HomeStreet Feels Weight of Spending in 1Q

Higher expenses offset an uptick in fees at HomeStreet Bank (HMST) in the first quarter.

Earnings at the $2.5 billion-asset company in Seattle fell 45% from a year earlier, to $10.9 million, or 74 cents per share.

Noninterest expense rose 61% year over year, to $55.8 million, because of increase in overhead tied to producing mortgages. In early 2012 HomeStreet hired roughly 160 mortgage professionals in the Pacific Northwest that had previously been employed by MetLife. (MetLife exited the mortgage business last year.)

The increased mortgage production helped boost fee income. Noninterest income grew by 47.2% from the first quarter of 2012, to $58.9 million, primarily from sales of home loans.

The company's efficiency ratio deteriorated 9.68 percentage points from the first quarter of 2012, to 75.21%.

Net interest income increased 18.7% year over year, to $15.2 million. The net interest margin widened 30 basis points from a year earlier, to 2.81%.

HomeStreet's loan portfolio increased 7.7% from a year earlier, to $1.4 billion. Chargeoffs fell 84% year over year, to $1.2 million, as credit quality improved.

"HomeStreet's loan portfolio grew for the third consecutive quarter with new lending in each of our traditional lending lines," Mark Mason, HomeStreet's chief executive, said in a press release. "To support this growth, we continued to expand our branch network with the addition of three new mortgage lending offices and our third commercial lending center."

"As the mortgage market transitions, we will continue to focus on the purchase mortgage business, growing our mortgage production capacity and personnel, and working toward our long-term goal of business diversification," Mason added.

In recent months, HomeStreet has freed itself from regulatory orders that required the company to boost capital. In March, the company paid $13.5 million in past-due interest to holders of its trust-preferred securities.