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HomeStreet, Inc. (HMST)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 showed sequential operational improvement but remained loss-making: adjusted total revenues were $48.97M, GAAP diluted EPS was -$0.23, and core diluted EPS was -$0.16; net interest margin rose to 1.90% and the efficiency ratio improved to 93.2% .
  • Mix shift and funding actions supported margin expansion; noninterest income rose $3.0M sequentially (mainly MSR fair-value uplift) and noninterest expenses fell $1.4M, but a $6.0M provision for credit losses—driven by adverse credit migration in certain multifamily loans—kept results negative .
  • Management reiterated a path to “return to core profitability in Q4 2025” and does not expect to recognize income tax expense for the next few years due to the deferred tax asset valuation allowance booked in Q4 2024 .
  • Strategic catalyst: the Mechanics Bank merger was “still expected to close in Q3 2025” as of the Q2 release; it subsequently closed on September 2, 2025, creating a combined franchise with ~166 branches and >$22B in assets (context for medium-term integration and synergy narrative) .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 1.90% from 1.82% on lower funding costs (14 bps reduction in interest-bearing liability rates), reflecting progress from balance sheet repositioning and deposit repricing .
  • Noninterest expense declined to $47.8M (core $45.6M), aided by headcount reductions (FTE 750 vs 766 in Q1) and elimination/deferral of nonessential spend; efficiency ratio improved to 93.2% from 102.9% .
  • MSR valuations drove stronger loan servicing income ($7.55M vs $4.86M in Q1), contributing to a $3.0M sequential increase in noninterest income; prepared remarks: “Our net interest margin continued to improve… The decrease in our core noninterest expenses reflects our efforts to eliminate or defer nonessential expenses…” .

What Went Wrong

  • Provision for credit losses rose sharply to $6.0M (from $1.0M in Q1), reflecting adverse credit migration in specific multifamily loans; ACL/LHFI increased to 0.78% from 0.66% .
  • Core results remained in loss (-$3.1M core net loss; -$0.16 core EPS) despite margin improvement; GAAP net loss was -$4.4M, underscoring lingering earnings headwinds .
  • Excluding brokered deposits, total deposits fell $146M QoQ and LHFI declined $136M, signaling continued balance sheet contraction while the franchise managed funding and credit risks .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Adjusted Total Revenues ($USD Millions)$42.928 $45.357 $48.970
Net Interest Income ($USD Millions)$29.701 $33.221 $33.870
Noninterest Income ($USD Millions)$13.227 $12.136 $15.100
Provision for Credit Losses ($USD Millions)$0.000 $1.000 $6.000
GAAP Diluted EPS ($USD)-$0.33 -$0.24 -$0.23
Core Diluted EPS ($USD)-$0.23 -$0.15 -$0.16
Net Interest Margin (%)1.37% 1.82% 1.90%
Efficiency Ratio (%)111.9% 102.9% 93.2%

Segment/Portfolio Mix (LHFI by product)

Category ($USD Thousands)Q2 2024Q1 2025Q2 2025
Multifamily$3,935,158 $2,934,442 $2,895,342
Construction/Land Development (Total CRE construction + SF construction + SF construction-to-perm)$683,126 $6,317, (sum of sublines: 468+73+5,704+140?) See detailed disclosure$6,480 (sum of sublines: 1,159+71+5,200+150)
Non-owner Occupied CRE$612,937 $545,313 $508,781
Owner Occupied CRE$372,452 $340,106 $324,299
Commercial Business$376,711 $299,001 $285,612
Single Family$1,152,004 $1,088,264 $1,060,566
Home Equity & Other$400,343 $419,480 $432,821
Total LHFI (gross)$7,380,050 $6,063,216 $5,933,139
ACL (loans)$(39,741) $(39,634) $(45,806)
Total LHFI less ACL$7,340,309 $6,023,582 $5,887,333

KPIs

KPIQ2 2024Q1 2025Q2 2025
Total Deposits ($USD Thousands)$6,532,470 $6,090,495 $5,857,284
Brokered Certificates of Deposit ($USD Thousands)$948,989 $297,717 $210,067
Loans-to-Deposits (Bank)112.6% 99.3% 101.1%
ACL to Total Loans (%)0.55% 0.66% 0.78%
Delinquencies (%)0.66% 1.09% 1.11%
Nonperforming Assets / Total Assets (%)0.42% 0.75% 0.76%
Book Value per Share ($)$27.58 $21.18 $21.30
Tangible Book Value per Share ($)$27.14 $20.83 $20.97
FTE840 766 750

Note: The construction category lines are disclosed at a subproduct level; ACL allocations by product are shown in .

Guidance Changes

Metric/TopicPeriodPrevious GuidanceCurrent GuidanceChange
Core profitability timingFY 2025“Return to profitability during 2025” (Q1 release); Q4 2024 indicated first half 2025 “Projecting a return to core profitability in Q4 2025” Timing pushed to Q4; narrowed and more specific (later than “first half”)
Income tax expenseMulti-yearExpect no tax expense for next few years due to DTA valuation allowance (Q4/Q1) Maintained: “do not expect to recognize any income tax expense… for the next few years” Maintained
Net interest margin trajectory2025Expect NIM to improve post loan sale and funding actions (Q1) NIM improved and expected to continue improving with lower funding costs and term deposit repricing Maintained/affirmed execution
Opex discipline / FTE2025Opex reductions underway; FTE trending down (Q1) Continued reduction in core noninterest expense and FTE to 750 Maintained
Mechanics Bank merger timeline2025Merger announced Mar 31, 2025; timeline not in Q1 release “Still expected to close in Q3 2025” (as of Q2); subsequently closed Sep 2, 2025 Affirmed; completed in Q3

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Mechanics Bank merger / strategic directionQ4: Prior merger terminated; strategic plan; Q1: continued plan and merger announced Mar 31 Expected Q3 close; post-close creates larger West Coast community bank (closed 9/2) Advancing to completion
Net interest margin & funding costsQ4/Q1: NIM rising; funding cost reductions after loan sale and brokered CD paydowns NIM 1.90%; 14 bps lower liability cost; term deposit repricing to lower rates Improving
Credit quality (multifamily migration)Q4: minimal identified issues but some specific reserves; Q1: increased specific reserve on syndicated commercial loan Provision $6.0M tied to adverse migration in certain multifamily loans; ACL/LHFI 0.78% Mixed; pressure in multifamily
Deposits and brokered CDsQ4: reduced brokered CDs; L/D ratio improved; Q1: ex-brokered deposits +$131M Ex-brokered deposits -$146M QoQ; brokered CDs down to $210M Mixed; brokered down, core balances declined
MSR valuation / servicing incomeQ4/Q1: MSR valuation effects; servicing income variability Single-family MSR assumption gains boosted servicing income to $7.55M Improving sequentially

Management Commentary

  • “Our net interest margin continued to improve in the second quarter due primarily to improving funding costs.” — Mark Mason, CEO .
  • “We are projecting a return to core profitability in the fourth quarter of this year… we anticipate continuous growth in earnings for the foreseeable future.” — Mark Mason, CEO .
  • “The increase in our allowance for credit losses was due to the adverse credit migration of certain multifamily loans…” — Mark Mason, CEO .

Q&A Highlights

  • The Q2 2025 earnings call transcript was not available in our document set; thus, specific Q&A themes and clarifications cannot be reproduced. We reviewed all Q2 company filings and press releases for qualitative guidance and operational commentary .

Estimates Context

  • S&P Global consensus: unavailable via system mapping for HMST (SPGI/CIQ mapping error).
  • Third-party context (non-SPGI):
    • EPS: Actual core EPS -$0.16 vs consensus $0.05 (MarketBeat); GAAP diluted EPS -$0.23. Miss of ~$0.21 per share (MarketBeat) .
    • Revenue: Actual $48.97M vs consensus $49.96M (MarketBeat) and vs $48.55M (Zacks); slight miss vs MarketBeat, slight beat vs Zacks .
  • Given the lack of SPGI data, use caution; Street views indicate the quarter missed EPS expectations, with top-line close to consensus ranges .

Estimates vs Actuals (Q2 2025)

MetricConsensus (source)ActualDelta
EPS ($)+$0.05 (MarketBeat) -$0.16 core; -$0.23 GAAP Miss: -$0.21 vs core, -$0.28 vs GAAP
Revenues ($USD Millions)$49.96 (MarketBeat) $48.97 (Adjusted Total) Miss: -$0.99
Revenues ($USD Millions)$48.55 (Zacks) $48.97 (Adjusted Total) Beat: +$0.42

Key Takeaways for Investors

  • Margin trajectory is positive and efficiency improving, but credit costs in multifamily remain the swing factor; watch ACL/LHFI and migration indicators in H2 .
  • Deposit mix normalization continues (brokered CDs sharply reduced), yet core deposits fell sequentially; stability of core funding is crucial for sustained NIM gains .
  • MSR-related valuation tailwinds boosted noninterest income; durable fee income trends can help bridge to profitability while rate and credit dynamics play out .
  • Guidance narrowed: “core” profitability now targeted for Q4 2025; the merger closing in Q3 2025 adds integration/synergy potential but also execution risk—monitor cost saves and balance sheet harmonization post-close .
  • Tax shield (no income tax expense for “next few years”) offers upside leverage to core earnings once profitability resumes; supports medium-term EPS recovery potential .
  • Near-term trading: results missed non-SPGI EPS consensus and were near revenue expectations; stock reaction likely sensitive to credit provision trends and merger integration updates .
  • Medium-term thesis: if margin expansion persists, opex discipline holds, and credit normalizes, the combined entity post-merger could drive earnings accretion; focus on deposit franchise strength and multifamily credit resolution to de-risk the path to positive core EPS .