Seattle-based HomeStreet is an IPO success story

Jan 8, 2013

HomeStreet, a Seattle bank company, sold its first shares publicly on Valentine’s Day, 2012. It's been a love affair with investors ever since.

This is a stock that didn’t split its shares only once, but did so twice in just nine months. Factoring in both two-for-one splits, the stock started out at $11 a share. They finished up at $25.55, more than a double their initial value.

Financial commentator Greg Heberlein and KPLU's Dave Meyer talk about Home Street on this week's Money Matters.

HomeStreet started out 92 years ago as Continental Mortgage and Loan.  It adopted the HomeStreet name 12 years ago.

The housing bubble that exploded in 2006 nearly capsized HomeStreet. When the mortgage market collapsed, federal regulators ordered HomeStreet to raise more cash and cease substandard business practices. 

Under new leadership that took over in 2009, HomeStreet was freed from some restrictions last March. But the feds still insisted the bank cut out more of its bad loans. In the last few days of December, that final restriction was terminated.

HomeStreet experienced amazing growth in 2012. It expanded its branches and loan centers from 29 to 46. Employee count catapulted 50 percent, to just over a thousand.

Profit for the nine months ended in September was six times larger than the same period a year earlier. Bad assets plunged by two-thirds.

Under federal restrictions, HomeStreet was not permitted to open more branches nor pay stockholders a dividend. With HomeStreet now free of shackles, it is already expanding its network of branches and loan centers.

Bank stocks bounced back last year, thanks to an improving economy. But few have bounced as high as HomeStreet. Only the nation’s fourth largest bank, Wells Fargo, provides more home mortgages around Puget Sound than this relatively small financial institution.

Shareholders now see a bank on solid ground, and a stock price reflecting that. The price-to-earnings ratio is extremely low at just under 5. That suggests more growth may be on the way. The two stock dividends already issued mean a holder of 100 shares beforehand now owns 400. Maybe the next dividend will be in cash.