DALLAS, Jan. 23, 2018 /PRNewswire/ -- Blue Lion Capital ("BLC") and its affiliates are the beneficial owners of 5.5% of the stock of HomeStreet, Inc. (Nasdaq: HMST) ("HomeStreet" or the "Bank"). BLC has expressed its intention to nominate two directors to the HomeStreet Board of Directors at the 2018 annual meeting of HomeStreet shareholders.
HomeStreet released fourth quarter and full-year 2017 earnings last night and is conducting a conference call today at 1:00 pm Eastern Time with analysts and investors to discuss those results.
BLC is disappointed with yet another earnings period in which HomeStreet failed to execute on a strategy that would enable the Bank to reach its full potential or generate earnings and cash flow commensurate with its assets and opportunity.
The mortgage segment was unprofitable for the fourth time in the past five quarters, despite its supposed restructuring. The commercial and consumer banking segment sold significantly more commercial real estate loans than it originated during the quarter, generating a one-time boost to earnings of more than 11 cents per share. Further, despite significant new loan growth, the Bank did not take a loan loss provision. In fact, in 2017, the increase in the provision for loan losses was a mere $750,000, despite $680 million of net loan growth and a $4.1 million increase in the loan loss provision in 2016.
BLC believes analysts and investors in HomeStreet should want answers to some critical questions during today's conference call. BLC encourages HomeStreet's management to proactively address these questions during the call, or, failing that, for analysts and investors to ask management these questions during the time allotted for questions and answers:
BLC further notes that HomeStreet generated just 27 cents of normalized, sustainable earnings during the quarter, as shown in the table below:
Q4 2017 | ||
Commercial & Consumer Bank |
||
Net interest income - reported |
$ |
45,876 |
Non-interest income - reported |
12,697 | |
Adjust: Gain (loss) on sale of securities |
(534) | |
Adjust: Pull forward of FNMA DUS, SBA and Other CRE gains |
(4,504) | |
Non-interest income - adjusted |
8,727 | |
Total revenues - adjusted |
$ |
54,603 |
Provision expense - reported |
- | |
Adjust: Provision expense consistent with Peers (123 bps) |
2,333 | |
Provision expense - adjusted |
2,333 | |
Non-interest expense - reported |
38,716 | |
Adjust: Office closure |
(497) | |
Non-interest expense - adjusted |
38,219 | |
Total expenses ? adjusted |
$ |
40,552 |
Pre-tax income |
$ |
14,051 |
Income taxes |
4,450 | |
Tax rate |
31.7% | |
Net income |
$ |
9,601 |
Commercial & Consumer Banking Segment EPS |
$ |
0.35 |
Mortgage Segment EPS |
$ |
(0.08) |
Normalized EPS for 4Q17 |
$ |
0.27 |
Consensus EPS Expectations |
$ |
0.42 |
Miss of Expectations (%) |
35% |
Additional materials concerning BLC's views on HomeStreet are available at the Securities and Exchange Commission's website at https://tinyurl.com/y8mpemcw and https://tinyurl.com/y8qvcfkn.
Important Information
This press release is not a solicitation of a proxy from any security holder of HomeStreet, Inc. (the "Company"). Charles W. Griege, Jr., intends to nominate individuals as nominees to the Company's board of directors and intends to solicit votes for the election of those individuals as members of the Company's board of directors (the "Nominees"). Mr. Griege will send a definitive proxy statement, proxy card and related proxy materials to shareholders of the Company seeking their support of the Nominees at the Company's 2018 Annual Meeting of Shareholders. Shareholders are urged to read the definitive proxy statement and proxy card when they become available, because they will contain important information about the Nominees, the Company and related matters. Shareholders may obtain a free copy of the definitive proxy statement and proxy card (when available) and other documents filed by Mr. Griege with the Securities and Exchange Commission ("SEC") at the SEC's web site at www.sec.gov. The definitive proxy statement (when available) and other related SEC documents filed by Mr. Griege with the SEC may also be obtained free of charge from Mr. Griege.
Participants in Solicitation
The following persons are participants in the planned solicitation from the Company's shareholders of proxies in favor of the Nominees: Mr. Griege, Roaring Blue Lion Capital Management, L.P., and the Nominees. The participants may have interests in the solicitation, including as a result of holding shares of the Company's common stock. Information regarding the participants and their interests may currently be found in the amended Schedule 13D, dated January 17, 2018, as filed with the SEC on January 17, 2018, which is incorporated herein by reference.
SOURCE Blue Lion Capital
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