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News Releases
May 15, 2009
HomeStreet Bank Reaches Agreement with Federal and State Regulators
SEATTLE -- HomeStreet Bank today announced that it has signed an agreement with the Federal Deposit Insurance Corporation (FDIC) and the Washington State Department of Financial Institutions (DFI). HomeStreet Bank's parent company, HomeStreet, Inc., has also reached a similar agreement with its regulator, the Office of Thrift Supervision.
The agreement, called a cease and desist order, provides for certain changes in operational policies, for reduction of problem loans and for increased capital levels to enhance the bank’s ability to weather the current economic downturn. “We have been working closely with the FDIC and the DFI on these issues and had completed some of the items before the agreement was signed,” said Bruce Williams, HomeStreet Bank Chairman and CEO. HomeStreet has been reducing exposure to commercial real estate, land development and acquisition, and construction loans; enhancing and expanding the bank's credit function; and preserving capital by reducing operating expenses, streamlining operations, freezing executive salaries and bonuses, and eliminating dividends to shareholders.
As of March 31, 2009, the bank had a Tier 1 capital ratio of 7.6 percent and a risk-based capital ratio of 11.4 percent. These ratios exceed those typically required by regulators for well-capitalized institutions. Under the terms of the agreement, HomeStreet will increase its Tier 1 capital to 10 percent and its risk-based capital to 12 percent. These enhanced capital levels are comparable to those required of banks operating under similar orders.
The agreement will have little if any impact on customers. "This has no bearing on the safety of deposits,” Williams said. “Last year’s increase in FDIC insurance has given our depositors the highest level of coverage ever, and pending legislation stands to extend that coverage for several more years.” HomeStreet also participates in the FDIC’s Transaction Account Guarantee Program, which provides unlimited coverage on low-interest bearing NOW accounts and non-interest bearing checking accounts. Over the last 12 months the bank has experienced record growth in deposits as former customers of big banks have moved their accounts to HomeStreet.
Like many banks with residential construction and development lending, the economic downturn has negatively impacted HomeStreet's borrowers. “In our nearly 90 years of experience in financing the building of communities, this has been one of the most sudden and far-reaching downturns in our local housing markets,” Williams commented.
However, HomeStreet is originating record levels of home mortgage loans that have produced a strong source of revenue. This revenue has helped the bank absorb much of the cost of increased reserves to cover estimated losses from existing construction and development loans. “We’ve been through difficult economic times before and always emerged a stronger company," Williams said. "Our record-breaking home mortgage lending will continue to help the bank weather the current economic crisis."
HomeStreet avoided subprime lending and today is one of the leading home lenders in the Pacific Northwest. The bank originated $1 billion in home loans in the first four months of 2009. HomeStreet is the number one Fannie Mae mortgage lender headquartered in Washington and Oregon, as well as one of the leading FHA and VA lenders.
HomeStreet has consistently received an “Outstanding” rating under the Community Reinvestment Act, a federal regulation that evaluates how effectively federally-insured banks meet the credit needs of their communities, through strategic investments and by providing quality home loans to low- and moderate-income residents.
About HomeStreet Bank
Founded in 1921, family- and employee-owned HomeStreet Bank is one of the largest privately owned banks in the Pacific Northwest and Hawaii. Headquartered in Seattle, the company has assets of $3.02 billion and a network of 30 branch and mortgage offices.
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