HomeStreet (HMST) Tops Q2 EPS by 20c

HomeStreet (NASDAQ: HMST) reported Q2 EPS of $0.46, $0.20 better than the analyst estimate of $0.26.

• Net income of $7.1 million, or $0.26 per diluted share for the second quarter of 2018, compared with net income of $5.9 million, or $0.22 per diluted share for the first quarter of 2018, and $11.2 million, or $0.41 per diluted share for second quarter of 2017.
• Core net income(1) for the second quarter of 2018, was $12.5 million, or $0.46 per diluted share, compared with core net income(1) of $5.6 million, or $0.21 per diluted share, for the first quarter of 2018, and $11.4 million, or $0.42 per diluted share, for the second quarter of 2017.

“During the second quarter of 2018 we continued to meet the challenges presented by the market,” said Mark K. Mason, Chairman, President, and Chief Executive Officer. “We took additional steps to refresh our board composition, including naming Donald R. Voss as our Lead Independent Director to succeed Scott Boggs and naming Sandra Cavanaugh as a new board member. The Board believes that Sandra’s strong background in banking and asset management will be an asset to the Company as we continue to execute on our strategic plan."

“Our Commercial and Consumer Banking Segment experienced strong loan growth of 3% during the quarter and continued improvement in asset quality. Our nonperforming asset ratio decreased to 0.14% of total assets, representing the lowest level of problem assets since 2006. Supporting this loan growth was strong quarterly growth in our business deposit accounts of 5%.”

“During the quarter, we implemented a plan to further streamline our Mortgage Banking operations by closing, consolidating, or reducing space in 20 single family lending centers. In addition to the estimated annual pre-tax expense savings of $13.1 million, we expect this plan to improve the profitability of the segment by reducing the proportion of lower profit margin jumbo originations and reducing direct origination expenses by exiting higher cost, lower market share regions. Competitive market pressures eased somewhat during the quarter, which resulted in improvement of our single-family composite gain on sale profit margin. The mortgage banking industry is at a low point of its cycle and remains a challenge, but we are taking measured steps to improve the segment’s profitability while maintaining our position as a market leading originator and servicer.”

“As part of our ongoing balance sheet and capital management, we entered into an agreement to sell approximately $4.9 billion of unpaid principal balance of our single family mortgage servicing rights. We also modified the loss sharing arrangement with Fannie Mae related to our DUS® servicing that significantly lowered our consolidated risk-weighted assets. In addition to increasing regulatory capital ratios, these actions will provide additional regulatory capital to support the continued growth of our Commercial and Consumer Banking business and accelerate the diversification of the Company’s net income.”

For earnings history and earnings-related data on HomeStreet (HMST) click here.

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