HomeStreet Inc., a bank holding company, filed for an initial public offering last week to raise up to $210 million. The Seattle-based company plans to offer an unspecified number of common shares in July and trade on the Nasdaq under the symbol HMST. There is a fair amount risk in investing in this company. HomeStreet Inc. and its wholly owned subsidiary HomeStreet Bank are currently operating under cease and desist orders from the Office of Thrift Supervision, the Federal Deposit Insurance Corp., and the Washington State Department of Financial Institutions, according to a filing with the Securities and Exchange Commission. HomeStreet Bank specializes in community banking, single-family lending, income property lending and residential construction lending. In May 2009, the regulators alleged HomeStreet Bank engaged in “certain unsafe and unsound banking practices” and “violated federal and state law and/or regulations.” For this reason, HomeStreet is reducing its problem assets. Between Sept. 30, 2009 and Dec. 31, 2010, HomeStreet decreased its nonperforming portfolio by 37.2%. The firm now holds $283.7 million in nonperforming assets. The company also sliced its portfolio delinquency rate in half, down to 11.1% in December from 22.6% in September 2009. As of Dec. 31, HomeStreet held $2.49 billion worth of assets. “The bank order places certain restrictions on the bank, including, but not limited to, prohibiting cash dividends and limiting our ability to solicit or renew brokered deposits and to extend additional credit to borrowers who have outstanding, uncollected loans or credit agreements that have been charged off or classified as a loss,” according to HomeStreet’s SEC filing. Moreover, the order requires the bank to adopt and adhere to certain policies relating to reducing classified assets and reliance on noncore funding sources. “Because of the restrictions contained in orders, we may be limited in our ability to take certain actions and pursue certain operating strategies that might otherwise have resulted in greater benefits to our earnings and results of operations,” the firm said. However, HomeStreet said a substantial portion of the IPO proceeds will fund activities to meet capital ratio requirements mandated under the cease and desist orders. Write to Christine Ricciardi. Follow her on Twitter @HWnewbieCR.
HomeStreet files IPO amid cease and desist orders
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