HomeStreet(HMST) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Q2 2025 Financial Highlights HomeStreet reported a net loss of $4.4 million in Q2 2025, consistent with Q1 2025, while core net loss slightly increased to $3.1 million. The company improved its net interest margin and reduced noninterest expenses, but these gains were offset by a significant increase in the provision for credit losses Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q1 2025 | Change (QoQ) | | :-------------------------------- | :------ | :------ | :----------- | | Reported Results: | | | | | Net loss | $4.4M | $4.5M | -$0.1M | | Net loss per fully diluted share | $0.23 | $0.24 | -$0.01 | | Noninterest expenses | $47.8M | $49.1M | -$1.3M | | ROAE | (4.4)% | (4.5)% | +0.1% | | ROATE | (4.1)% | (4.2)% | +0.1% | | ROAA | (0.23)% | (0.23)% | 0% | | Net interest margin | 1.90% | 1.82% | +0.08% | | Efficiency ratio | 93.2% | 102.9% | -9.7% | | Core Results: | | | | | Net loss | $3.1M | $2.9M | +$0.2M | | Net loss per fully diluted share | $0.16 | $0.15 | +$0.01 | | Core noninterest expenses | $45.6M | $46.7M | -$1.1M | | Core ROAE | (3.0)% | (2.9)% | -0.1% | | Core ROATE | (2.7)% | (2.5)% | -0.2% | | Core ROAA | (0.16)% | (0.15)% | -0.01% | Management Commentary CEO Mark Mason highlighted ongoing merger efforts with Mechanics Bank, expected to close in Q3 2025, and improvements in operating metrics like net interest margin and noninterest expenses. He projected a return to core profitability in Q4 2025, driven by repricing of loans and deposits, and continued expense management. The company does not expect to recognize income tax expense for the next few years due to a deferred tax asset valuation allowance - Merger with Mechanics Bank is still expected to close in the third quarter of 2025[2] - Anticipates continuous growth in earnings for the foreseeable future, projecting a return to core profitability in Q4 2025[2] - No income tax expense expected for the next few years due to a deferred tax asset valuation allowance recorded in Q4 2024[2] Financial Position Highlights Key financial position metrics for Q2 2025 showed a decrease in total deposits (excluding brokered deposits) and loans held for investment. Credit quality metrics remained stable, with nonperforming assets to total assets at 0.76% and delinquencies at 1.11% Financial Position Metrics | Metric | As of June 30, 2025 | | :------------------------------------ | :------------------ | | Total deposits (excluding brokered) | Decreased by $146M | | Loans held for investment (LHFI) | Decreased by $136M | | Nonperforming assets to total assets | 0.76% | | Delinquencies | 1.11% | | Allowance for credit losses to LHFI | 0.78% | | Book value per share | $21.30 | | Tangible book value per share | $20.97 | - Increase in allowance for credit losses was due to adverse credit migration of certain multifamily loans, though overall credit metrics remained stable[4] About HomeStreet HomeStreet, Inc. is a diversified financial services company based in Seattle, Washington, providing real estate lending (including mortgage banking) and commercial and consumer banking services across the Western United States and Hawaii through its principal subsidiary, HomeStreet Bank - HomeStreet, Inc. is headquartered in Seattle, Washington, serving consumers and businesses in the Western United States and Hawaii[5] - The Company is primarily engaged in real estate lending (including mortgage banking) and commercial and consumer banking[5] Summary Financial Data Select Income Statement Data The company's net interest income showed a positive trend, increasing from $29.7 million in Q2 2024 to $33.87 million in Q2 2025. However, a significant provision for credit losses of $6.0 million was recorded in Q2 2025, leading to a net loss Select Income Statement Data (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :----------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Net interest income | $33,870 | $33,221 | $29,616 | $28,619 | $29,701 | | Provision for credit losses | $6,000 | $1,000 | — | — | — | | Noninterest income (loss) | $15,100 | $12,136 | ($78,124) | $11,058 | $13,227 | | Noninterest expense | $47,751 | $49,108 | $43,953 | $49,166 | $50,931 | | Net income (loss) | ($4,412) | ($4,465) | ($123,327) | ($7,282) | ($6,238) | | Net income (loss) per diluted share | ($0.23) | ($0.24) | ($6.54) | ($0.39) | ($0.33) | | Core net income (loss) | ($3,050) | ($2,866) | ($5,140) | ($5,999) | ($4,341) | Select Performance Ratios Performance ratios showed slight improvements in Q2 2025 compared to Q1 2025, with ROAE and ROATE showing less negative values. The net interest margin increased to 1.90%, and the efficiency ratio improved significantly to 93.2% Select Performance Ratios (Annualized) | Ratio (annualized) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | ROAE (Net Income) | (4.4)% | (4.5)% | (92.7)% | (5.4)% | (4.8)% | | ROAE (Core) | (3.0)% | (2.9)% | (3.9)% | (4.5)% | (3.3)% | | ROATE (Net Income) | (4.1)% | (4.2)% | (93.7)% | (5.1)% | (4.5)% | | ROATE (Core) | (2.7)% | (2.5)% | (3.5)% | (4.2)% | (3.0)% | | ROAA (Net Income) | (0.23)% | (0.23)% | (5.38)% | (0.32)% | (0.27)% | | ROAA (Core) | (0.16)% | (0.15)% | (0.22)% | (0.26)% | (0.19)% | | Efficiency ratio | 93.2% | 102.9% | 115.6% | 118.7% | 111.9% | | Net interest margin | 1.90% | 1.82% | 1.38% | 1.33% | 1.37% | Other Data (FTE) Full-time equivalent employees (FTE) continued to decrease, reaching 750 in Q2 2025 from 766 in Q1 2025, reflecting ongoing expense management efforts Full-Time Equivalent Employees (FTE) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :----- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | FTE | 750 | 766 | 792 | 819 | 840 | Select Balance Sheet Data Total assets decreased to $7.61 billion as of June 30, 2025, from $7.80 billion in the prior quarter. Loans held for investment, net, and deposits also saw declines, while total shareholders' equity slightly increased Select Balance Sheet Data (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :----------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Loans held for sale | $48,783 | $34,734 | $20,312 | $38,863 | $29,781 | | Loans held for investment, net | $5,887,333 | $6,023,582 | $6,193,053 | $7,294,603 | $7,340,309 | | Allowance for credit losses | $45,806 | $39,634 | $38,743 | $38,651 | $39,741 | | Investment securities | $1,030,981 | $1,055,318 | $1,057,006 | $1,158,035 | $1,160,595 | | Total assets | $7,609,323 | $7,803,631 | $8,123,698 | $9,201,285 | $9,266,039 | | Deposits | $5,857,284 | $6,090,495 | $6,413,021 | $6,435,404 | $6,532,470 | | Borrowings | $1,040,000 | $1,000,000 | $1,000,000 | $1,896,000 | $1,886,000 | | Total shareholders' equity | $402,981 | $400,751 | $396,997 | $538,315 | $520,117 | | Book value per share | $21.30 | $21.18 | $21.05 | $28.55 | $27.58 | | Tangible book value per share | $20.97 | $20.83 | $20.67 | $28.13 | $27.14 | Credit Quality Ratios Credit quality metrics showed a slight increase in delinquencies and nonperforming assets quarter-over-quarter, but the allowance for credit losses to total loans also increased, indicating a more conservative stance Credit Quality Ratios and Nonperforming Assets | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Delinquencies | 1.11% | 1.09% | 1.06% | 0.69% | 0.66% | | ACL to total loans | 0.78% | 0.66% | 0.63% | 0.53% | 0.55% | | ACL to nonaccrual loans | 82.9% | 71.0% | 70.4% | 95.9% | 109.3% | | Nonaccrual loans to total loans | 0.93% | 0.92% | 0.88% | 0.55% | 0.49% | | Nonperforming assets to total assets | 0.76% | 0.75% | 0.71% | 0.47% | 0.42% | | Nonperforming assets | $58,052 | $58,611 | $57,814 | $43,320 | $39,374 | Regulatory Capital Ratios Both the Bank and the Company maintained strong regulatory capital ratios, with Tier 1 leverage and total risk-based capital ratios showing increases for the Bank in Q2 2025 Regulatory Capital Ratios | Regulatory Capital Ratios | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Bank: | | | | | | | Tier 1 leverage | 8.74% | 8.46% | 7.30% | 8.59% | 8.44% | | Total risk-based capital | 13.66% | 13.40% | 13.02% | 13.41% | 13.29% | | Common equity Tier 1 capital | 12.76% | 12.61% | 12.27% | 12.75% | 12.62% | | Company: | | | | | | | Tier 1 leverage | 6.78% | 6.62% | 5.77% | 7.04% | 6.98% | | Total risk-based capital | 12.65% | 12.48% | 12.23% | 12.70% | 12.67% | | Common equity Tier 1 capital | 8.78% | 8.76% | 8.62% | 9.50% | 9.49% | Consolidated Financial Statements Consolidated Balance Sheets As of June 30, 2025, total assets decreased to $7.61 billion from $8.12 billion at December 31, 2024, primarily due to reductions in cash and loans held for investment. Total liabilities also decreased, mainly driven by a reduction in deposits Consolidated Balance Sheets (in thousands) | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $201,080 | $406,600 | | Investment securities | $1,030,981 | $1,057,006 | | Loans held for sale | $48,783 | $20,312 | | Loans held for investment (net) | $5,887,333 | $6,193,053 | | Total assets | $7,609,323 | $8,123,698 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Deposits | $5,857,284 | $6,413,021 | | Borrowings | $1,040,000 | $1,000,000 | | Total liabilities | $7,206,342 | $7,726,701 | | Total shareholders' equity | $402,981 | $396,997 | | Total liabilities and shareholders' equity | $7,609,323 | $8,123,698 | Consolidated Income Statements (Quarterly & Six Months) For Q2 2025, net interest income increased year-over-year, but a $6.0 million provision for credit losses led to a net loss of $4.4 million. For the six months ended June 30, 2025, net loss improved to $8.9 million from $13.7 million in the prior year, driven by higher net interest income and noninterest income Consolidated Income Statements (in thousands) | (in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Total interest income | $83,042 | $101,123 | $168,807 | $203,664 | | Total interest expense | $49,172 | $71,422 | $101,716 | $141,812 | | Net interest income | $33,870 | $29,701 | $67,091 | $61,852 | | Provision for credit losses | $6,000 | — | $7,000 | — | | Total noninterest income | $15,100 | $13,227 | $27,236 | $22,681 | | Total noninterest expense | $47,751 | $50,931 | $96,859 | $103,095 | | Income (loss) before income taxes | ($4,781)| ($8,003) | ($9,532) | ($18,562)| | Net income (loss) | ($4,412)| ($6,238) | ($8,877) | ($13,735)| | Net income (loss) per diluted share | ($0.23) | ($0.33) | ($0.47) | ($0.73) | Five Quarter Consolidated Income Statements The five-quarter trend shows a consistent increase in net interest income from Q2 2024 to Q2 2025, alongside a reduction in total interest expense. However, the provision for credit losses, which was zero in 2024, significantly impacted net income in Q1 and Q2 2025 Five Quarter Consolidated Income Statements (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :----------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Total interest income | $83,042 | $85,765 | $99,072 | $99,837 | $101,123 | | Total interest expense | $49,172 | $52,544 | $69,456 | $71,218 | $71,422 | | Net interest income | $33,870 | $33,221 | $29,616 | $28,619 | $29,701 | | Provision for credit losses | $6,000 | $1,000 | — | — | — | | Total noninterest income (loss)| $15,100 | $12,136 | ($78,124) | $11,058 | $13,227 | | Total noninterest expense | $47,751 | $49,108 | $43,953 | $49,166 | $50,931 | | Net income (loss) | ($4,412) | ($4,465) | ($123,327) | ($7,282) | ($6,238) | | Net income (loss) per share | ($0.23) | ($0.24) | ($6.54) | ($0.39) | ($0.33) | Results of Operations Analysis Average Balances, Yields and Rates The net interest margin significantly improved to 1.90% in Q2 2025 from 1.37% in Q2 2024, driven by a decrease in rates paid on interest-bearing liabilities and a stable yield on interest-earning assets. Average interest-earning assets and interest-bearing liabilities both decreased year-over-year Average Balances, Yields, and Rates (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Average Balances (in thousands): | | | | | | Total interest-earning assets | $7,272,471 | $8,858,433 | $7,383,957 | $8,973,319 | | Total interest-bearing liabilities | $5,901,443 | $7,372,602 | $6,007,083 | $7,452,289 | | Average Yield/Rate: | | | | | | Loans | 4.74% | 4.66% | 4.75% | 4.63% | | Total interest earning assets | 4.60% | 4.59% | 4.62% | 4.56% | | Deposits: Interest-bearing | 2.98% | 3.41% | 3.08% | 3.34% | | Total interest-bearing liabilities | 3.33% | 3.87% | 3.40% | 3.81% | | Net interest rate spread | 1.27% | 0.72% | 1.22% | 0.76% | | Net interest margin | 1.90% | 1.37% | 1.86% | 1.40% | Q2 2025 vs Q1 2025 Performance In Q2 2025, the company's net loss remained stable compared to Q1 2025, while core net loss slightly increased. This was primarily due to a higher provision for credit losses, partially offset by improvements in net interest income, noninterest income, and reduced noninterest expenses - Net loss was $4.4 million in Q2 2025, compared to $4.5 million in Q1 2025[17] - Core net loss increased to $3.1 million in Q2 2025 from $2.9 million in Q1 2025, mainly due to an increased provision for credit losses[17] Income Taxes The company recognized income tax benefits of $0.4 million in Q2 2025 and $0.3 million in Q1 2025, primarily from the reversal of disparate tax effects on AOCI, as no income tax expense is expected due to a deferred tax asset valuation allowance - No income tax expense is expected until the deferred tax asset valuation allowance, recorded in Q4 2024, no longer exists[18] Net Interest Income and Margin Net interest income increased by $0.6 million in Q2 2025, driven by an improvement in net interest margin from 1.82% to 1.90%. This was primarily due to a 14 basis point decrease in interest-bearing liability rates, partially offset by a 5 basis point decrease in interest-earning asset yields - Net interest income increased by $0.6 million QoQ[19] - Net interest margin increased from 1.82% to 1.90% due to a 14 basis point decrease in interest-bearing liability rates[19] Provision for Credit Losses The provision for credit losses significantly increased to $6.0 million in Q2 2025, up from $1.0 million in Q1 2025, primarily due to adverse credit migration of certain multifamily loans - Provision for credit losses increased to $6.0 million in Q2 2025, up from $1.0 million in Q1 2025[20] - The increase was primarily due to adverse credit migration of certain multifamily loans[20] Noninterest Income Noninterest income increased in Q2 2025, mainly due to a $4.4 million increase in the value of single-family mortgage servicing rights (MSRs) from higher market valuations - Noninterest income increased primarily due to a $4.4 million increase in single-family mortgage servicing rights (MSRs) value[21] Noninterest Expenses Noninterest expenses decreased by $1.4 million in Q2 2025, largely due to a $0.9 million reduction in general, administrative, and other expenses, reflecting efforts to eliminate or defer nonessential costs - Noninterest expenses decreased by $1.4 million QoQ, driven by a $0.9 million decrease in general, administrative and other expenses[22] Six Months Ended June 30, 2025 vs 2024 Performance For the first six months of 2025, HomeStreet significantly reduced its net loss to $8.9 million from $13.7 million in the prior year. Core net loss also improved, primarily due to higher net interest income and noninterest income, and lower noninterest expenses, despite an increased provision for credit losses - Net loss for the six months ended June 30, 2025, improved to $8.9 million from $13.7 million in the prior year[24] - Core net loss decreased by $3.9 million, primarily due to higher net interest income and noninterest income, and lower noninterest expenses, partially offset by an increased provision for credit losses[24] Income Taxes_YTD An income tax benefit of $0.7 million was recognized for the six months ended June 30, 2025, primarily due to the reversal of disparate tax effects on AOCI, consistent with the deferred tax asset valuation allowance recorded in Q4 2024 - Income tax benefit of $0.7 million recognized for YTD 2025, related to the reversal of disparate tax effects on AOCI[25] Net Interest Income and Margin_YTD Net interest income increased by $5.2 million for the six months ended June 30, 2025, with the net interest margin rising from 1.40% to 1.86%. This improvement was driven by a 41 basis point decrease in interest-bearing liability rates and a 6 basis point increase in interest-earning asset yields, partly due to the sale of lower-yielding multifamily loans - Net interest income increased $5.2 million YoY for the six-month period[26] - Net interest margin increased from 1.40% to 1.86%, driven by a 41 basis point decrease in interest-bearing liability rates and a 6 basis point increase in interest-earning asset yields[26] - Increase in yield on interest-earning assets was primarily due to the sale of $990 million of lower-yielding multifamily loans in Q4 2024[26] Provision for Credit Losses_YTD A $7.0 million provision for credit losses was recognized for the six months ended June 30, 2025, primarily due to adverse credit migration in certain multifamily loans and a $3.3 million increase in specific reserves. This contrasts with no provision in the prior year period - A $7.0 million provision for credit losses was recognized for YTD 2025, compared to no provision in YTD 2024[27] - The provision was mainly due to adverse credit migration in multifamily loans and a $3.3 million increase in specific reserves[27] Noninterest Income_YTD Noninterest income increased for the six months ended June 30, 2025, driven by a $1.1 million increase in gain on loan sales and a $6.0 million increase in loan servicing income, partially offset by a decrease in other noninterest income - Noninterest income increased YoY for the six-month period, primarily due to a $1.1 million increase in gain on loan sales and a $6.0 million increase in loan servicing income[28] - Loan servicing income increase was mainly due to a $5.9 million increase in the value of single-family mortgage servicing rights[28] Noninterest Expenses_YTD Noninterest expenses decreased by $6.2 million for the six months ended June 30, 2025, primarily due to lower compensation and benefit costs (driven by an 11% decrease in FTE), reduced occupancy costs from branch closures, and lower general and administrative costs - Noninterest expense decreased by $6.2 million YoY for the six-month period[29] - Key drivers include $3.3 million lower compensation and benefit costs (due to 11% decrease in FTE), $0.8 million lower occupancy costs, and $2.2 million lower general and administrative costs[29] Financial Position Overview During the first six months of 2025, total assets decreased by $514 million, mainly due to a $306 million decrease in loans held for investment and a $206 million decrease in cash. Total liabilities decreased by $520 million, primarily driven by a $556 million decrease in deposits, largely from brokered certificates of deposits - Total assets decreased by $514 million during the six months ended June 30, 2025[30] - This decrease was primarily due to a $306 million decrease in loans held for investment and a $206 million decrease in cash[30] - Total liabilities decreased by $520 million, driven by a $556 million decrease in deposits, mainly from brokered certificates of deposits[31] Loan Portfolio & Credit Quality Loans Held for Investment Total loans held for investment (LHFI) decreased to $5.93 billion as of June 30, 2025, from $7.38 billion a year prior. The decline was observed across all major categories, particularly multifamily and single-family loans Loans Held for Investment Breakdown (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Commercial real estate ("CRE") | | | | | | | Non-owner occupied CRE | $508,781 | $545,313 | $570,750 | $590,956 | $612,937 | | Multifamily | $2,895,342 | $2,934,442 | $2,992,675 | $3,950,941 | $3,935,158 | | Construction/land development | $425,718 | $436,610 | $472,740 | $535,601 | $530,445 | | Total CRE | $3,829,841 | $3,916,365 | $4,036,165 | $5,077,498 | $5,078,540 | | Commercial and industrial loans | | | | | | | Owner occupied CRE | $324,299 | $340,106 | $361,997 | $365,138 | $372,452 | | Commercial business | $285,612 | $299,001 | $312,004 | $345,999 | $376,711 | | Total Commercial and industrial | $609,911 | $639,107 | $674,001 | $711,137 | $749,163 | | Consumer loans | | | | | | | Single family | $1,060,566 | $1,088,264 | $1,109,095 | $1,137,981 | $1,152,004 | | Home equity and other | $432,821 | $419,480 | $412,535 | $406,638 | $400,343 | | Total Consumer | $1,493,387 | $1,507,744 | $1,521,630 | $1,544,619 | $1,552,347 | | Total LHFI | $5,933,139 | $6,063,216 | $6,231,796 | $7,333,254 | $7,380,050 | Loan Roll-forward & Originations The total loans held for investment decreased by $130 million in Q2 2025, with originations and advances of $226.8 million being offset by payoffs, paydowns, and other reductions of $355.8 million. Construction/land development loans represented the largest portion of new originations Loan Roll-forward and Originations Data (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :----------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Loans - beginning balance | $6,063,216 | $6,231,796 | $7,333,254 | $7,380,050 | $7,444,729 | | Originations and advances | $226,790 | $203,589 | $278,922 | $279,783 | $282,460 | | Payoffs, paydowns and other | ($355,761) | ($371,629) | ($385,790) | ($324,639) | ($346,493) | | Loans - ending balance | $5,933,139 | $6,063,216 | $6,231,796 | $7,333,254 | $7,380,050 | | Loan Originations by Type: | | | | | | | CRE | $160,268 | $127,861 | $202,574 | $209,189 | $171,153 | | Commercial and industrial | $18,692 | $26,224 | $32,961 | $12,966 | $39,653 | | Consumer loans | $47,830 | $49,504 | $43,387 | $57,628 | $71,654 | Credit Quality Metrics Credit quality remained at low levels in Q2 2025, with nonperforming assets to total assets at 0.76% and total loans delinquent over 30 days at 1.11%. While these ratios slightly increased from Q1 2025, the total balance of past due and nonaccrual loans decreased slightly - Nonperforming assets to total assets was 0.76% at June 30, 2025, a slight increase from 0.75% at March 31, 2025[37] - Total loans delinquent over 30 days, including nonaccrual loans, was 1.11% at June 30, 2025, up from 1.09% at March 31, 2025[37] Past Due and Nonaccrual Loans (in thousands) | (dollars in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------ | :------------ | :------------- | | Total past due and nonaccrual loans | $65,683 | $65,886 | | % of total loans held for investment | 1.11% | 1.09% | | Nonaccrual loans | $55,232 | $55,791 | | % of total loans held for investment | 0.93% | 0.92% | Allowance for Credit Losses (ACL) The Allowance for Credit Losses (ACL) increased to $45.8 million at June 30, 2025, from $39.6 million in the prior quarter, primarily due to a $6.16 million provision for credit losses on loans. The ACL rate to total loans increased to 0.78%, with multifamily and commercial business loans showing higher allocation rates Allowance for Credit Losses Roll-forward (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :----------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | ACL - Beginning balance | $39,634 | $38,743 | $38,651 | $39,741 | $39,677 | | Provision for credit losses | $6,160 | $888 | $203 | $104 | $128 | | ACL - Ending balance | $45,806 | $39,634 | $38,743 | $38,651 | $39,741 | | Total Provision for credit losses | $6,000 | $1,000 | — | — | — | Allowance for Credit Losses by Loan Type (in thousands) | (dollars in thousands) | June 30, 2025 Balance | June 30, 2025 Rate | March 31, 2025 Balance | March 31, 2025 Rate | December 31, 2024 Balance | December 31, 2024 Rate | | :------------------------------------ | :-------------------- | :----------------- | :--------------------- | :------------------ | :------------------------ | :--------------------- | | Multifamily | $18,948 | 0.65% | $13,287 | 0.45% | $14,909 | 0.50% | | Commercial business | $11,150 | 3.96% | $10,648 | 3.61% | $6,886 | 2.23% | | Total ACL | $45,806 | 0.78% | $39,634 | 0.66% | $38,743 | 0.63% | Other Key Financial Data Production Volumes for Secondary Market Single-family loan originations for sale to the secondary market increased significantly in Q2 2025 to $114.7 million from $83.8 million in Q1 2025. Net gain on loan origination and sale activities also increased, primarily from single-family loans Secondary Market Production and Sales (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Loan originations: | | | | | | | Single family loans | $114,723 | $83,834 | $110,434 | $125,964 | $101,057 | | Commercial and industrial and CRE loans | $18,861 | $42,676 | $84,263 | — | $19,593 | | Loans sold: | | | | | | | Single family loans | $105,197 | $82,397 | $127,401 | $109,091 | $98,081 | | Commercial and industrial and CRE loans | $12,894 | $54,195 | $1,074,405 | $7,602 | $13,539 | | Net gain (loss) on loan origination and sale activities: | | | | | | | Single family loans | $3,182 | $2,283 | $2,090 | $2,779 | $2,718 | | Commercial and industrial and CRE loans | $53 | $933 | ($87,082) | ($19) | $318 | | Total | $3,235 | $3,216 | ($84,992) | $2,760 | $3,036 | Loan Servicing Income & MSRs Total loan servicing income increased to $7.55 million in Q2 2025 from $4.86 million in Q1 2025, primarily driven by a significant increase in single-family servicing income due to changes in fair value assumptions for MSRs. Capitalized Single Family MSRs increased to $75.99 million Loan Servicing Income and MSRs Data (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Single family servicing income | $6,341 | $3,430 | $1,853 | $1,562 | $2,058 | | Commercial loan servicing income | $1,209 | $1,428 | $1,144 | $1,496 | $1,352 | | Total loan servicing income | $7,550 | $4,858 | $2,997 | $3,058 | $3,410 | | Capitalized MSRs: | | | | | | | Single Family MSRs (Ending balance) | $75,991 | $72,285 | $72,901 | $70,800 | $73,725 | | Multifamily and SBA MSRs (Ending balance) | $24,502 | $25,674 | $26,565 | $26,322 | $27,583 | - Changes in fair value due to assumptions for single family MSRs contributed $4.37 million to income in Q2 2025[44] Deposits by Product Total deposits decreased to $5.86 billion as of June 30, 2025, from $6.09 billion in the prior quarter. This decline was primarily driven by a significant reduction in brokered deposits, while other certificates of deposit showed a slight increase Deposits by Product Category (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Noninterest-bearing demand deposits | $1,203,680 | $1,276,133 | $1,195,781 | $1,253,582 | $1,252,850 | | Interest-bearing demand deposits | $322,151 | $327,400 | $323,112 | $315,711 | $332,290 | | Savings | $233,074 | $233,240 | $229,659 | $239,060 | $246,397 | | Money market | $1,363,793 | $1,437,024 | $1,396,697 | $1,445,639 | $1,502,960 | | Brokered deposits | $210,067 | $297,717 | $751,406 | $741,051 | $948,989 | | Other Certificates of deposit | $2,524,519 | $2,518,981 | $2,516,366 | $2,440,361 | $2,248,984 | | Total deposits | $5,857,284 | $6,090,495 | $6,413,021 | $6,435,404 | $6,532,470 | | Percent of total deposits: | | | | | | | Noninterest-bearing demand deposits | 20.5% | 21.0% | 18.6% | 19.5% | 19.2% | | Brokered deposits | 3.6% | 4.9% | 11.7% | 11.5% | 14.5% | Non-GAAP Financial Measures Explanation of Non-GAAP Measures HomeStreet uses several non-GAAP financial measures, including tangible common equity, core net income (loss), core noninterest expenses, and an adjusted efficiency ratio. These measures exclude specific items like merger-related expenses, significant loan sale losses, and deferred tax asset valuation allowances, to provide a clearer view of underlying performance and comparability for future projections - Non-GAAP measures include tangible common equity, core net income (loss), core noninterest expenses, and an adjusted efficiency ratio[51] - Core net income (loss) excludes items such as loss on loan sale, deferred tax asset valuation allowance, loss on debt extinguishment, and merger-related expenses to better project future results[51] - These measures are used by management and investors to assess operating results, plan, forecast, and analyze future periods, and facilitate comparison to prior periods and industry peers[53] Reconciliations The report provides detailed reconciliations of GAAP to non-GAAP measures, illustrating the adjustments made for items such as merger-related expenses, loan sale losses, and deferred tax asset valuation allowances to derive core net income, tangible equity ratios, and the efficiency ratio Core Net Income (Loss) Reconciliation (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Core net income (loss): | | | | | | | Net income (loss) | ($4,412) | ($4,465) | ($123,327) | ($7,282) | ($6,238) | | Adjustments (tax effected) | $1,362 | $1,599 | $118,187 | $1,283 | $1,897 | | Total Core net income (loss) | ($3,050) | ($2,866) | ($5,140) | ($5,999) | ($4,341) | Efficiency Ratio Reconciliation | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Efficiency ratio: | | | | | | | Noninterest expense (Total) | $47,751 | $49,108 | $43,953 | $49,166 | $50,931 | | Adjustments | ($2,128) | ($2,436) | $2,640 | ($2,083) | ($2,895) | | Core noninterest expense | $45,623 | $46,672 | $46,593 | $47,083 | $48,036 | | Adjusted total revenues | $48,970 | $45,357 | $40,310 | $39,677 | $42,928 | | Ratio | 93.2% | 102.9% | 115.6% | 118.7% | 111.9% | Tangible Book Value Per Share Reconciliation | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Tangible book value per share: | | | | | | | Shareholders' equity | $402,981 | $400,751 | $396,997 | $538,315 | $520,117 | | Less: Intangible assets | ($6,184) | ($6,662) | ($7,141) | ($7,766) | ($8,391) | | Tangible shareholders' equity | $396,797 | $394,089 | $389,856 | $530,549 | $511,726 | | Computed amount | $20.97 | $20.83 | $20.67 | $28.13 | $27.14 | Forward-Looking Statements This section contains forward-looking statements regarding future performance, financial condition, and the pending merger with Mechanics Bank. It highlights inherent risks and uncertainties that could cause actual results to differ materially, including factors related to the merger, interest rate changes, economic conditions, operating costs, credit quality, regulatory changes, and technological advancements. Readers are cautioned to review risk factor disclosures in SEC filings - Forward-looking statements include expectations regarding the growth of the Company, achievement of profitability, timing of the merger with Mechanics Bank, and income tax expense[57] - Actual results may differ materially due to factors such as the ability to consummate the merger, obtain governmental approvals, achieve expected synergies, changes in interest rates, economic conditions, operating costs, credit quality, and regulatory changes[58] - The Company does not assume any obligation to update forward-looking statements, and readers are advised to review risk factor disclosures in Forms 10-K and 10-Q[57][59][60]