UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________________ FORM 10-Q ________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2023 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____ to _____ Commission file number: 001-35424 ________________________________ HOMESTREET, INC. ...

HomeStreet eet Important Disclosures Forward-Looking Statements Non-GAAP Financial Measures Highlights and Developments • Net income of $2.3 million, or $0.12 per share • Net interest margin of 1.74% • Excluding broker deposits, total deposits decreased $137 million to $5.8 billion • Book value per share of $26.74 and tangible book value per share of $26.18(1) on September 30, 2023 • Net loss of $24.1 million, or $1.28 per share • Core net income of $10.5 million(1), or $0.56 per share • Net interest margin ...

Financial Performance - The company reported a net loss of $31.4 million in Q2 2023, significantly impacted by a goodwill impairment charge of $34.6 million[138]. - Core net income for Q2 2023 was $3.2 million, down from $5.1 million in Q1 2023, reflecting a decrease in net interest income[142]. - Net interest income for Q2 2023 was $43.5 million, compared to $49.4 million in Q1 2023, indicating a decline in earnings[133]. - Noninterest expense surged to $90.8 million in Q2 2023, primarily due to a $39.9 million goodwill impairment charge, compared to $52.5 million in Q1 2023[153]. - Core net income for the six months ended June 30, 2023, was $8.2 million, down from $37.7 million in the same period of 2022, reflecting lower net interest income and higher provisions for credit losses[155]. - The company reported a net loss of $26.4 million for the six months ended June 30, 2023, compared to a net income of $37.7 million for the same period in 2022[155]. - Total revenues for the quarter were $53,787,000, down from $59,566,000 in the previous quarter, representing a decrease of approximately 13%[190]. Asset and Liability Management - The company's total assets increased to $9.5 billion as of June 30, 2023, up from $9.4 billion at the end of 2022[135]. - Total interest-earning assets increased to $9.1 billion in Q2 2023, with an average yield of 4.45%[144]. - The total interest-bearing liabilities rose to $7.4 billion in Q2 2023, with an average cost of 3.08%[144]. - The company experienced a $782 million decrease in deposits, attributed to a decline in brokered certificates of deposit and non-certificates of deposit balances[167]. - Average borrowings increased by $1.1 billion to fund the growth of the loan portfolio and investment securities[159]. - The company reported a cumulative interest sensitivity gap of $(2,145,799) thousand, which is approximately (23)% of total assets[197][198]. Credit Quality and Provisions - The allowance for credit losses (ACL) remained stable at $41.5 million, representing 0.57% of total loans[135]. - Nonperforming assets increased to $41.5 million, representing 0.44% of total assets as of June 30, 2023[135]. - Provision for credit losses recorded a recovery of $0.4 million in Q2 2023, compared to a provision of $0.6 million in Q1 2023, with the allowance for credit losses remaining unchanged at $41.5 million[148]. - The company recorded a $0.2 million provision for credit losses in the first half of 2023, contrasting with a $9.0 million recovery in the same period of 2022[160]. Taxation - The effective tax rate for Q2 2023 was 14.2%, influenced by the non-deductible portion of the goodwill impairment charge[143]. - The effective tax rate for the six months ended June 30, 2023, was 12.5%, significantly impacted by the non-deductible portion of the goodwill impairment charge[156]. - The effective tax rate for core net income was 14.2% for the quarter, reflecting a slight increase from 12.5% in the previous quarter[190]. Interest Rate Risk Management - The company is focused on managing interest rate risk through a simulation model to estimate sensitivity of net interest income to changes in market interest rates[195]. - The estimated impact on net interest income for a +300 basis point change in interest rates is a decrease of 7.3%[202]. - The company is considered liability-sensitive, taking actions to extend the duration of its liabilities through increased levels of term certificates of deposit[198]. - Changes in the mix of interest-earning assets or interest-bearing liabilities can significantly affect net interest margin without altering interest rate sensitivity[199]. - The interest rate spread between earning assets and funding liabilities can vary significantly, impacting net interest income[199]. Capital and Liquidity - HomeStreet, Inc. reported a Tier 1 leverage capital ratio of 6.93% as of June 30, 2023, exceeding the minimum requirement of 4.0%[182]. - The capital conservation buffer for HomeStreet, Inc. was 4.03% as of June 30, 2023, indicating strong capital adequacy above regulatory requirements[182]. - The Company had available borrowing capacity of $2.3 billion from the FHLB as of June 30, 2023, down from $2.6 billion at December 31, 2022[173]. - The company believes it has sufficient liquidity to meet its current needs despite market uncertainties[205]. - The company has $5.6 billion in available contingent liquidity, representing 84% of total deposits, with uninsured deposits at 7% of total deposits[205]. Dividends and Shareholder Returns - The Company declared a cash dividend of $0.10 per common share for the second quarter of 2023, with intentions to continue quarterly dividends subject to Board approval[183]. Operational Efficiency - The efficiency ratio for the quarter was 93.7%, compared to 87.2% in the previous quarter, indicating a decline in operational efficiency[190]. - Return on average tangible equity (annualized) was 2.9% for the quarter, down from 4.1% in the previous quarter[190]. - Tangible book value per share decreased to $27.50 as of June 30, 2023, from $28.41 at the end of 2022[191].

Financial Data and Key Metrics Changes - The company reported a net loss of $31.4 million or $1.67 per share in Q2 2023, primarily due to a $39.9 million goodwill impairment charge [45] - Core earnings for Q2 2023 were $3.2 million or $0.17 per share, compared to net income of $5.1 million or $0.27 per share in Q1 2023 [45] - Net interest income decreased by $5.9 million from Q1 2023, with a net interest margin decline from 2.23% to 1.93% [26][53] - The effective tax rate for Q2 2023 was 14.2%, significantly impacted by the goodwill impairment charge [27] Business Line Data and Key Metrics Changes - Non-interest income in Q2 2023 remained consistent with Q1, with a 10% increase in single-family lending rate locks offset by a slight decrease in rate lock margin [28] - The ratio of non-performing assets to total assets increased from 15 basis points at March 31, 2023, to 44 basis points at June 30, 2023, primarily due to one customer relationship being designated as non-accrual [28][59] Market Data and Key Metrics Changes - The company experienced a stabilization in deposit levels at the three retail deposit branches acquired in Southern California, with a weighted average cost of deposits at these branches remaining low at 38 basis points as of June 30, 2023 [36] - Home prices have been stable or rising, particularly in West Coast markets, with increased demand for new homes leading to higher land acquisition and project development by builders [37] Company Strategy and Development Direction - The company is focusing on reducing non-essential expenses while maintaining high-quality lending lines of business to prepare for growth once the interest rate environment stabilizes [30] - The strategy includes attracting new deposits and retaining existing ones through promotional certificates of deposit and money market accounts, while managing liquidity and net interest margin [32][54] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating results reflect the adverse impact of historically high increases in short-term interest rates, with expectations for continued margin pressure until rates stabilize [53][56] - The company anticipates a decline in loans held for investment, stable deposits, and slightly increasing non-interest expenses in the near term [40] Other Important Information - The company recorded a goodwill impairment charge of $39.9 million, which is a non-cash charge and does not impact core earnings, cash flows, or liquidity [25] - The accumulated and other comprehensive income balance was negative $101 million, affecting tangible book value per share but not regulatory capital levels [62] - A dividend of $0.10 per share was approved, unchanged from the prior quarter [63] Q&A Session Summary Question: What is the company's outlook on margins and profitability? - Management expects to remain profitable, excluding the goodwill charge, and anticipates some increases in single-family lock volume [70][71] Question: What is the company's strategy regarding deposit ratios? - The company is comfortable operating at current loan-to-deposit ratios and prioritizes managing liquidity and net interest margin over increasing this ratio [76] Question: What are the expected cash flows from the securities portfolio? - The monthly cash flow from the securities portfolio is approximately $40 million to $50 million [100][114] Question: What is the company's approach to non-essential expenses? - Non-essential expenses include advertising and marketing, which can be reduced without significant impact on brand awareness [112]

HomeStreet meStreet Important Disclosures Forward-Looking Statements Non-GAAP Financial Measures Highlights and Developments • Net loss of $31.4 million, or $1.67 per share • Recorded $39.9 million goodwill impairment charge • Net interest margin of 1.93% • Uninsured deposits decreased to $495 million as of June 30, 2023 (7% of total deposits) from $1.0 billion as of March 31, 2023 (14% of total deposits • Nonperforming assets to total assets 0.44% on June 30, 2023 • Book value per share of $28.10 and tangi ...

Financial Performance - Net interest income for Q1 2023 was $49.4 million, down from $55.7 million in Q4 2022, reflecting a decrease of approximately 11.5%[128] - Noninterest income increased to $10.2 million in Q1 2023 from $9.7 million in Q4 2022, representing an increase of about 5.4%[128] - Return on average equity (annualized) was 3.5% in Q1 2023, down from 6.0% in Q4 2022, indicating a significant decrease in profitability[128] - Net income for Q1 2023 was $5.1 million, a decrease from $20.0 million in Q1 2022, with income before taxes dropping from $24.6 million to $6.5 million[147] - Total revenues for the quarter were $59,566,000, down from $65,364,000 in the previous quarter, representing a decline of 8.7%[184] Asset and Liability Management - Total assets grew to $9.86 billion as of March 31, 2023, compared to $9.36 billion at the end of 2022, marking an increase of approximately 5.3%[130] - The loans to deposit ratio increased to 106.4% as of March 31, 2023, compared to 99.9% at the end of 2022, indicating a tighter liquidity position[130] - Total interest-earning assets increased to $9.05 billion in Q1 2023, up from $8.89 billion in Q4 2022[138] - The total interest-bearing liabilities amounted to $7.27 billion in Q1 2023, compared to $7.17 billion in Q4 2022, with a net interest rate spread of 1.71%[138] - The Company had available borrowing capacity of $2.1 billion from the FHLB as of March 31, 2023, down from $2.6 billion at December 31, 2022[167] Credit Quality - Provision for credit losses was $593,000 in Q1 2023, significantly lower than $3.8 million in Q4 2022, indicating improved credit quality[128] - Nonperforming assets increased to $14.9 million as of March 31, 2023, compared to $11.9 million at the end of 2022, reflecting a rise of approximately 25.5%[130] - A provision for credit losses of $0.6 million was recorded in Q1 2023, compared to a $9.0 million recovery in Q1 2022[153] - As of March 31, 2023, the total Allowance for Credit Losses (ACL) was $41,500,000, with a rate of 0.56%, unchanged from December 31, 2022[163] Interest Rate and Liquidity Risk - The net interest margin decreased to 2.23% in Q1 2023 from 2.53% in Q4 2022, a decline of approximately 11.8%[128] - The estimated impact on net interest income over a one-year horizon shows a decrease of (5.0)% with a +300 basis points change in interest rates[196] - The Company is considered liability-sensitive, with a cumulative interest sensitivity gap of $(2.30) million, representing (23)% of total assets[192] - The Company believes it has sufficient liquidity to meet its current needs despite the competitive landscape for deposits in the banking industry[199] Operational Efficiency - Noninterest expense increased to $52.49 million in Q1 2023 from $50.42 million in Q4 2022, primarily due to higher compensation and benefits costs[146] - The efficiency ratio for the quarter was 87.2%, up from 76.2% in the previous quarter, indicating a decline in operational efficiency[184] - The tangible common equity to tangible assets ratio decreased to 5.3% as of March 31, 2023, down from 5.7% at the end of the previous quarter[184] Tax and Dividends - The company’s effective tax rate was 22.0% in Q1 2023, lower than 23.7% in Q4 2022, primarily due to benefits from tax-advantaged investments[137] - The effective tax rate for Q1 2023 was 22.0%, compared to 19.0% in Q1 2022, influenced by tax-advantaged investments[148] - The Company declared a cash dividend of $0.10 per common share payable on May 24, 2023, following a quarterly cash dividend of $0.35 per common share in the first quarter of 2023[177] Growth and Acquisitions - The company acquired three branches in Southern California, gaining $373 million in deposits and $21 million in loans, with total deposit balances reaching $322 million by the end of March 2023[135] - The Company had no material commitments for capital expenditures as of March 31, 2023, but intends to pursue growth opportunities, which may include acquisitions[178]

Loans Held for Investment Balance Trend | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |---------------------------------------|----------------------|-------|----------------------|-------|----------------------|--------|----------------------|-------|----------------------|-------| | $ Millions \nNon-owner Occupied CRE | Mar. 31, 2023 \n$652 | \n9% | Dec. 31, 2022 \n$658 | \n9% | Sep. 30, 2022 \n$666 | \n9% | June 30, 2022 \n$711 | \n11% | Mar. 31, 2022 \n$699 | 12% | | Multifamily | ...

HomeStreet, Inc. (NASDAQ:HMST) Q1 2023 Earnings Conference Call April 25, 2023 1:00 PM ET Company Participants Mark Mason - Chief Executive Officer, President, and Chairman John Michel - Chief Financial Officer Conference Call Participants Matthew Clark - Piper Sandler Woody Lay - KBW Operator Good afternoon and thank you for attending today’s First Quarter 2023 Earnings Release Call for HomeStreet Bank. Joining us on this call is Mark Mason, CEO, President, and Chairman of the Board. I would now like to pa ...

Financial Performance - Net income for 2022 was $66,540,000, a decrease of 42.4% from $115,422,000 in 2021[177]. - Total revenues decreased to $280,607,000 in 2022, down 19.2% from $347,032,000 in 2021[177]. - The net interest income for 2022 was $233.3 million, an increase from $227.1 million in 2021, while noninterest income dropped significantly to $51.6 million from $120.0 million[123]. - The effective tax rate for 2022 was 21.4%, slightly higher than 21.3% in 2021, due to benefits from tax-advantaged investments[129]. - The company reported a net interest income sensitivity gap of $(2,795,402,000), indicating a liability-sensitive position[184]. - Basic net income per share decreased to $3.51 in 2022 from $5.53 in 2021, a decline of 36.5%[211]. - The Company’s net interest income after provision for credit losses was $238,509 thousand in 2022, a decrease of 1.3% from $242,057 thousand in 2021[211]. Assets and Liabilities - As of December 31, 2022, HomeStreet had total assets of $9.4 billion, loans of $7.4 billion, and deposits of $7.5 billion[15]. - The company's total assets increased to $9,364,760,000 in 2022, up 30.0% from $7,204,091,000 in 2021[177]. - Total liabilities increased to $8,802,613 thousand in 2022 from $6,488,752 thousand in 2021, a rise of approximately 35.7%[208]. - The allowance for credit losses (ACL) for loans held for investment was $41,500 thousand in 2022, down from $47,123 thousand in 2021[208]. - The total amount of loans was $7,426,320 thousand as of December 31, 2022, with a delinquency rate of 0.29%[152]. Interest Rates and Profitability - Changes in interest rates significantly impact the company's profitability, affecting the difference between interest earned on loans and investments and interest paid on deposits and borrowings[40]. - The net interest margin decreased to 2.99% in 2022 from 3.38% in 2021, reflecting the impact of rising short-term interest rates[123]. - A 200 basis point increase in interest rates is projected to decrease net interest income by 1.7% and net portfolio value by 24.1%[188]. - The estimated impact on net interest income over a one-year period shows a potential decrease of 0.7% with a 100 basis point increase in interest rates[188]. - The company’s interest rate simulation model assumes no negative interest rates, which may limit the reliability of results in extreme scenarios[190]. Operational Efficiency - Efficiency ratio increased to 72.4% in 2022 compared to 61.9% in 2021, indicating a decline in operational efficiency[177]. - Total noninterest expense decreased to $205.4 million in 2022 from $215.3 million in 2021, mainly due to lower compensation and benefit costs[140]. Employee and Community Engagement - The employee headcount was 937, with a turnover rate of 28% and a voluntary turnover rate of 21%[17]. - The company emphasizes diversity, equity, and inclusion, aiming to create a workplace that reflects the communities it serves[20]. - The company is committed to community involvement, offering paid time off for employees who volunteer and matching their contributions to community organizations[26]. - In 2022, HomeStreet provided 6,890 paid hours off for employees to isolate, treat, and recover from COVID-19 exposure[24]. Regulatory and Compliance Risks - The company faces extensive regulations that increase compliance costs and potential liabilities, particularly in states like California with stringent laws[72]. - The company is subject to ongoing regulatory examinations, which could lead to operational restrictions and increased compliance risks[73]. - The company is subject to federal and state privacy regulations, including the California Consumer Privacy Act of 2018 and the California Privacy Rights Act of 2020, which impose strict obligations on the use and dissemination of customer information[83]. Market and Economic Conditions - The financial services industry is highly competitive, with pressures on pricing for loans and deposits, which could adversely affect future earnings and growth[45]. - Inflation may negatively impact the company's profitability by increasing fixed costs and reducing consumer purchasing power, potentially leading to higher default rates[44]. - The company operates primarily in the Western United States, with a majority of revenues derived from the Puget Sound region and other metropolitan areas, exposing it to regional economic volatility and natural disasters[66]. Cybersecurity and Operational Risks - The company has experienced various cyber incidents but has not been materially impacted; however, the risk of future incidents remains high[79]. - The company faces risks related to cybersecurity threats, which may increase operational costs and impact customer information security[84]. - The company acknowledges that climate change poses operational, credit, and reputational risks that could adversely affect its business and customers[96]. Capital Management - The company's capital management strategy aims to return excess capital to shareholders, but negative changes in business conditions could lead to suspended dividend payments[61]. - The company maintains capital ratios above regulatory minimums but may face decreases due to economic changes or capital returns to shareholders[63]. - The Company paid a quarterly cash dividend of $0.35 per common share in each quarter of 2022, with intentions to continue this in 2023[169].

HomeStreet Forward-Looking Statements This presentation includes forward-looking statements, as that term is defined for purposes of applicable securities laws, about our industry, our future financial performance, business plans and expectations. These statements are, in essence, attempts to anticipate or forecast future events, and thus subject to many risks and uncertainties. These forward-looking statements are based on our management's current expectations, beliefs, projections, and related to future p ...