HomeStreet Rides Mortgages to Record Profit in 2012

Improved asset quality and a surge in mortgage lending powered HomeStreet Bank (HMST) in Seattle to record earnings in 2012.

The $2.6 billion-asset company said Monday that it earned $82.1 million last year, up 409% from 2011. Its fourth-quarter profit climbed 206% from the same period in 2011, to $21.5 million.

The full-year and fourth-quarter profits were driven largely by mortgage activity, which increased substantially after the bank hired more than 150 mortgage lenders and support staff from MetLife in early 2012. (MetLife exited mortgage lending last year.)

For the year single-family loan originations rose 174% from 2011, to nearly $4.7 billion, and for the quarter originations increased 143%, to more than $1.5 billion. Gains on sales from mortgage loans helped boost noninterest income by 144% for the year, to nearly $238 million, and 160% for the quarter, to $71.7 million.

HomeStreet, which had been battered in recent years by losses on real estate loans, also continues to reduce its level of problem credits. At Dec. 31, classified assets totaled $86 million, or 3.28% of total assets, down from $188 million, or 8.31% of assets, a year earlier.

The bank also was released from regulatory enforcement orders in 2012, thanks primarily to the $77 million it raised in a February public offering that substantially improved its capital levels. At Dec. 31, its total risk-based capital level was 19.3%, compared to 11.2% at the same time in 2011.