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HomeStreet beats Wall Street's 3Q earnings forecasts on pick-up in loan growth and slashed expenses

Last updated: 21:50 22 Oct 2018 BST, First published: 21:29 22 Oct 2018 BST

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A restructuring pared back the banking group’s non-interest expenses to $94.6 million in the third quarter

HomeStreet (NASDAQ:HMST), the parent company of HomeStreet Bank, beat Wall Street’s forecasts for third-quarter earnings on the back of a pick-up in loan growth and shrinking expenses.

For the third quarter, HomeStreet posted net income of $11.8 million or $0.44 per diluted share, which was down from the $13.8 million, or $0.51 per share reported in the year-ago quarter. But the results came in ahead of analysts’ estimate of $0.41.

The Seattle-based lender posted revenue of $127.8 million in the period, or $109.8 million on an adjusted basis, which fell short of the Street's forecast of $114 million.

“During the third quarter of 2018, we made significant progress on our long-term strategy to build a better HomeStreet,” said Mark Mason, HomeStreet’s CEO, in a statement.

“Our commercial and consumer banking segment achieved record net income for the quarter. This was in the face of a continued flat yield curve that pressured our net interest margin,” he added.

During the period, HomeStreet completed the Mortgage Banking segment restructuring announced last quarter as well as other cost-savings measures, including the closure of nine single family-home loan centers. Additional restructuring expenses recorded in the quarter include $524,000 in pre-tax restructuring expenses related to these actions.

The restructuring pared back the banking group’s non-interest expenses to $94.6 million in the third quarter from $114.7 million in the year-ago period. But they also pushed down families’ mortgage interest rate lock commitments in the period as compared to the second quarter of 2018 and the third quarter of 2017.

“The mortgage banking industry remains at a low point in its cycle, with higher interest rates reducing the volume of refinance mortgages and an ongoing shortage of homes for sale which reduces the volume of purchase mortgages," Mason noted.

HomeStreet’s growth in loans held for investment jumped to $5.05 billion, up from $4.34 billion at the close of September last year.

HomeStreet shares were flat in Monday’s after-hours trade at $25.42.

Contact Ellen Kelleher at ellen@proactiveinvestors.com

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