HomeStreet, Inc. Reports $4.5 Million Net Loss, Announces Merger with Mechanics Bank

HomeStreet, Inc. reported a net loss of $4.5 million for the first quarter of 2025, a significant improvement compared to a net loss of $7.5 million in the same period last year. The company's total revenue for the quarter was $45.4 million, which included net interest income of $33.2 million and noninterest income of $12.1 million. This represents an increase in net interest income from $32.2 million in the first quarter of 2024, driven by a higher net interest margin of 1.82%, up from 1.44% a year earlier. The improvement in net interest income was attributed to a decrease in interest rates on liabilities and the sale of lower-yielding loans.

In terms of operational metrics, HomeStreet's total assets decreased to $7.8 billion as of March 31, 2025, down from $8.1 billion at the end of 2024. The decline was primarily due to a reduction in loans held for investment, which fell to $6.0 billion from $6.2 billion. Deposits also decreased significantly, dropping to $6.1 billion from $6.4 billion, largely due to a reduction in brokered certificates of deposit. The company’s allowance for credit losses increased to $39.6 million, reflecting a provision for credit losses of $1 million during the quarter.

Strategically, HomeStreet announced a definitive merger agreement with Mechanics Bank on March 28, 2025, which is expected to close in the third quarter of 2025. This merger will result in Mechanics Bank acquiring HomeStreet, with Mechanics shareholders owning approximately 91.7% of the combined entity. The merger is anticipated to enhance the company's market position and operational efficiencies.

HomeStreet's employee headcount decreased to 766 from 792 in the previous quarter, reflecting ongoing efforts to manage costs. The company also reported a slight increase in nonperforming assets to $58.6 million, representing 0.75% of total assets, compared to $57.8 million or 0.71% at the end of 2024. The ratio of loans delinquent over 30 days increased to 1.09% from 1.06%, indicating a slight deterioration in credit quality.

Looking ahead, HomeStreet anticipates growth in earnings driven by expected reductions in short-term interest rates and effective management of noninterest expenses. The company is focused on improving its net interest margin and maintaining a strong liquidity position, with available contingent liquidity of $5.5 billion, which is 91% of total deposits. The management remains optimistic about the potential benefits of the upcoming merger and the overall economic environment.