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HomeStreet, Inc. (HMST - Snapshot Report) hit a 52-week high on Dec. 10, as shares of this commercial bank have been steadily increasing since its strong third quarter report in late October. The solid performance of this Zacks #1 Rank (Strong Buy) is reflected in its impressive year-to-date return of 114.8%.

Robust Q3 Results

On Oct. 29, HomeStreet reported third quarter earnings of $1.45 per share, beating the Zacks Consensus Estimate of 96 cents by 51.0%.

Net interest income surged 26.6% year over year to $16.3 million. Likewise, non-interest income jumped 84.2% to $68.1 million, primarily driven by a significantly higher net gain on mortgage loan origination and sale activities. Moreover, non-interest expenses were up 41.7% to $45.8 million, due mainly to a rise in salaries and related costs.

Credit quality continued to improve. As of Sept. 30, 2012, total nonperforming assets were down 65.4% from the year-ago quarter to $55.3 million. Furthermore, allowance for credit losses was 2.12% of total loans, down 164 basis points year over year.

In Nov. 2012, HomeStreet completed a two-for-one split of its common stock. Now the company has approximately 14.35 million shares of common stock outstanding.

Earnings Estimates Advance

The Zacks Consensus Estimate for 2012 has gained 8.9% to $5.24 per share over the past 60 days, while the Zacks Consensus Estimate for 2013 is up 41.8% to $5.02 in the same time.

Attractive Valuation

HomeStreet currently trades at 4.9x 12-month forward earnings, a 62% discount to the peer group average of 12.8x. Its price-to-book ratio of 1.5 is 50% above the peer group average of 1.0.

Moreover, HomeStreet has a trailing 12-month ROE of 35.8%, compared with the peer group average of 6.1%. This implies that the company reinvests its earnings more efficiently compared with its industry peers.

HomeStreet has witnessed strong price momentum since its third quarter earnings release. Moreover, the company has been almost continuously outperforming the S&P 500 over the last three months, along with its 50-day moving average. The year-to-date return for the stock is 114.8%, compared with the S&P 500’s return of 6.3%.

Headquartered in Seattle, Washington, HomeStreet is the bank holding company for HomeStreet Bank. Founded in 1921, the company provides consumer and business banking, investment and insurance products and services in Washington, Oregon, Idaho and Hawaii. The company has a market cap of approximately $370.3 million. Banner Corporation (BANR) is another Zacks #1 Rank (Strong Buy) in the same industry.


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