Business Context and Reporting Period
This Form 8-K was filed by HomeStreet, Inc. on June 24, 2019, reporting the completion of a significant asset disposition by its wholly owned subsidiary, HomeStreet Bank. The transaction involved the final phase of divesting the Bank's stand-alone home loan center-based single-family mortgage origination operations (the "HLC Business").
Key Financial Metrics and Transaction Details
- Total Consideration Received: Approximately $186.7 million in cash across three transactions.
- Mortgage Servicing Rights (MSRs) Sale:
- Sold to PennyMac Loan Services LLC: MSRs with $4.4 billion unpaid principal balance (Ginnie Mae).
- Sold to New Residential Mortgage LLC: MSRs with $9.9 billion unpaid principal balance (Freddie Mac/Fannie Mae).
- Aggregate purchase price for MSRs: Approximately $183.1 million (subject to a $16.9 million holdback).
- Home Loan Center (HLC) Sale:
- Assets sold to Homebridge Financial Services, Inc. included 47 stand-alone home loan centers, satellite offices, and production offices.
- Purchase price: Approximately $4.9 million (net book value plus $1.0 million premium, less $1.5 million expense reimbursement).
- Potential contingent payment: Up to $750,000 based on future loan originations.
- Deposit Transfers:
- Transferred to PennyMac: Approximately $93.5 million (custodial funds/advances).
- Expected transfer to New Residential: Approximately $125.6 million (Q3 2019).
Material Changes Versus Prior Period
The filing details a structural change in the Company's operations rather than a standard period-over-period financial comparison. The disposition represents the exit from the HLC Business, which previously included 47 physical locations and significant mortgage origination assets. The transaction was executed in three closings on June 6, June 17, and June 24, 2019, with the MSR sales occurring earlier on March 29, 2019.
Outlook, Management Commentary, and Risks
- Pro Forma Information: The Company has attached unaudited pro forma financial statements as of March 31, 2019, giving effect to the disposition. Additional pro forma statements for fiscal years 2017 and 2016 will be filed as an amendment.
- Future Cash Flows: The Company expects to receive the remaining holdback of approximately $16.9 million upon the physical transfer of servicing to New Residential in the third quarter of 2019.
- Contingent Consideration: The Company may receive an additional payment of up to $750,000 from Homebridge if specific loan origination targets are met within 12 months of closing.
- Risks/Contingencies: The filing notes no material relationships between the Company and the purchasers other than the transactions described. The primary contingency involves the timing of the final MSR servicing transfer and the performance-based payment from Homebridge.
Key Facts for Investor Verification
- Verify the receipt of the $16.9 million holdback in Q3 2019 upon the transfer of New Residential servicing.
- Monitor the performance of Homebridge to determine if the contingent $750,000 payment is triggered.
- Review the unaudited pro forma financial statements (Exhibit 99.1) to assess the impact of the asset disposition on the Company's balance sheet and earnings.
- Confirm the transfer of approximately $125.6 million in deposit accounts to New Residential as scheduled.