As rising rates and a tight housing supply have hurt mortgage earnings at HomeStreet Inc., the company has taken steps to reduce the size of its home-lending business.
Before the provision for income taxes, the Seattle-based bank-holding company revealed in its third-quarter 2017 earnings report $20 million in income.
Earnings were slashed by more than half from the $43 million earned during the same-three months last year. But income improved from $16 million in the preceding quarter.
Mortgage-banking income swung to a less than $0.1 million loss from a $27 million profit one year earlier and a $3 million profit three months earlier.
“Higher interest rates reduced refinance mortgage originations and the ongoing housing shortages in our primary markets have reduced purchase mortgage originations,” HomeStreet Chairman, President and Chief Executive Officer Mark K. Mason said in the report. “In response, we instituted a restructuring plan in the mortgage banking segment to reduce our cost structure to better align with market conditions.”
Single-family loan originations inched up to $2.035 billion from $2.011 billion in the three months ended June 30. But business sank from $2.648 billion in the three months ended Sept. 30, 2016.
Year-to-date mortgage production amounted to $5.667 billion.
Business during the current quarter is likely down based on single-family interest rate lock commitments, which dipped to $1.9 billion in the third quarter form $2.0 billion in the second quarter.
Mason noted that the company was the top purchase-money originator in the Pacific Northwest during the third quarter.
The single-family third-party servicing portfolio expanded to $21.892 billion from $21.105 billion and has also grown from $18.199 billion the same quarter a year ago.
The weighted-average note rate on third-party servicing was 3.99 percent at the end of last month, while the weighted-average servicing fee was 0.28 percent. That left the ratio of mortgage servicing rights carrying value at 1.12 percent of the loan balances.
The bank’s balance sheet contained $1.706 billion in residential assets, more than $1.563 billion as of June 30 and $1.525 billion as of Sept. 30, 2016. The most-recent balance was comprised of $1.269 billion in single-family mortgages and $0.437 billion in home-equity assets.
In its commercial real estate business, HomeStreet originated $0.110 billion in multifamily loans, nearly doubling the $0.058 billion originated in the second quarter and $0.045 billion during the third quarter of last year. For all nine months that have completed this year, multifamily originations came to $0.226 billion.
HomeStreet serviced $1.213 billion in multifamily loans for third parties as of the end of last month.
CRE assets grew to $2.387 billion from $2.371 billion and was also bigger than $2.034 billion as of the same date last year. Most recently, CRE holdings consisted of $0.986 billion in commercial mortgages, $0.747 billion in multifamily loans and $0.653 billion in construction-and-land-development loans.
The previously announced restructuring had mortgage staffing reduced by 60 employees during the third quarter. Including 71 second-quarter layoffs, mortgage job cuts are expected to reach 133 by the end of this year.
The human resource activity left 1,392 full-time equivalent employees on the mortgage payroll. Mortgage staffing was 1,487 people as of the close of the second quarter and 1,483 at the same point in 2016.
Company-wide staffing finished last month at 2,463 full-time equivalent employees. Headcount was reduced by 79 people versus mid-2017. But the payroll expanded from 2,431 as of Sept. 30, 2016.
Eight single-family lender centers were restructured during the latest period, leaving 45 centers in operation. Another center restructuring will take place in the fourth quarter.
Retail deposit branch count closed out the third-quarter 2017 at 58.
