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Section 1: 8-K/A (FORM 8-K/A)

Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K/A
(Amendment No. 1)
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 24, 2019
 
HOMESTREET, INC.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Washington
 
001-35424
 
91-0186600
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
601 Union Street, Ste. 2000, Seattle, WA 98101
(Address of principal executive offices) (Zip Code)
(206) 623-3050
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, No Par Value
HMST
The Nasdaq Stock Market LLC
[ ]
Emerging growth Company
 
 
[ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 12(a) of the Exchange Act.




Explanatory Note
This Amendment No. 1 (this “Amendment”) is being filed by HomeStreet, Inc. (the “Company”) to amend and restate in its entirety the Current Report on Form 8-K that the Company filed with the Securities and Exchange Commission on June 28, 2019 disclosing the completion of a disposition of assets. This amendment and restatement provides unaudited pro forma consolidated statements of operations for the fiscal years ended December 31, 2018, 2017 and 2016 as well as the fiscal quarter ended March 31, 2019 which give effect to the Asset Disposition (defined below), and also provides an updated unaudited proforma Consolidated Statement of Financial Condition at March 31, 2019 to reflect a change in intent for certain assets and liabilities that were determined to be part of continuing operations as they were no longer part of the asset disposal group under discontinued operations. The unaudited pro forma consolidated statements of operations for the fiscal year ended December 31, 2018 and the fiscal quarter ended March 31, 2019 replace the previously filed versions of those statements provided in the initial Current Report on Form 8-K for this matter filed on June 28, 2019.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On June 24, 2019, HomeStreet Bank (the "Bank"), a wholly owned subsidiary of HomeStreet, Inc. (the "Company"), closed on the final phase of a disposition of assets (the "Asset Disposition") related to the Bank's stand-alone home loan center-based single family mortgage origination operations (the "HLC Business"). This Asset Disposition included the sale of mortgage servicing rights ("MSRs") related to the HLC Business in two separate transactions on March 29, 2019 and the sale of substantially all assets related to 47 stand-alone home loan centers, satellite offices and production offices of the HLC Business. This was completed in three separate closings on June 6, 2019, June 17, 2019, and June 24, 2019. The completion of the Asset Disposition is considered to be the disposition of a significant amount of assets under Item 2.01 of Form 8-K.
MSRs with an unpaid principal balance of approximately $4.4 billion that were issued through the Government National Mortgage Association were sold to PennyMac Loan Services LLC ("PennyMac") on March 29, 2019, and a portfolio of MSRs related to loans issued through Freddie Mac and Fannie Mae with an unpaid principal balance of approximately $9.9 billion was sold to New Residential Mortgage LLC ("New Residential") on the same date. The aggregate purchase price for these two transactions was approximately $183.1 million, subject to a holdback pending delivery of loan documents, and with respect to the sale to PennyMac, satisfaction of other post-transfer conditions related to repairs of damage with respect to loans in disaster areas and resolution of prior servicing errors, of approximately $18.3 million. The PennyMac servicing transferred on June 4, 2019 and the New Residential servicing will transfer in the third quarter of 2019. In addition, the Bank transferred approximately $116.1 million of deposit accounts representing custodial funds relating to the MSRs sold to PennyMac. In the third quarter of 2019, the Bank expects to transfer approximately $132.8 million of deposit accounts representing advances relating to the MSRs sold to New Residential.
The sale of assets related to 47 stand-alone home loan centers (the "HLC Sale") was pursuant to a Purchase and Assumption Agreement between the Bank and Homebridge Financial Services, Inc. ("Homebridge") that was executed on April 4, 2019. The assets sold primarily consisted of mortgage origination assets and related personnel affiliated with the Bank’s stand-alone home loan centers, satellite offices and production offices related to the HLC Business. The purchase price for the HLC Sale was approximately $4.9 million, which is the net book value of the assets sold, plus a premium of $1.0 million, which was reduced by $1.5 million for reimbursement by the Bank of certain transaction expenses incurred by Homebridge. In addition, Homebridge has assumed certain home loan center and fulfillment office lease obligations. In the event Homebridge realizes a certain level of loan originations for the 12 months following the closing of the Asset Sale, the Bank will be entitled to an additional payment of up to $750 thousand at that time.
In the aggregate, the Bank received consideration in cash of approximately $186.6 million in exchange for the sale of these assets across the three transactions that constitute the Asset Disposition.
There are no material relationships between the Company and its affiliates and any of the purchasers and their respective affiliates other than in respect of the transactions described above.



The Company's unaudited pro forma consolidated statement of financial condition as of March 31, 2019 and unaudited pro forma consolidated statements of operations for the fiscal year ended December 31, 2018, 2017 and 2016 and quarter end March 31, 2019, in each case giving effect to the Asset Disposition, and related notes are attached hereto as Exhibit 99.1.
Item 9.01
Financial Statements and Exhibits.
(b) Unaudited Pro Forma Financial Information
Certain unaudited pro forma financial information required by Item 9.01(b) of Form 8-K is included as Exhibit 99.1 hereto and incorporated herein by reference.
(d) Exhibits
The following exhibits are attached with this current report on Form 8-K:
 





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 7, 2019

 
 
 
 
HomeStreet, Inc.
 
 
 
 
By:
 
/s/ Mark R. Ruh
 
 
 
Mark R. Ruh
 
 
 
Executive Vice President and Chief Financial Officer
 
 
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


HOMESTREET, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Overview

On June 24, 2019, HomeStreet Bank (the "Bank"), a wholly-owned subsidiary of HomeStreet Inc., Inc. (the "Company"), completed the previously announced sale of certain assets under the Purchase and Assumption Agreement dated as of April 4, 2019 (the "Purchase Agreement"), by and between the Bank and Homebridge Financial Services, Inc. ("Homebridge").

Under the Purchase Agreement, a copy of which was filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the "SEC") on April 4, 2019, the Bank agreed to sell and the Purchaser agreed to purchase substantially all of the assets related to up to 50 stand-alone, satellite and fulfillment offices related to the Bank's home loan center-based single family mortgage origination operations and offered to hire a significant portion of the related personnel who were currently employed in that portion of the Bank's business (the "Asset Sale"). Homebridge agreed to a purchase price comprised of the net book value of the acquired assets, of approximately $4.9 million, plus a premium of $1.0 million, which was reduced by $1.5 million for reimbursement by HomeStreet of certain transaction expenses incurred by Homebridge, as well as the assumption of certain home loan center and fulfillment office lease obligations. In the event Homebridge realizes a certain level of loan originations for the twelve months following the closing of the Asset Sale, HomeStreet will be entitled to an additional payment of up to $750 thousand at that time.

The Bank ultimately sold 47 of these offices and transferred 464 related personnel to Homebridge. The final asset transfer occurred on June 24, 2019. The four remaining home loan centers not sold to Homebridge were closed in June 2019 and no mortgage centers remain.

On March 29, 2019, the Bank successfully sold and settled two sales of the rights to service $14.26 billion in total unpaid principal balance ("Servicing Sale") of single family mortgage loans serviced for Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and Government National Mortgage Association ("Ginnie Mae"), representing approximately 71% of HomeStreet's total single family mortgage loans serviced for others portfolio as of December 31, 2018. The sale resulted in a $774 thousand pre-tax increase in income from discontinued operations during the first quarter and a $2.0 million pre-tax decrease in income from discontinued operations during the second quarter. The Bank finalized the servicing transfer for some of these loans in the second quarter of 2019, and will finalize the remainder in the third quarter of 2019, and is subservicing these loans until the transfer dates. The Asset Sale and Servicing Sales are collectively referred to as the "Transactions".

Basis of Presentation

The following unaudited pro forma consolidated financial information reflects adjustments to the Company's historical financial results as reported under U.S. Generally Accepted Accounting Principles ("GAAP") in connection with the Transactions. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2018 has been prepared with the assumption that the Transactions were completed and sold as of January 1, 2018. The unaudited pro forma consolidated statement of financial condition as of March 31, 2019 has been prepared with the assumption that the Transactions were completed and sold as of that date.

The unaudited pro forma consolidated financial information do not purport to be indicative of the results of operations or the financial condition which would have actually resulted if the Transactions had been completed on the dates indicated and do not purport to indicate the results of future operations.

The historical financial statements have been adjusted in the unaudited pro forma financial information to give effect to pro forma events that are: (i) directly attributable to the discontinued operation; and (ii) factually supportable.






The unaudited pro forma financial statements: (i) adjust for certain assets and liabilities that either are being reallocated between continuing and discontinued operations or that are required to be settled as required by the related agreements; and (ii) includes adjustments to allocate income tax expense between continuing and discontinued operations.

The Consolidated column in the unaudited pro forma statement of financial condition and in the unaudited pro forma statements of operations reflect the Company's historical financial statements for the periods presented and do not reflect any adjustments related to the Transactions. Assumptions and estimates underlying the Pro Forma Adjustments column are described in the accompanying notes.

The unaudited pro forma financial information has been prepared by the Company based upon assumptions deemed appropriate by the Company's management and are based upon information and assumptions available at the time of filing the Company's Current Report on Form 8-K A filed with the SEC on August 7, 2019. An explanation of certain assumptions is set forth in the notes to the unaudited pro forma consolidated financial statements.

The unaudited pro forma consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X. The following unaudited pro forma financial information should be read in conjunction with: (i) the accompanying notes to the unaudited pro forma financial information; and (ii) the audited consolidated financial statements of the Company which were included in the Company's annual report on Form 10-K filed with the SEC on March 6, 2019 and the Company's unaudited quarterly report on Form 10-Q filed with the SEC on May 10, 2019.






HomeStreet, Inc.
Unaudited Pro Forma Consolidated Statement of Financial Condition
As of March 31, 2019
(in thousands)
 
 Consolidated
 
Discontinued Operations
 
Continuing Operations
 
Pro Forma Adjustments
 
Pro Forma Continuing Operations
Assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
67,690

 
$

 
$
67,690

 
$
(2,811
)
(1)
$
64,879

Investment securities
 
816,878

 

 
816,878

 

 
816,878

Loans held for sale
 
364,478

 
307,550

 
56,928

 

 
56,928

Loans held for investment, net
 
5,345,969

 

 
5,345,969

 

 
5,345,969

Mortgage servicing rights
 
95,942

 

 
95,942

 

 
95,942

Other real estate owned
 
838

 

 
838

 

 
838

Federal Home Loan Bank stock, at cost
 
32,533

 

 
32,533

 

 
32,533

Premises and equipment, net
 
90,926

 
5,291

 
85,635

 

 
85,635

Lease right-of-use assets
 
115,546

 
2,463

 
113,083

 

 
113,083

Goodwill
 
29,857

 

 
29,857

 

 
29,857

Other assets
 
210,748

 
41,480

 
169,268

 

 
169,268

Total assets
 
$
7,171,405

 
$
356,784

 
$
6,814,621

 
$
(2,811
)
 
$
6,811,810

Liabilities:
 
 
 
 
 
 
 
 
 
 
Deposits
 
$
5,397,434

 
$
219,100

 
$
5,178,334

 
$

 
$
5,178,334

Federal Home Loan Bank advances
 
599,590

 

 
599,590

 
(111,625
)
(2)
487,965

Accounts payable and other liabilities
 
141,820

 
15,274

 
126,546

 

 
126,546

Federal funds purchased and securities sold under agreements to repurchase
 
27,000

 

 
27,000

 

 
27,000

Long-term debt
 
125,509

 

 
125,509

 

 
125,509

Lease liabilities
 
133,021

 
2,800

 
130,221

 

 
130,221

Inter-segment borrowings
 

 
119,610

 
(119,610
)
 
119,610

(3)

Total liabilities
 
6,424,374

 
356,784

 
6,067,590

 
7,985

 
6,075,575

Shareholders' equity:
 
 
 
 
 
 
 
 
 
 
Preferred stock, no par value
 
 
 
 
 
 
 
 
 
 
Authorized 10,000 shares
 

 

 

 

 

Common stock, no par value
 
 
 
 
 
 
 
 
 
 
Authorized 160,000,000 shares
 
511

 

 
511

 

 
511

Additional paid-in capital
 
342,049

 

 
342,049

 

 
342,049

Retained earnings
 
411,826

 

 
411,826

 
(10,796
)
(4)
401,030

Accumulated other comprehensive loss
 
(7,355
)
 

 
(7,355
)
 

 
(7,355
)
Total shareholders' equity
 
747,031

 

 
747,031

 
(10,796
)
 
736,235

Total liabilities and shareholders' equity
 
$
7,171,405

 
$
356,784

 
$
6,814,621

 
$
(2,811
)
 
$
6,811,810







HomeStreet, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Three Months Ended March 31, 2019
(in thousands, except share data)
 
 Consolidated
 
Discontinued Operations
 
Continuing Operations
 
Pro Forma Adjustments
 
Pro Forma Continuing Operations
Interest income:
 
 
 
 
 
 
 
 
 
 
Loans
 
$
66,166

 
$
3,235

 
$
62,931

 
$

 
$
62,931

Investment securities
 
5,564

 

 
5,564

 

 
5,564

Other
 
209

 
21

 
188

 

 
188

 
 
71,939

 
3,256

 
68,683

 

 
68,683

Interest expense:
 
 
 
 
 
 
 
 
 
 
Deposits
 
14,312

 

 
14,312

 

 
14,312

Federal Home Loan Bank advances
 
5,614

 
972

 
4,642

 
(740
)
(5)
3,902

Federal funds purchased and securities sold under agreements to repurchase
 
304

 

 
304

 

 
304

Long-term debt
 
1,744

 

 
1,744

 

 
1,744

Other
 
263

 
139

 
124

 

 
124

 
 
22,237

 
1,111

 
21,126

 
(740
)
 
20,386

Net interest income
 
49,702

 
2,145

 
47,557

 
740

 
48,297

Provision for credit losses
 
1,500

 

 
1,500

 

 
1,500

Net interest income after provision for credit losses
 
48,202

 
2,145

 
46,057

 
740

 
46,797

Noninterest income:
 
 
 
 
 
 
 
 
 
 
Net gain on mortgage loan origination and sale activities
 
38,095

 
35,488

 
2,607

 

 
2,607

Loan servicing income
 
4,629

 
3,586

 
1,043

 

 
1,043

Income from Windermere Mortgage Services Series, LLC
 
57

 
57

 

 

 

Depositor and other retail banking fees
 
1,750

 
5

 
1,745

 

 
1,745

Insurance agency commissions
 
625

 

 
625

 

 
625

Loss on sale of investment securities available for sale
 
(247
)
 

 
(247
)
 

 
(247
)
Other
 
2,452

 
133

 
2,319

 

 
2,319

 
 
47,361

 
39,269

 
8,092

 

 
8,092

Noninterest expense:
 
 
 
 
 
 
 
 
 
 
Salaries and related costs
 
55,317

 
30,038

 
25,279

 
(2,740
)
(6)
22,539

General and administrative
 
12,184

 
4,002

 
8,182

 

 
8,182

Amortization of core deposit intangibles
 
333

 

 
333

 

 
333

Legal
 
532

 
736

 
(204
)
 

 
(204
)
Consulting
 
1,944

 
536

 
1,408

 

 
1,408

Federal Deposit Insurance Corporation assessments
 
864

 
43

 
821

 

 
821

Occupancy
 
18,545

 
13,577

 
4,968

 
(296
)
(7)
4,672

Information services
 
8,784

 
1,696

 
7,088

 

 
7,088

Net benefit from operation and sale of other real estate owned
 
(29
)
 

 
(29
)
 

 
(29
)
Gain on disposal
 
(774
)
 
(774
)
 

 

 

 
 
97,700

 
49,854

 
47,846

 
(3,036
)
 
44,810

(Loss) income before income taxes
 
(2,137
)
 
(8,440
)
 
6,303

 
3,776

 
10,079

Income tax (benefit) expense
 
(422
)
 
(1,667
)
 
1,245

 
793

(8)
2,038

NET (LOSS) INCOME
 
$
(1,715
)
 
$
(6,773
)
 
$
5,058

 
$
2,983

 
$
8,041

 
 
 
 
 
 
 
 
 
 
 
Earnings per common share
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(0.06
)
 
$
(0.25
)
 
$
0.19

 
 
 
$
0.30

Diluted
 
$
(0.06
)
 
$
(0.25
)
 
$
0.19

 
 
 
$
0.30

Weighted average number of shares outstanding
 
 
 
 
 
 
 
 
 
 
Basic
 
27,021,507

 
27,021,507

 
27,021,507

 
 
 
27,021,507

Diluted
 
27,185,175

 
27,185,175

 
27,185,175

 
 
 
27,185,175







HomeStreet, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2018
(in thousands, except share data)
 
 Consolidated
 
Discontinued Operations
 
Continuing Operations
 
Pro Forma Adjustments
 
Pro Forma Continuing Operations
Interest income:
 
 
 
 
 
 
 
 
 
 
Loans
 
$
247,126

 
$
18,776

 
$
228,350

 
$

 
$
228,350

Investment securities
 
22,645

 

 
22,645

 

 
22,645

Other
 
931

 
464

 
467

 

 
467

 
 
270,702

 
19,240

 
251,462

 

 
251,462

Interest expense:
 
 
 
 
 
 
 
 
 
 
Deposits
 
41,995

 

 
41,995

 

 
41,995

Federal Home Loan Bank advances
 
18,501

 
6,127

 
12,374

 
(2,958
)
(5)
9,416

Federal funds purchased and securities sold under agreements to repurchase
 
298

 

 
298

 

 
298

Long-term debt
 
6,647

 

 
6,647

 

 
6,647

Other
 
782

 
597

 
185

 

 
185

 
 
68,223

 
6,724

 
61,499

 
(2,958
)
 
58,541

Net interest income
 
202,479

 
12,516

 
189,963

 
2,958

 
192,921

Provision for credit losses
 
3,000

 

 
3,000

 

 
3,000

Net interest income after provision for credit losses
 
199,479

 
12,516

 
186,963

 
2,958

 
189,921

Noninterest income:
 
 
 
 
 
 
 
 
 
 
Net gain on mortgage loan origination and sale activities
 
186,249

 
174,383

 
11,866

 

 
11,866

Loan servicing income
 
28,724

 
25,053

 
3,671

 

 
3,671

Income from Windermere Mortgage Services Series, LLC
 
160

 
160

 

 

 

Depositor and other retail banking fees
 
8,047

 
28

 
8,019

 

 
8,019

Insurance agency commissions
 
2,193

 

 
2,193

 

 
2,193

Gain on sale of investment securities available for sale
 
235

 

 
235

 

 
235

Other
 
11,351

 
802

 
10,549

 

 
10,549

 
 
236,959

 
200,426

 
36,533

 

 
36,533

Noninterest expense:
 
 
 
 
 
 
 
 
 
 
Salaries and related costs
 
250,798

 
145,756

 
105,042

 
(10,684
)
(6)
94,358

General and administrative
 
53,753

 
20,821

 
32,932

 

 
32,932

Amortization of core deposit intangibles
 
1,625

 

 
1,625

 

 
1,625

Legal
 
3,931

 
558

 
3,373

 

 
3,373

Consulting
 
3,071

 
602

 
2,469

 

 
2,469

Federal Deposit Insurance Corporation assessments
 
4,091

 
283

 
3,808

 

 
3,808

Occupancy
 
38,304

 
20,201

 
18,103

 
(471
)
(7)
17,632

Information services
 
35,139

 
7,111

 
28,028

 

 
28,028

Net benefit from operation and sale of other real estate owned
 
(139
)
 

 
(139
)
 

 
(139
)
 
 
390,573

 
195,332

 
195,241

 
(11,155
)
 
184,086

Income before income taxes
 
45,865

 
17,610

 
28,255

 
14,113

 
42,368

Income tax expense
 
5,838

 
4,072

 
1,766

 
2,964

(8)
4,730

NET INCOME
 
$
40,027

 
$
13,538

 
$
26,489

 
$
11,149

 
$
37,638

 
 
 
 
 
 
 
 
 
 
 
Earnings per common share
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.48

 


 


 
 
 
$
1.40

Diluted
 
$
1.47

 


 


 
 
 
$
1.39

Weighted average number of shares outstanding
 
 
 
 
 
 
 
 
 
 
Basic
 
26,970,916

 
 
 
 
 
 
 
26,970,916

Diluted
 
27,168,135

 
 
 
 
 
 
 
27,168,135







HomeStreet, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2017
(in thousands, except share data)
 
 Consolidated
 
Discontinued Operations
 
Continuing Operations
 
Interest income:
 
 
 
 
 
 
 
Loans
 
$
215,363

 
$
25,018

 
$
190,345

 
Investment securities
 
21,753

 

 
21,753

 
Other
 
567

 
345

 
222

 
 
 
237,683

 
25,363

 
212,320

 
Interest expense:
 
 
 
 
 
 
 
Deposits
 
23,912

 

 
23,912

 
Federal Home Loan Bank advances
 
12,589

 
4,965

 
7,624

 
Federal funds purchased and securities sold under agreements to repurchase
 
5

 

 
5

 
Long-term debt
 
6,067

 

 
6,067

 
Other
 
672

 
501

 
171

 
 
 
43,245

 
5,466

 
37,779

 
Net interest income
 
194,438

 
19,897

 
174,541

 
Provision for credit losses
 
750

 

 
750

 
Net interest income after provision for credit losses
 
193,688

 
19,897

 
173,791

 
Noninterest income:
 
 
 
 
 
 
 
Net gain on mortgage loan origination and sale activities
 
255,876

 
235,850

 
20,026

 
Loan servicing income
 
35,384

 
32,053

 
3,331

 
Income from Windermere Mortgage Services Series, LLC
 
598

 
598

 

 
Depositor and other retail banking fees
 
7,221

 
26

 
7,195

 
Insurance agency commissions
 
1,904

 

 
1,904

 
Gain on sale of investment securities available for sale
 
489

 

 
489

 
Other
 
10,682

 
1,030

 
9,652

 
 
 
312,154

 
269,557

 
42,597

 
Noninterest expense:
 
 
 
 
 
 
 
Salaries and related costs
 
293,870

 
192,079

 
101,791

 
General and administrative
 
65,036

 
27,254

 
37,782

 
Amortization of core deposit intangibles
 
1,710

 

 
1,710

 
Legal
 
1,410

 
107

 
1,303

 
Consulting
 
3,467

 
785

 
2,682

 
Federal Deposit Insurance Corporation assessments
 
3,279

 
281

 
2,998

 
Occupancy
 
38,268

 
21,287

 
16,981

 
Information services
 
33,143

 
7,246

 
25,897

 
Net benefit from operation and sale of other real estate owned
 
(530
)
 

 
(530
)
 
 
 
439,653

 
249,039

 
190,614

 
Income before income taxes
 
66,189

 
40,415

 
25,774

 
Income tax (benefit) expense *
 
(2,757
)
 
12,559

 
(15,316
)
 
NET INCOME
 
$
68,946

 
$
27,856

 
$
41,090

 
 
 
 
 
 
 
 
 
Earnings per common share
 
 
 
 
 
 
 
Basic
 
$
2.57

 


 
$
1.53

 
Diluted
 
$
2.54

 


 
$
1.52

 
Weighted average number of shares outstanding
 
 
 
 
 
 
 
Basic
 
26,864,657

 
 
 
26,864,657

 
Diluted
 
27,092,019

 
 
 
27,092,019

 
* The income tax benefit we received from the 2017 Tax Reform Act is all allocated to continuing operations.





HomeStreet, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2016
(in thousands, except share data)
 
 Consolidated
 
Discontinued Operations
 
Continuing Operations
 
Interest income:
 
 
 
 
 
 
 
Loans
 
$
190,667

 
$
26,764

 
$
163,903

 
Investment securities
 
18,394

 

 
18,394

 
Other
 
476

 

 
476

 
 
 
209,537

 
26,764

 
182,773

 
Interest expense:
 
 
 
 
 
 
 
Deposits
 
19,009

 

 
19,009

 
Federal Home Loan Bank advances
 
6,030

 
381

 
5,649

 
Federal funds purchased and securities sold under agreements to repurchase
 
4

 

 
4

 
Long-term debt
 
4,043

 

 
4,043

 
Other
 
402

 
349

 
53

 
 
 
29,488

 
730

 
28,758

 
Net interest income
 
180,049

 
26,034

 
154,015

 
Provision for credit losses
 
4,100

 

 
4,100

 
Net interest income after provision for credit losses
 
175,949

 
26,034

 
149,915

 
Noninterest income:
 
 
 
 
 
 
 
Net gain on mortgage loan origination and sale activities
 
307,313

 
290,442

 
16,871

 
Loan servicing income
 
33,059

 
30,080

 
2,979

 
Income from Windermere Mortgage Services Series, LLC
 
2,333

 
2,333

 

 
Depositor and other retail banking fees
 
6,790

 
27

 
6,763

 
Insurance agency commissions
 
1,619

 

 
1,619

 
Gain on sale of investment securities available for sale
 
2,539

 

 
2,539

 
Other
 
5,497

 
585

 
4,912

 
 
 
359,150

 
323,467

 
35,683

 
Noninterest expense:
 
 
 
 
 
 
 
Salaries and related costs
 
303,354

 
210,351

 
93,003

 
General and administrative
 
63,206

 
29,785

 
33,421

 
Amortization of core deposit intangibles
 
2,166

 

 
2,166

 
Legal
 
1,867

 
527

 
1,340

 
Consulting
 
4,958

 
1,364

 
3,594

 
Federal Deposit Insurance Corporation assessments
 
3,414

 
326

 
3,088

 
Occupancy
 
30,530

 
15,493

 
15,037

 
Information services
 
33,063

 
8,447

 
24,616

 
Net cost from operation and sale of other real estate owned
 
1,764

 

 
1,764

 
 
 
444,322

 
266,293

 
178,029

 
Income before income taxes
 
90,777

 
83,208

 
7,569

 
Income tax expense
 
32,626

 
29,905

 
2,721

 
NET INCOME
 
$
58,151

 
$
53,303

 
$
4,848

 
 
 
 
 
 
 
 
 
Earnings per common share
 
 
 
 
 
 
 
Basic
 
$
2.36

 
 
 
$
0.20

 
Diluted
 
$
2.34

 
 
 
$
0.20

 
Weighted average number of shares outstanding
 
 
 
 
 
 
 
Basic
 
24,615,990

 
 
 
24,615,990

 
Diluted
 
24,843,683

 
 
 
24,843,683

 

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The pro forma adjustments are based on preliminary estimates and assumptions by management that are subject to change. The following adjustments have been reflected in the unaudited pro forma consolidated financial information.






(1) Pro forma adjustment represents the estimated net cash proceeds from the Transactions.
(in thousands)
 
 
Three Months Ended June 30, 2019
 
Proceeds from MSR sales
 
 
$

 
Proceeds from asset sales
 
 
3,461

 
Compensation expense related to the Transactions
 
 
(2,675
)
 
Other transaction costs
 
 
(3,597
)
 
Net cash received (paid)
 
 
$
(2,811
)
 

(2) These Transactions would allow management to reduce funding via lower advances from the Federal Home Loan Bank.
(3) Inter-segment borrowings are eliminated at the consolidated level.
(4) Pro forma adjustment represents the estimated net loss on disposal. The estimated pre-tax loss is not included in the pro forma consolidated statement of operations for the quarter ended March 31, 2019 as it represents a non-recurring item that results directly from the Transactions.

(in thousands)
 
 
Three Months Ended June 30, 2019
 
Net cash received (paid)
 
 
$
(2,811
)
 
Book value of certain assets sold
 
 
(4,038
)
 
Book value of MSR sold
 
 

 
Non-cash charges
 
 
(3,947
)
 
Net loss on disposal
 
 
$
(10,796
)
 

(5) Pro forma adjustment represents the estimated reduction of interest expense that the Company would have realized from lower advances from the Federal Home Loan Bank to support the former Mortgage Banking segment’s business activities.
(6) Pro forma adjustment represents the estimated corporate support cost savings from salaries and benefits that the Company will realize as a result of the Transactions.
(7) Pro forma adjustment represents the estimated corporate support cost savings from occupancy-related costs that the Company will realize as a result of the Transactions.
(8) Tax rate applied to the pro forma adjustments was the Company’s federal statutory tax rate for the period.



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