HomeStreet is Executing a Strategic Plan Focused on Improving
Efficiency and Profitability While Becoming a Leading West Coast
Company is Focused on Closing the Announced Sale of its Home Loan
Center-Based Mortgage Origination Business and Related MSRs to Reduce
the Size and Impact of its Mortgage Banking Business
HomeStreet’s Board is Composed of Highly-Qualified Directors Who are
Proven Leaders with Expertise Across Key Areas Critical to the Company’s
Building on Engagement with Shareholders Following the 2018 Annual
Meeting, HomeStreet has Taken Concrete Actions to Respond to Investor
Feedback, Improve Corporate Governance and Drive Value Creation
Roaring Blue Lion Has Declined to Engage Constructively and Remains
Resolute in Pursuing a Disruptive and Costly Contested Election Based on
False and Misleading Arguments
HomeStreet Urges Shareholders to Vote on the WHITE
Proxy Card to Protect the Company’s Ability to Continue Executing its
Strategic Plan and Drive Shareholder Value
SEATTLE–(BUSINESS WIRE)–The Board of Directors of HomeStreet, Inc. (Nasdaq: HMST) (the “Company”
or “HomeStreet”), the parent company of HomeStreet Bank, today sent a
letter to shareholders in connection with the Company’s upcoming 2019
Annual Meeting of Shareholders (the “2019 Annual Meeting”), which is
scheduled to be held on June 20, 2019.
The full text of the letter follows:
May 16, 2019
Dear Fellow Shareholders,
As we approach the 2019 Annual Meeting, you will face an important
choice that could impact the future of HomeStreet and the value of your
investment in the Company: supporting HomeStreet’s highly-qualified and
proven director nominees, including CEO and Chairman Mark Mason, or
voting for two dissident candidates put forward by activist hedge fund
Roaring Blue Lion Capital Management, L.P. (“Roaring Blue Lion”).
Since the 2018 Annual Meeting of Shareholders (the “2018 Annual
Meeting”), we have engaged extensively with our shareholders and have
worked to translate their feedback into positive and constructive
action. We have also reoriented our strategy and are executing against a
plan to drive near- and long-term value creation. As you consider the
decision before you, it is important to carefully review the following
HomeStreet’s Strategy Has Created and Continues
to Create Value for Shareholders
HomeStreet is executing a plan focused on improving efficiency and
profitability while becoming a leading West Coast regional bank – and we
are seeing results.
HomeStreet has outperformed the KBW Regional Banking Index in 2019 –
the Company’s share price increased 36% year-to-date, significantly
above the 14% increase in the KBW Regional Banking Index.
As of 5/14/19, HomeStreet’s share price has increased by 168% since
our IPO in 2012, outperforming the 120% increase in the KBW Regional
Banking Index over the same time period.
The components of our strategic plan include:
Focus on Commercial & Consumer Banking
Growing and diversifying our commercial loan portfolio with a focus on
expanding commercial and industrial (“C&I”) lending
- Growing core deposits to improve deposit mix and support asset growth
- Improving operating efficiency over the long term
- Expanding product offerings and improving technology as a fast-follower
Growing market share in our highly attractive West Coast metropolitan
Exiting our Large-Scale Home Loan Center-Based Mortgage Banking
Selling the majority of our stand-alone home loan centers and a
substantial portion of our related mortgage servicing rights (“MSRs”)
As part of our corporate wide efficiency improvement initiative,
substantially reducing corporate overhead formerly required for the
mortgage banking business
We have made significant progress to date:
In the years since our IPO the Company has continuously grown the
key metrics that drive value.
Total assets have grown from $2.3 billion to $7.2 billion, an 18%
compound annual growth rate (“CAGR”) (as of March 31, 2019).
Tangible equity has increased from $191.2 million to $717.2 million, a
21% CAGR (as of March 31, 2019).
Our loans held for investment have grown from $1.3 billion to $5.3
billion, a 22% CAGR (as of March 31, 2019).
Our deposit base has grown from $2.0 billion to $5.2 billion, a 15%
CAGR (as of March 31, 2019).
Our retail branch footprint has expanded from 20 to 63 branches (as of
March 31, 2019).
We were ranked the 4th largest bank headquartered in
Washington State by assets (as of December 31, 2018).
Placed 80th on Fortune Magazine’s 2017 “100 Fastest Growing
We have invested significantly in our commercial banking segment
to diversify our net income, and we have built a powerful Commercial and
Consumer Banking platform in highly attractive markets.
The former Commercial and Consumer Banking segment reported record net
income of $56.8 million for 2018, increasing 35% from $42.1 million in
2017, driven by organic loan growth and improved operating efficiency.
Return on average tangible shareholders’ equity (excluding Income Tax
Reform-related expenses and acquisition related items) increased from
9.2% in 2017 to 9.9% in 2018.
In the first quarter of 2019, deposits increased by nearly 6% since
December 31, 2018 and nearly 7% since March 31, 2018, while loans held
for investment grew by 5% since December 31, 2018 and 12%
year-over-year as of March 31, 2018.
HomeStreet is Significantly Reducing the Size
of its Mortgage Banking Business
We are focused on executing the Home Loan Center-Based Mortgage
Origination Business and MSR Sale and concentrating on the Commercial
and Consumer Banking Business.
On April 4, 2019 HomeStreet announced that HomeStreet Bank (the
“Bank”) executed a definitive agreement providing for Homebridge
Financial Services, Inc. (“Homebridge”) to acquire substantially all
of our stand-alone production and fulfillment offices related to our
home loan center-based mortgage origination business, and the transfer
of related employees to the buyer.
In March 2019 we sold approximately 71% of our portfolio of
single-family mortgage servicing rights as of December 31, 2018.
These actions followed extensive deliberations by the Board and
thorough analysis of current and future market conditions.
Going forward, this sale will allow us to focus on growing and
diversifying our Commercial and Consumer Banking business.
We will continue to offer mortgages through bank locations, online and
affinity arrangements, but the scale of this product line will be
substantially smaller, focused on our retail deposit network and
regional markets – and most importantly, positioned for ongoing
Our Shareholders Have Spoken – We Have Listened
HomeStreet is always open to engaging with our shareholders and
considering ideas that may drive shareholder value creation – and,
following the 2018 Annual Meeting, the Board has been working to ensure
that shareholders have a direct line of communication with their
In the fall of 2018, we reached out to more than half of our
shareholder base and offered to have them speak with multiple
independent directors, as well as senior management, in order to fully
understand those investors’ perspectives and views of the 2018 Annual
Meeting and our governance structures and practices going forward.
These conversations included discussions about results of operations,
the business strategy of the Company, corporate governance policies,
compensation practices and long-term incentives, and our Board
composition, diversity and refreshment.
We also engaged with two proxy advisory firms, ISS and Glass Lewis, to
discuss HomeStreet’s governance practices, shareholder rights and
access, as well as Board composition and refreshment, and to provide
feedback on our conversations with our institutional shareholders.
We have not just listened – we have acted.
We appointed a new Lead Independent Director, Donald R. Voss, in July
2018. Mr. Voss has served on our Board since March 2015 and has
extensive experience in the banking industry.
We updated our Bylaws in July 2018 to define the role and
responsibilities of our Lead Independent Director’s duties and to
clarify that shareholders do not require “cause” to remove directors.
We also updated our corporate governance principles, including to add
an annual review of the Lead Independent Director and combined
Chairman / CEO role.
We elected to submit the following corporate governance proposals at
the 2019 Annual Meeting:
Amend our Articles of Incorporation to declassify the Board and
provide for the annual election of directors;
Ratify the amendment to our Bylaws to make Washington State the
exclusive forum for shareholder actions against the Company; and
Amend our Articles of Incorporation to remove all supermajority
shareholder vote requirements in our Articles of Incorporation.
- Amend our Articles of Incorporation to declassify the Board and
In April 2019, the Board approved a $75 million share repurchase
program, which represents approximately 10.5% of the Company’s
outstanding common stock based on the closing price of the stock as of
April 3, 2019. This announcement underscored the confidence in
HomeStreet’s future performance and long-term value creation for all
A Strong Board Focused on Shareholder Value
HomeStreet’s Board is comprised of highly-qualified directors who are
proven leaders with diverse expertise across the key areas we believe
are critical to the success of the Company.
The Board regularly reviews its composition to make sure we have the
right people in place to exercise effective independent oversight and
make the best decisions for our shareholders.
Based on feedback from shareholders, in 2017 we explicitly adopted
principles to consider gender and ethnic diversity in the boardroom to
ensure we are mindful of considering the broadest possible pool of
As an example of the excellent talent added to the Board recently, we
appointed two new directors in 2018:
Mark Patterson, appointed in January 2018, was previously managing
director and equity analyst at NWQ Investment Management, one of
our largest shareholders and a significant investor at the time of
our IPO. He possesses significant experience as an institutional
investor and in the financial services industry. He is also a
substantial individual shareholder of HomeStreet.
Sandra Cavanaugh, appointed in May 2018, was previously CEO and
President of U.S. Private Client Services at Russell Investments
and possesses deep experience in the banking and financial
institutions sectors, specifically in asset management and
financial product creation and distribution.
- Mark Patterson, appointed in January 2018, was previously managing
Our evaluation of directors and Board composition is an ongoing
process. As our business needs evolve, so will our Board. Going
forward, we may search for candidates with proficiency in areas such
as IT, cybersecurity and large bank expertise as we continue to grow.
Our directors up for re-election at the 2019 Annual Meeting are
integral members of our Board.
Mark K. Mason, our Chairman and CEO, is a proven leader with
significant experience as an executive officer, director and
consultant to banks and mortgage companies. His expertise in banking
and real estate operations, lending and finance is directly relevant
to HomeStreet’s business. Additionally, he has a successful record of
creating shareholder value, turning around troubled financial
institutions, creating and executing growth and diversification
strategies, raising capital – including two highly successful initial
public offerings, addressing portfolio and operational challenges and
effectively working with boards, investors and regulators.
Since becoming CEO of HomeStreet in February of 2010, Mr. Mason
Led the turnaround of HomeStreet following the recession,
recapitalizing the bank through an initial public offering and
returning it to profitability.
Grew HomeStreet at the top of peer rates while avoiding credit
and operational problems.
Utilized our single-family mortgage banking business to fund
losses incurred in addressing the cleanup of our loan
Successfully created and executed a growth and diversification
strategy away from single-family mortgage banking while
converting the institution from a thrift to a full-service
Reduced nonperforming assets from peak of 16% of assets to a
low of 0.15%.
- Improved our net interest margin from 0.87% to a peak of 3.53%.
Established new and/or substantially grew lines of business:
commercial lending and cash management, small balance
commercial real estate lending, residential construction
lending and consumer products.
- Led the turnaround of HomeStreet following the recession,
- Since becoming CEO of HomeStreet in February of 2010, Mr. Mason
Donald R. Voss, Lead Independent Director, has extensive
large-scale commercial banking experience focused on lending, credit,
cash management and retail banking. Mr. Voss served as an Executive
Vice President at First Interstate Bank (US Banking division) which
was acquired by Wells Fargo Bank. Mr. Voss was also the Chairman of
the Board of a public bank, the sale of which he oversaw, that was
acquired by HomeStreet.
Additional notable leadership experience includes:
Elected to the Board of Simplicity Bank and the Board of its
parent company, Simplicity Bancorp (“Simplicity”), in December
2011 and elected Chairman of each Board in October 2013.
Serving as a member of the Audit Committee and the
Executive Committee at Simplicity, providing leadership in
all aspects of corporate governance.
Working principally with the Chief Executive Officer,
participated in, contributed to, helped guide, and oversaw
a thorough and disciplined Board-directed evaluation of
the Bank’s strategic options. This evaluation culminated
in an agreement to merge into HomeStreet Bank in a
transaction valued at $133 million as of the September 29,
2014 announcement date.
- Serving as a member of the Audit Committee and the
Appointed in late 2006 to complete the term of a Councilmember
of the City of La Cañada Flintridge, California and was
elected to the California State Assembly, and began a
four-year term in this elected at-large position in early
2007. Mr. Voss was involved in all aspects of City governance.
- Elected to the Board of Simplicity Bank and the Board of its
- Additional notable leadership experience includes:
Sandra A. Cavanaugh, appointed in May 2018, has deep experience
in the banking and financial institutions industries, specifically in
asset management and financial product creation and distribution. She
previously served as chief executive officer and president of U.S.
Private Client Services at Russell Investments. Ms. Cavanaugh has a
proven track record of developing, launching, or turning around large,
complex businesses, and product portfolios to produce long-term,
Notable leadership experience includes:
Oversaw Russell Investments’ $45 billion mutual fund business
in U.S. with full P&L responsibility, including sales,
marketing, product management, consulting, incentives,
operations, finance, compliance and strategic planning.
Led Russell Private Client Services through an ownership
transition requiring extensive coordination and collaboration
with Board of Trustees, legal and compliance team and
Redesigned Washington Mutual/JP Morgan Chase’s sales
structure, go-to-market strategy and service culture across
2,200 branches, 22,000 employees and $120 billion in assets.
- Oversaw Russell Investments’ $45 billion mutual fund business
- Notable leadership experience includes:
We Believe that Roaring Blue Lion’s
Candidates Lack Meaningful Bank Management or Operational Experience
Despite the Board’s repeated attempts to engage with Roaring Blue
Lion in productive discussions, its principal, Charles W. Griege, Jr.,
remains resolute in pursuing a disruptive and costly contested election.
Based on its initial assessment, the Board does not recommend that
shareholders vote for the election of Roaring Blue Lion’s nominees –
Ronald K. Tanemura and Charles W. Griege, Jr. – as we believe that their
election would not be in the best interests of all shareholders.
The Board has previously and thoroughly considered the request of Mr.
Griege to be appointed as a director at the Company’s 2018 Annual
When Mr. Griege first sought to be appointed to the Board back in
2017, the Human Resources and Corporate Governance Committee of the
Board (the “HRCG Committee”), along with the Lead Independent Director
of the Board, interviewed Mr. Griege for several hours.
Following an interview and an extensive review of his background,
experience and qualifications, the HRCG Committee concluded in January
2018 that appointing Mr. Griege to the Board would not be in the best
interests of all shareholders, as Mr. Griege’s professional experience
is that of an investment analyst or trader running a hedge fund
focused on short-term gains. No subsequent developments have changed
the Board’s determination.
In our view, Ronald Tanemura would not add necessary bank management
or operational experience or perspective to our Board and replacing
directors in key leadership positions would hinder the Company’s
ability to execute on its strategy.
We believe the apparent inability of Roaring Blue Lion to attract
director candidates with meaningful bank management or operational
experience suggests that experienced bank industry leaders do not
support Roaring Blue Lion’s criticisms of the Company.
Roaring Blue Lion Appears to Have an Extremely
Checkered Track Record
We believe Roaring Blue Lion has misrepresented the facts and
continues to try to blame the Company for its mistakes.
The accusation that we are using “corporate machinery” to
disenfranchise Roaring Blue Lion is false, and Roaring Blue Lion
admitted as much to the investors in its fund. In our view, these
inflammatory claims are simply a ploy to attract support in another
In a letter to its own investors in August 2018, Roaring Blue Lion
admitted that the reason its director nominations were rejected
last year was due to “errors made by [Roaring Blue Lion’s]
attorneys” – yet they are now trying to publicly blame
HomeStreet for its missteps and inexperience.
Similarly, Roaring Blue Lion blamed its prior law firm for failing
to file the legally required notice with the regulators. In its
investor letter from August 2018, Roaring Blue Lion explained this
misstep by stating: “Unfortunately, [Roaring Blue Lion’s prior
law firm] committed another error in not contacting the Washington
State Department of Financial Institutions (“DFI”) to get approval
for the proxy solicitation.”
- In a letter to its own investors in August 2018, Roaring Blue Lion
We believe Roaring Blue Lion’s pattern of behavior over the past
two years – from its deficient director nomination notice and lack of
compliance with Washington state law in 2018 to its current
interactions with Washington State regulators – raises real concerns
about Mr. Griege’s and the fund’s ability to follow basic legal rules
Roaring Blue Lion continued last year’s proxy contest against
HomeStreet without providing a notice to the DFI, even after they
were specifically advised about the rules by the regulator. They
continued to solicit and accept proxies from our shareholders even
after learning that its proxies would likely be invalid, thereby
disenfranchising shareholders – and then attempted to blame the
Company for its own missteps.
Concerningly, Roaring Blue Lion has failed to disclose this
material risk to investors again this year. Roaring Blue Lion has
filed a notice with the DFI in connection with the 2019 Annual
Meeting that is currently pending. It cannot legally vote proxies
for 25% or more of the shares until the DFI approves its request
or the statutory comment period has passed. These regulatory
requirements are outside of the Company’s control.
- Roaring Blue Lion continued last year’s proxy contest against
Contrary to what Roaring Blue Lion argues, HomeStreet has not
experienced high executive turnover in the Commercial/SBA lending
Two senior officers departed in 2018 – this does not constitute
Further, Mr. Griege alleges that at least one of these officers
was terminated for cause. This is false.
One of the individuals retired at the end of 2018 at age 72 and
the other departure was due to the elimination of a position in
the summer of 2018 as part of a reorganization to improve
operating efficiency. Neither of these individuals left because of
the allegations made by Mr. Griege.
- Two senior officers departed in 2018 – this does not constitute
Our Board has a clear strategy for HomeStreet and the experience and
expertise to execute it. The Company’s highly-qualified nominees, Sandra
A. Cavanaugh, Mark K. Mason and Donald R. Voss, are key members of our
leadership team, have a strong track record of enhancing shareholder
value and a deep understanding of HomeStreet’s business. We ask for your
support as we continue to execute on our strategy to drive shareholder
value creation at HomeStreet.
Support continued value creation at HomeStreet and vote for the
Company’s nominees on the WHITE
proxy card today.
The Board of Directors of HomeStreet, Inc.
About HomeStreet, Inc.
HomeStreet, Inc. (Nasdaq: HMST) is a diversified financial services
company headquartered in Seattle, Washington, serving consumers and
businesses in the Western United States and Hawaii through its various
operating subsidiaries. The company’s primary business following the
completion of these transactions will be community banking, including:
commercial real estate lending, commercial lending, residential
construction lending, single family residential lending for portfolio,
retail banking, private banking, investment, and insurance services. Its
principal subsidiaries are HomeStreet Bank and HomeStreet Capital
Corporation. Certain information about our business can be found on our
investor relations web site, located at http://ir.homestreet.com.
Important Additional Information and Where to
The Company has filed a definitive proxy statement on Schedule 14A and
accompanying WHITE proxy card with
the Securities and Exchange Commission (the “SEC”) in connection with
the solicitation of proxies for its 2019 Annual Meeting of Shareholders.
SHAREHOLDERS ARE STRONGLY ADVISED TO READ THE COMPANY’S DEFINITIVE PROXY
STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY
OTHER DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain a free
copy of the proxy statement and accompanying WHITE
proxy card, any amendments or supplements to the proxy statement and
other documents that the Company files with the SEC from the SEC’s
website at www.sec.gov
or the Company’s website at http://ir.homestreet.com
as soon as reasonably practicable after such materials are
electronically filed with, or furnished to, the SEC.
This release, as well as other information provided from time to time by
HomeStreet or its employees, may contain forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from those anticipated in the forward-looking
statements. Forward-looking statements give the Company’s current
beliefs, expectations and intentions regarding future events. You can
identify forward-looking statements by the fact that they do not relate
strictly to historical or current facts. These statements may include
words such as “anticipate,” “believe,” “could,” “estimate,” “expect,”
“intend,” “may,” “plan,” “potential,” “should,” “will” and “would” and
similar expressions (including the negative of these terms). These
forward-looking statements involve risks, uncertainties (some of which
are beyond the Company’s control) and assumptions.