Financial Services
HomeStreet’s Mortgage-Business Downsizing Is Nearly Completed
By Bill Conroy May 16, 2019
Seattle lender tells shareholders that it is ramping up growth of commercial and consumer lending
HomeStreet Inc., the parent company of Seattle-based HomeStreet Bank, is well along the path of downsizing its mortgage business and putting its full attention on expanding its commercial and consumer banking business, according to a letter issued to its shareholders on May 16.
Last month, HomeStreet announced that it had entered into a definitive agreement to sell to Homebridge Financial Services Inc. “substantially all of [HomeStreet’s] stand-alone production and fulfillment offices related to [its] home loan center-based mortgage origination business.” HomeStreet also told shareholders that as of March 2019, the lender had sold some 71% of its single-family mortgage-servicing rights ― acquired by New Residential Mortgage and PennyMac.
The bank will continue to offer mortgages through its bank branches, online and via affinity partnerships, but the scale of its mortgage business will be reduced substantially, according to the lender.
“These actions followed extensive deliberations by the board and thorough analysis of current and future market conditions,” the bank wrote to shareholders. HomeStreet had previously cited the steep drop-off in the mortgage-refinancing business spurred by rising interest rates as well as rising home prices that have decreased the affordability of homes as factors in its decision to exit the mortgage business.
“Going forward, this sale [of mortgage assets] will allow us to focus on growing and diversifying our commercial and consumer banking business,” the letter to shareholders states. Last year, HomeStreet executives note in the letter to shareholders, the bank’s commercial and consumer banking segment recorded record net income of $56.8 million, up 35% from 2017, “driven by organic loan growth and improved operating efficiency.”
HomeStreet (HMST-Nasdaq) also relayed the following information to shareholders related to the bank’s growth since its February 2012 IPO, which raised some $80 million.
- Total assets increased from $2.3 billion to $7.2 billion as of March 31.
- Loans held for investment grew from $1.3 billion to $5.3 billion as of March 31.
- Deposits grew from $2 billion to $5.2 billion as of March 31.
- The bank’s retail branch network expanded from 20 to 63 locations as of March 31.
- HomeStreet ranked as the 4th-largest bank headquartered in Washington state by assets as of Dec. 31, 2018.