % | 45.7 | % | 44.0 | % | 43.5 | % | 43.5 | % | ||||||||||||||||||||||
Total interest-bearing transaction and savings deposits | 59.0 | % | 59.0 | % | 57.5 | % | 57.5 | % | 57.3 | % | ||||||||||||||||||||||
Total transaction and savings deposits | 82.1 | % | 82.3 | % | 80.8 | % | 79.1 | % | 76.7 | % | ||||||||||||||||||||||
Certificates of deposit | 14.6 | % | 14.8 | % | 15.7 | % | 16.8 | % | 19.2 | % | ||||||||||||||||||||||
Noninterest-bearing accounts - other | 3.3 | % | 2.9 | % | 3.5 | % | 4.1 | % | 4.1 | % | ||||||||||||||||||||||
Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
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HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures
To supplement our unaudited condensed consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance.
In this press release, we use the following non-GAAP measures: (i) tangible common equity and tangible assets as we believe this information is consistent with the treatment by bank regulatory agencies, which excluded intangible assets from the calculation of capital ratios; and (ii) an efficiency ratio which is the ratio of noninterest expenses to the sum of net interest income and noninterest income, excluding certain items of income or expense and excluding taxes incurred and payable to the state of Washington as such taxes are not classified as income taxes and we believe including them in noninterest expenses impacts the comparability of our results to those companies whose operations are in states where assessed taxes on business are classified as income taxes.
These supplemental performance measures may vary from, and may not be comparable to, similarly titled measures provided by other companies in our industry. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirements.
We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate a comparison of our performance to prior periods. We believe these measures are frequently used by securities analysts, investors and other parties in the evaluation of companies in our industry. Rather, these non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures prepared in accordance with GAAP. In the information below, we have provided reconciliations of, where applicable, the most comparable GAAP financial measures to the non-GAAP measures used in this press release, or a reconciliation of the non-GAAP calculation of the financial measure.
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HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures
Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures:
As of or for the Quarter Ended | |||||||||||||||||||||||||||||||||||||||||
(in thousands, except share and per share data) | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||||||||||||||||||||||
Tangible book value per share | |||||||||||||||||||||||||||||||||||||||||
Shareholders' equity | $ | 601,231 | $ | 715,339 | $ | 710,376 | $ | 708,731 | $ | 701,463 | |||||||||||||||||||||||||||||||
Less: Goodwill and other intangibles | (31,464) | (31,709) | (32,002) | (32,295) | (32,587) | ||||||||||||||||||||||||||||||||||||
Tangible shareholders' equity | $ | 569,767 | $ | 683,630 | $ | 678,374 | $ | 676,436 | $ | 668,876 | |||||||||||||||||||||||||||||||
Common shares outstanding | 18,700,536 | 20,085,336 | 20,446,648 | 20,791,659 | 21,360,514 | ||||||||||||||||||||||||||||||||||||
Computed amount | $ | 30.47 | $ | 34.04 | $ | 33.18 | $ | 32.53 | $ | 31.31 | |||||||||||||||||||||||||||||||
Tangible common equity to tangible assets | |||||||||||||||||||||||||||||||||||||||||
Tangible shareholders' equity (per above) | $ | 569,767 | $ | 683,630 | $ | 678,374 | $ | 676,436 | $ | 668,876 | |||||||||||||||||||||||||||||||
Tangible assets | |||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 7,510,894 | $ | 7,204,091 | $ | 7,372,451 | $ | 7,167,951 | $ | 7,265,191 | |||||||||||||||||||||||||||||||
Less: Goodwill and other intangibles | (31,464) | (31,709) | (32,002) | (32,295) | (32,587) | ||||||||||||||||||||||||||||||||||||
Net | $ | 7,479,430 | $ | 7,172,382 | $ | 7,340,449 | $ | 7,135,656 | $ | 7,232,604 | |||||||||||||||||||||||||||||||
Ratio | 7.6 | % | 9.5 | % | 9.2 | % | 9.5 | % | 9.2 | % | |||||||||||||||||||||||||||||||
Return on average tangible equity (annualized) | |||||||||||||||||||||||||||||||||||||||||
Average shareholders' equity | $ | 698,598 | $ | 726,014 | $ | 726,823 | $ | 718,838 | $ | 731,719 | |||||||||||||||||||||||||||||||
Less: Average goodwill and other intangibles | (31,624) | (31,901) | (32,195) | (32,487) | (32,777) | ||||||||||||||||||||||||||||||||||||
Average tangible equity | $ | 666,974 | $ | 694,113 | $ | 694,628 | $ | 686,351 | $ | 698,942 | |||||||||||||||||||||||||||||||
Net income | $ | 19,951 | $ | 29,432 | $ | 27,170 | $ | 29,157 | $ | 29,663 | |||||||||||||||||||||||||||||||
Adjustments (tax effected) | |||||||||||||||||||||||||||||||||||||||||
Amortization of core deposit intangibles | 191 | 229 | 229 | 229 | 236 | ||||||||||||||||||||||||||||||||||||
Tangible income applicable to shareholders | $ | 20,142 | $ | 29,661 | $ | 27,399 | $ | 29,386 | $ | 29,899 | |||||||||||||||||||||||||||||||
Ratio | 12.2 | % | 17.0 | % | 15.6 | % | 17.2 | % | 17.3 | % | |||||||||||||||||||||||||||||||
Efficiency ratio | |||||||||||||||||||||||||||||||||||||||||
Noninterest expense | |||||||||||||||||||||||||||||||||||||||||
Total | $ | 54,473 | $ | 53,971 | $ | 51,949 | $ | 52,815 | $ | 56,608 | |||||||||||||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||||||||
Legal fees recovery | — | — | — | 1,900 | — | ||||||||||||||||||||||||||||||||||||
State of Washington taxes | (506) | (664) | (578) | (602) | (579) | ||||||||||||||||||||||||||||||||||||
Adjusted total | $ | 53,967 | $ | 53,307 | $ | 51,371 | $ | 54,113 | $ | 56,029 | |||||||||||||||||||||||||||||||
Total revenues | |||||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 54,546 | $ | 57,084 | $ | 57,484 | $ | 57,972 | $ | 54,517 | |||||||||||||||||||||||||||||||
Noninterest income | 15,558 | 28,620 | 24,298 | 28,224 | 38,833 | ||||||||||||||||||||||||||||||||||||
Adjusted total | $ | 70,104 | $ | 85,704 | $ | 81,782 | $ | 86,196 | $ | 93,350 | |||||||||||||||||||||||||||||||
Ratio | 77.0 | % | 62.2 | % | 62.8 | % | 62.8 | % | 60.0 | % | |||||||||||||||||||||||||||||||
Effective tax rate used in computations above | 22.0 | % | 22.0 | % | 22.0 | % | 22.0 | % | 19.3 | % |
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Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements that address and/or include beliefs, assumptions, estimates, projections and expectations of our future performance, financial condition, long-term value creation, capital management, reduction in volatility, reliability of earnings, provisions and allowances for credit losses, cost reduction initiatives, performance of our continued operations relative to our past operations, and restructuring activities are forward-looking statements within the meaning of the Reform Act. Forward-looking statements involve inherent risks, uncertainties and other factors, many of which are difficult to predict and are generally beyond management’s control. Forward-looking statements are based on the Company’s expectations at the time such statements are made and speak only as of the date made. The Company does not assume any obligation or undertake to update any forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although the Company may do so from time to time. The Company does not endorse any projections regarding future performance that may be made by third parties. For all forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act.
We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements. Rather, more important factors could affect the Company’s future results, including but not limited to the following: (1) the continued impact of COVID-19 on the U.S. and global economies, including business disruptions, reductions in employment and an increase in business failures, specifically among our clients; (2) the continued impact of COVID-19 on our employees and our ability to provide services to our customers and respond to their needs as more cases of COVID-19 may arise in our primary markets; (3) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (4) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (5) changes in the interest rate environment may reduce interest margins; (6) changes in deposit flows, loan demand or real estate values may adversely affect the business of our primary subsidiary, the Bank, through which substantially all of our operations are carried out; (7) our ability to control operating costs and expenses; (8) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses; (9) the adequacy of our allowance for credit losses; (10) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently; (11) legislative or regulatory changes that may adversely affect our business or financial condition, including, without limitation, changes in corporate and/or individual income tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes; (12) general economic conditions, either nationally or locally in some or all areas in which we conduct business, or conditions in the securities markets or banking industry, may be less favorable than what we currently anticipate; (13) challenges our customers may face in meeting current underwriting standards may adversely impact all or a substantial portion of the value of our rate-lock loan activity we recognize; (14) technological changes may be more difficult or expensive than what we anticipate; (15) a failure in or breach of our operational or security systems or information technology infrastructure, or those of our third-party providers and vendors, including due to cyber-attacks; (16) success or consummation of new business initiatives may be more difficult or expensive than what we anticipate; (17) our ability to grow efficiently both organically and through acquisitions and to manage our growth and integration costs; (18) our ability to attract and retain key members of our senior management team; (19) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (20) litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than what we anticipate; and (21) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank, or repurchases of our common stock. A discussion of the factors, risks and uncertainties that could affect our financial results, business goals and operational and financial objectives cited in this release, other releases, public statements and/or filings with the Securities and Exchange Commission (“SEC”) is also contained in the “Risk Factors” sections of the Company’s Forms 10-K and 10-Q. We strongly recommend readers review those disclosures in conjunction with the discussions herein.
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All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect the Company.
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