HMST - Earnings call transcript Q1 2018

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Operator

Good morning. And welcome to the HomeStreet, Inc., First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. to conference like Mason, to now CEO. would turn over the Mark I go Please ahead.

Mark Mason

you us for quarter thank and Hello, joining call. XXXX for earnings first our

Before at SEC on you X-K and data to release would link. on furnished the Form we our news available detailed market website was the our under earnings remind to yesterday is begin, I ir.homestreet.com that like and

On will today's recording description and probably we that following a be call available to subject a this address statement at and risks addition, forward-looking some In the of make and of call. call, will Any is forward-looking uncertainties. same the transcript is many historical statements. fact a isn't

identified as filings. detailed most release earnings our and our margins, are servicing actual SEC SEC different as from in from and our origination performance, we credit net findings impact Those and value of general or supply that other Report recent may performance affecting mortgage mortgages include the expectations Annual housing our and anticipate. may the those our current filings, on regulators our to conditions that short that mortgage factors actual interest and that economic our loan various such results interest of expectations, performance, plans rates us fall demand in actions net as rights. our or our changes and conditions affect deviate including that markets, borrower from affect Form our our currently interest margin for Our in requirements factors differ Other of XX-Q volumes other take cause to of cause we financial our the the aspects or well may may actions,

call, reconciliation to results Please available like detailed our and XXXX in certain of you card earnings I company's be including our and of the Additionally, release mailed any a proxy those from with for connection today's our SEC to The the condition GAAP of referenced company the website. meeting may more refer operations. our set or website are is forth which be participants security or indirect the and filed other via company the the are connection they solicitation statement on the and earnings shareholders. non-GAAP financial XXXX found interest or of inform release as for found measures, to encourage measures holdings discussion in solicitation SEC on read otherwise a company, other of through and would proxies with that information proxy filings the in on measures in at shareholders detailed free their in of annual to Investor the its officers in definitive in statement carefully accompanying Relations company's with in company's filed financial the section, website participants executive documents and of materials SEC, its meeting. proxy Directors and card and company's strongly the its proxies identity of proxy the the of information. Information entirety annual regarding can with the the the www.sec.gov. www.homestreet.com for their statement, the company the in Shareholders proxy important SEC's by direct SEC filed contain all with

call. contest We Blue with Capital regarding comment the will take questions proxy not on or Lion this on

of the just our Mark like an present our strategy. to is Mark Ruh. In will financial today I review executing moment, on Financial and Chief results a results. update progress give business would But first, me in operations Joining you our Officer, our

ever levels is become experiencing of many new U and and phenomenon lowest housing The become the challenges. curve with historic observed. near resale housing XXXX markets The acute lows. and of first resale nationwide limited considerably is quarter The we now historic of has many a new met to flat and supply

convexity have higher markets experienced debt and portfolio utility servicing periods capital of of quarter. in negative in during our levels the We experienced extreme low

price reduced volume business. in and the held quarter. of substantially quarter an of progress growth was making our first low competition investment These segment cost the mortgage and Additionally increased and for and income first challenges difficult, loan the for with mortgage increases towards we in meaningfully X%. lines goals. that margins, based lower substantial already significant industry quarter profit all mortgage despite the Nevertheless restructuring loss more broad volumes made in quarter volume operating reflects loan our in seasonally diversification our increased year. loans quarter reductions servicing growth driving last This the In banking meaningful

since the improve in non-performing to XXXX. basis Additionally to ratio our problem points, to falling total to basis continued credit of assets points, quarter's assets XX quarter, of at relative down fourth just first with levels absolute the representing volume level XX the of lowest assets

and increases normal in Our relate projects residential primary United reflect observations the of new project our Job cap construction vacancies, the rates absorption, of economic not creation, the fundamentals in our real years and We other in support X%. area. opened deposit the increased a do development increasing we those continue opened real today. given strongest novo generally urban the deposits in de was we activity States commercial to the reflect centers, quarter. which in our in that our retail Millcreek in of also novo be estate acquired de reflecting indicators is in of a five Recently all to markets. course. suburban sales estate and growing in will new quarter, Seattle To early a as markets slower in deposits which commercial first in the indicators during of seasonality branches loan HomeStreet's unemployment, levels stronger X% significant three have as well quarter, branches X% closing the credit branches our of deposits the by absorption quarter strong of the activity loan [indiscernible] surprising, Seattle, growth Business and decreased during growth business absorbed Commercial areas X.X%, strong Seattle in warning originations increased within near past the we late and by City Gig deposit in by this quarter. economies large the business also all Harbor and increased these Tacoma. in and believe Lake in leading observed markets, in the number these is some and

XX%. sales years efficiency we progresses, year commercial the the ratio as half finished the of year this the ratio commercial loan segment with expect expect The increase We lower to in the with consumer real quarter Consistent banking in prior latter under the year XX% and for segment an of efficiency second of than XX%. year. estate half averaging the improve with

those expect banking the These ongoing our reduced April to challenges commercial our HomeStreet's of to employees mortgage mortgage meaningfully Our mortgage and maintaining reduction and efforts these took will part planned part We mortgage contributor the an annualized through this functions. the of our reductions actions important In of non-personnel to to and expenses taken in management we cuts response risk to believe a been will by and included as in in will related steps These as and challenges. cost tailored our affected related mortgage be sufficiently result structure these while we million. headcount banking were work $XX.X banking banking segment XX going reduce non-interest corporate improve additional continue include, consumer service expense and goals. of well current success non-personnel to cycle. support to the safe releasing units the we actions the efficiency. challenging segment and meet which sound The growth, expectations good our ability our of success full-time the be has cost and with equivalent an pre business forward our employees, as reduction in for address we've appreciate costs and together

continuing to to share Mark financial of And on turn We work details to who'll efficiency. I'll cost the our results. additional it are ways now over structure however and improve our

Mark Ruh

Thank on then talk results I'll you, Mark. segments. everyone us. morning consolidated first joining detail operational our and thank Good few you for again a provide and about

consolidated with was benefit million $X.X acquisition or tax for of was net to per for the income quarter Finance of the rates tax. net Act. related recoveries and XX% Tax XXXX first $XX,XXX of fourth the quarter research both our 'XX. income, income for 'XX share plan net Cuts Included million for quarter quarter the results, our related to diluted and tax the $XX.X $XXX,XXX in to the or Jobs resulting of from of of net diluted $XX.X was recoveries, lowering in million share compared Included first $X.XX Regarding per fourth a the $X.XX corporate

of quarter was impact restructuring from $X.XX net reform, in was net first tax per primarily activities on from of fourth prior related largely expenses $X.X quarter income is the This gain $X.XX $XX.X segment. income income, share in share and banking somewhat diluted in million banking the non-interest funds. or lower million charges first of quarter of million held decreased sale net to for $X.X lower non-interest acquisition servicing commercial the offset 'XX. and per core income diluted income, or $XX.X million interest sale the quarter mortgage income due fourth million both for due core from segments higher Excluding the decrease core compared income by loans 'XX. the primarily Decrease our lower to to lower of retention and but interest mortgage quarter in Net consumer for the net net to our and And cost expenses. lower of balances by $XX.X in the lower

Non-interest lower lower excluding expenses. decreased primarily to an margin from lower restructuring specifically from This increased the funds primarily of net first X.XX% increased administrative family in $XXX.X related costs March loan Fed 'XX. net of the interest home commission This to and basis the in eight quarter points in quarter this from non-interest federal liabilities, million of closed Our first mortgage on decrease Federal in quarter of and margin year. acquisition cost fourth 'XX. Reserve cost million interest interest as due impact quarter of volume by rate advances which expense in $XXX the of single bearing general expenses loan X.XX% in expense is the the fourth the and of was decrease the in bank increase decreased

performance net yield decrease This resulted loan first and employee, was decrease at non-performing primarily the to or our expenses. offset basis origination sales a impact losses. XX for the losses expense lower cost and the of in million. points million million net banking in net fourth during rate was processing billion regarding I'll non-interest real interest to first portfolio lower increase quarter income, primarily due the loans period due points March core quarter. to quarter core $X.X non-accrual in growth expense, compared one-single private This hiring segment to reported XXXX. a $XXX those million sales, servicing primarily related Deposits December the credit due banking Our of residential to compared $X.X decrease to income, 'XX lower related $XXX,XXX to XX. quarter $XXX.X a marketing million compared now our expense a segment $X in 'XX. in fourth our net of XX.X% tax provision state in the quarter I'll first recoveries and improved on of points $XX.X quarter no core December fourth both opened a for $XX.X net originations core including the of loan offset first fourth to to to and from primarily The of XX, first from effective and reduction rate quarter $X.X of from somewhere a in net gain estate the growth. XX% to consumer Non-performing expected segment in was retail $XX.X quarter. in million million decreased Commercial administrative partially the We of curve assets first net loss rate This novo balances and of X% from to primarily XXXX. results. were range loan assets XX, by $XX.X our prior of was million or business lower $XXX,XXX in the commercial net X% by to at in from income due discrete quarter. of fourth origination quarter-to-quarter quarter. driven of yields, loan $XX.X key de $XX.X our our now over decreased the million banking decrease gain This key years, segment to a the assets net within loans increasing general XX million operating million activities. in by X% and growth, declined to seasonally commissions the of decrease some increased points core for tax $XXX.X tax quarter. core impacting was investor. costs. the at an primarily commercial the was This a from non-interest past loans to loan Net in $X.X accounts. $XXX,XXX mortgage a due loan quarter primarily Segmented during reduction the $X.X differs quarter five assets a earnings related discuss income net due to the portfolio investment mortgage at item or million compared Deposit greater in of some during XX% of banking branches million funds $XXX,XXX interest despite to XX, of million reflecting deposit result The basis share asset was held lower income cost increased the variety Segment activities was in results. loss quarter compared fourth increase $XX.X strong increase first was sale provision Net provision our lower of March generally of income was consumer million,

Our pressures due was decreased margin. activity on competitive to lower origination intense deposit primarily sale

was decreased This direct to million closed including upon fall reduction decrease quarter lower Single-family in due March. the million a steps quarter, the the in from commissions and in first due in volume was volume primarily the $X.X competitive million took $XX.X revenue covered interest has we our quarter. primarily segment higher points mortgage recognize loans loan but of the was government XXXX agency decline being servicing quarter. mortgage million of [indiscernible] fourth income purchase XX are in quarter integrated of Note closed loans majority a The majority by closing. through in origination was sale margin pressures the in decrease in first in of points in sourced closing of of in on $X.X The single XXXX the XXX the to in segment's fourth our rate affiliate expense and and impacted result. expenses also this risk margin to WMS. The portion by convexity The than disclosure interest billion on changes new basis fourth system implementation basis basis primarily versus of profit risk with X% held in rate due in was quarter. management substantially Mortgage curve results at gain higher points has $X.X partially that mortgage composite mortgages, for of servicing in while restructuring banking portfolio composite non-interest mortgage loan fees. from interest given Our costs positive to reduced negative offset resulted is management in decrease sales a has the regulation. as $X.X XXX mix mortgages and core origination processes, the increase recognized origination refinanced servicing in than greater by of flattening the loan the yield March effect as our particularly requirements quarter banking mortgage earnings of plans lower dealer family mortgage the

Our to XX insights the back basis XX. portfolio end, to quarter loan future. additional to will increase others our turn the loan for basis compared balance December outlook prior an on of service of single-family Mason, compared March mortgage now value increased HomeStreet's at provide to billion to over rights quarter. servicing Mark XX, for others $XX.X for at points was $XX.X relative of of I on XXX at forbearances points some the serviced The billion

Mark Mason

Mark. you, Thank

currently Looking forward volume second next loss billion and mortgage quarters anticipate mortgage family quarters single in volumes we and in billion the held and sale closing and of $X.X quarters. our this anticipate two third $X.X third the for commitment for forward of to banking the sale both segment, $X.X year, We respectively. second mortgage billion of

now billion. closing loan total we full family single loan $X.X to for mortgage and to billion year loss the commitments $X.X XXXX, volume For and anticipate total held sale

decline composite composite the to during A and basis government mortgage between margin our decrease well range as as and lower XXX current profit XXXX. expect reflects a profit XXX our to environment. guidance points we competitive in purchase originations Additionally, of mortgage margin

competitive impact buying lower the term, quarterly loan these average composite January increase do our These anticipated. assume issues to of pressure low, anticipate of substantially estimates some segment, year but In of the which current the on we recently in loan positively margins. of will have and loan sales during commercial commercial composite during volume resale change the average home All banking quarter. and guidance profit levels net seasonal higher as of than mid-year real remainder year, profit expect estate consumer growth. for our higher mortgage at fall was the previously for levels than season We volume potential near continuance margin in the and new challenges of as inventory this our the and margin example

to X.XX% the of Reflecting year. to interest portfolio the range and our average second range a up the increase expect fourth X.XX% quarter the a asset market by loan rates continue and prepayments changes growth X% to of to quarterly loan remainder X.XX% continue curve to and between we our the for We continued consolidated in to the XXXX fees, X.XX% and margin yield in expect flattening of to X% of net quarter.

During seasonally loan the non-interest the we our mortgage second higher to quarter closed expense given expect increase expectations. total

growth. and in more segment non-interest However over and segment at grow year. X% consumer increase commercial rate are of banking X% increase expense non-interest segment expenses the remainder Notwithstanding our we this consumer expect in commercial banking expense to the in to the of twice between the expected revenues than the and

non-interest of concludes non-interest seasonality remainder the total total will growth cyclicality quarter-over-quarter XXXX in This X%. For our for our any loan somewhat X% expenses Mark at vary driven and rate comments. I you questions you to expect we this The happy close of and volume. attention mortgage our have between to your expenses time. and grow prepared by answer Thank will today be

Operator

the question-and-answer Instructions] from Davidson. today The begin comes now Rulis ahead. Jeff D.A. Please will We go question session. first with [Operator

Jeff Rulis

Thanks good morning.

go Just on have a is XX those today couple as reduction, a let really are or headcount the been that QX employees event?

Mark Mason

yes. of are reductions April in All those

Jeff Rulis

XXXX the employee Okay, and end quarter not XX to so have reflect. end, correct? quarter subsequent is mortgage been Those count additional that does of

Mark Mason

That's correct.

Jeff Rulis

I any there layoffs were save in self-selecting I to that. sort that that is And guess if severance process? offset any Okay guess there were and of the expense within guess portion I of

Mark Mason

for all segments details recruiting affirmative that have our that's reduction our in we true We pressure. some The in due expense the reduction both competitive significant loan attrition in the that originators had the force. includes that in also headcount. business in reduction Unfortunately more cite to numbers But segment. of mortgage need reduced

Jeff Rulis

Okay. not there number? any And that XX.X offset, clear. severance a there net is in or was expense increase an is maybe Is I

Mark Mason

is million $XX.X The

Mark Ruh

only going going a Is is the expense small, about our be quite There is annual to in be $XXX,XXX. quarter, to severance second rate. it's run

Jeff Rulis

What was number? that

Mark Ruh

it will number. small About be $XXX,XXX, a

Jeff Rulis

annualized anticipate I would and the on hit got increase run rate I - we But in the would to And guess take your that expenses. XQ. the effect seasonal guidance Okay. number in in

Mark Mason

to mortgage primarily. That's with respect frankly origination commissions

Jeff Rulis

XX.X? guess mean all of last that line comp then other Is cost we from maybe is is I the line And back the with Or compensation comp expense then, there can associated on per the I Okay. saves here. outside into that employee the line. one

Mark Ruh

question breakdown then salaries is other employment good million. annualized of Actually $X.X Yeah $XX.X is the million $X.X of that Jeff. costs and related expenses million are

Jeff Rulis

or other the will facilities? just support And be

Mark Ruh

be [ph] have breakdown of items a an it different bucket later. is. million. top to for context $X.X for having going of But detailed right sorts all other rated in It's expense of I'm consultants, this got camps, It's detail all or the We very that, NCC things, amount here. it's

Jeff Rulis

level thing XX.X for we enough, plans quarter or last so I Then The going is to down a high on - or was the that Ruh. quarter new Mark That's rate one that the XX? maybe tax back - at to one are it. a appreciate tax rate forward question XX

Mark Ruh

onetime that to event We're looking in was XX that like we'd be that range, XX a [ph].

Jeff Rulis

step back. Okay, Thanks. I'll

Operator

O'Brien The next O'Neill. with ahead. Tim from Sandler go question Please comes

Tim O'Brien

Good morning.

Mark Mason

Tim. morning, Good

Tim O'Brien

give bit Good that morning color of know little liabilities. liability some points. a Mark Mark neutralization bearing Mark, is a But the Ruh. for basis mix by Question front. XX were you I the and Mark. cost can liability there non-costing interest on change of there was on

my As know table, I what on you the the your there mean a that, from little bit side at might take cost least pressure and what for the marketplace about pricing can for funding going is in don't funds? and that forward specifically of talk outlook the

Mark Ruh

here. I basis can on our increased the see the bearing again Again release XX yield in points. think you FDI deposit liabilities Well, statement

Bank. As quarter pressure They Loan from XXX basis charged see to have big basis Federal XXX can you from we Home quarter continue points to this pretty last points.

as compared rates. is how our again relatively fast going But deposit to mean outlook going deemphasize beta guess guess that repos is So balance use bank. kind positive $XX this in in the quarter using current to are curve to only we're I anybody's increase. again, of we're home the in my as against and yield is in I and be million rates activity quarter of low repos. how this good to These around loan that's feel working years

handle really events can of kind that, is So called that out again Loan Banking we events. on good we getting, have that Home as see pretty you are a

Tim O'Brien

much, through run information, works is we And a could where by the the and have been effect million or that year planning here change you possible we changes that's then there through have continue something here you state or adjustments forward? the of the shareholders? Board - to here that is a strategic $XX.X of year are cost in and made the that what more the end we that we're and are reached here determined pretty the that mortgage is have way get the savings or to going unit where dynamic that Are a the that the very for best point guys helpful should management, where made are changes static going in been way end in point have

Mark Mason

we I to the of cost are with don't that. finished we think structure believe that improve opportunities mortgage the

origination We environment. capacity current we have the risk maintain we the can management for and take necessary taken believe and immediately actions,

offices, We and continue potentially a opportunities estate environment. to others dynamic consolidate view so to it's certain downsize real of that say I

Tim O'Brien

spot then it? the makes range, That be table it I it held investment it have I the was net in can for the don't And out of know remind the last my million I for $XXX I production you notes the you'd just can I is, sounds know in but got me quarter and sense, get question number opportunistic. loans for like

Mark Mason

be the for table.. the should quarter additions in The

Tim O'Brien

was any question basis of originated guess production because have that about here, table this. I purchased? purchases for Of I that the by to in you is to and that, it is been were bankers that gave that much the as HomeStreet a it's suggested a I and use sorry guess there how that going was line some Yeah, my guys there question, item could

Mark Mason

a Yeah, is the and is unfortunately of you page it's release portfolio, on read kind go there a earnings of lot XX, the advances. purchases of and forward it's, - wide, very there

Tim O'Brien

spotted. that it, was that's Yeah, what I

Mark Mason

an embodies don't - example of roughly. they also number have purchases purchases. The a existing it's our mortgage affiliate lion's us from that running commitments of but million of front portfolio share services $XX that originate as quarter appears been that on I for about us, in loans is the that

Tim O'Brien

So purchase useful break at and maybe just, going those maybe versus where that point the you to advances forward folks. see the we kind might out some could be

a and my suggestion Just questions. for answering Mark Mark, thanks

Mark Mason

Tim. Thanks

Operator

The Please go FIG next ahead. comes Coffey Partners. Tim question from with

Tim Coffey

good gentlemen. Hey morning

Mark Mason

Hey Tim.

Tim Coffey

on trying an am expenses with on is idea mortgage MSR typical me business, the can to give an what get I associated portfolio? idea of managing base you the expense

Mark Mason

right. the on question first So managing of the the definition portfolio,

We have hedge right. we then treasury activities, activities have and servicing, the

you processing like. is the as which you defaults simply processing or payments, foreclosures expect of treasury? the So and the to Are referring entirety activity that

Tim Coffey

the less banking from come assuming mortgage The entirety of of origination expense activity the the of the activity. considering in the one volatile

Mark Mason

That's true.

would tell the but that position that at this such We have I among to you filings have not States broken in a the servicing, loan we most efficient not service out in those loan I'm $XX. numbers billion separately in very point. to I about because cost low United public sorry very low and under running is so for We've a not we're a it large on UPB the $XX do our treasurers very sitting portfolio. delinquencies, right, is here. cost it's basis per high quality credit it's by servicing have because of we defaults, asking think today

Mark Ruh

a year it's for I is which on per about depending product $XXX loan. it think

Mark Mason

And loans…? in terms we're servicing Right. of total

Mark Ruh

XXX,XXX.

Mark Mason

loans, that help? XXX,XXX does

Tim Coffey

say did you per $XXX It loan? does, a

Mark Ruh

Yeah.

Mark Mason

$XXX per month.

Mark Ruh

Yes.

Mark Mason

and servicing, management the so and allocation gives that's which treasury on. of plus other some an cost Now

Tim Coffey

recent any margin any in moved gain the color kind quarter? do - estate you the sale have And and the quarter margins of on on kind commercial then great. whether what was real loans how for Okay sold of the those in

Mark Mason

Sure do.

Mark Ruh

sales We didn't have quarter. the of a in lot

Mark Mason

U.S., maybe have the then We and into And the non-[indiscernible] we in SPA, correct? U.S. estate always sales sales. commercial of real so loan have lot sales SPA our quarter didn't

Tim Coffey

of that heard the into might on prepared lands what to I'm - thought of a in coming might terms quarters loans look be the comments so I comments get you I that delta trying Okay more in sell income? non-interest the handle share what in A these

Mark Ruh

If sale on demand and We each in right. estate pricing of west and the believe but you last year year-over-year loan the was commercial to begin loan latter true has the of origination real year that's seems part run the early the the with half part people the of currently working the that loan If look rate year, meaningfully volume each year, loan higher for last lower. activity at substantially is to supplement generally seasonally and year, in do improves. that on product so

those the real on commercial range loan sales was of if Our estate X% helps? average roughly, that to non-U.S. sales X.X% gain in

Tim Coffey

Yeah, then the And number see release very performing press you thank but have TDRs? for a do you I does, didn't much.

Mark Ruh

I TDRs substantially $XX.XX, are total number, all are those think they TDRs. outperforming. Those and yeah are the substantially yeah, performing

Tim Coffey

Okay. were very well those much. questions. right Thank you my All

Mark Mason

Tim. Thanks

Operator

Please ahead. The Jackie KBW. next comes question Bohlen from with go

Jackie Bohlen

Hi guys good morning.

Mark Mason

Hi Jackie.

Jackie Bohlen

to and Looking potential the mortgage more items so there's headcount focus XX in on XX throughout the parts and on understanding March How headcount moving place little at are just where in that future April. and about the more that bit XXXX took in thinking segments, given just the you impacting started be through de to we you a then going just banking understanding that two like then some at any see sounds that you novo have year? aspirations it headcount maybe other attrition, reduction

Mark Mason

any is And fourth until first those of expecting We retail quarter branches next year. or the of in deposit will additional the it's year. year the did quarter. fourth branches add for first complement We're to quarter. novo the de deposit our three half the in when the open in in That the opened latter not unclear new quarter perhaps

headcount we in headcount And we of the that two course will decrease So as reduction quarters. across that filled a have open consequence the be over quarter the of positions of disclosed our remainder year, few additions today. the likely to the headcount over second ensuing company to the are

or fourth And in quarter by of XX XX smaller the least positions. the so at in of plan the you'll range maybe additions quarter on see somewhere open number third the currently in

Jackie Bohlen

most of the bank? those are And commercial in

Mark Mason

functions. support Or absolutely. Yes,

Jackie Bohlen

Okay. somewhat anticipate you And to to then do an offset attrition that? of be

Mark Mason

will refilled. positions critical in attrition The be Yes.

Jackie Bohlen

could but occupancy it areas? areas to some already, looking the you sounds that then and be And expenses, at trend enough. you're primarily other Fair related that like briefly that for Okay. other expense potential mentioned in areas

Mark Mason

answer. Yes. vague Yes. That's slightly of I'm hesitating. That's way sort

our items of think all are I line to consideration. subject expense continuous

support and our and and thoughtful ability soundness efforts. are about risk to diversification our management We about safety

same So to to create But and careful review. successful. or are the of course we've not subject be unwanted risk risk been liability all those to decisions

it's work so And process. in

Jackie Bohlen

Understood. planning thinking an about lastly, you're then provide management? how could you capital update And if and on just

Mark Mason

first have expected we quarter And expectations despite has significant forward. quarter. lower growth reduced last for the lower Well we our we still growth than this lease. quarterly in more growth reduced are expecting And capital growth going

we're anticipating equation, low this juncture, dynamic question it's need or a course And for thereof. based don't upon at the of sort that beyond our Of lack earnings not this but help capital year. success

Jackie Bohlen

Mark. Thanks, back Okay. I'll step now.

Mark Mason

Thank you.

Operator

[Operator Instructions] go with Steve Riley Please from Moss comes FBR. question B. Next ahead.

Unidentified Analyst

filling Hey Mark, West Mark. and today. This Al Steve is for [ph]

duration then changed the any on portfolio. on versus How question mix you. would helpful. update the Thank quick the since Just And fourth quarter? fixed be is the variable a

Mark Ruh

variable portfolio. that our fixed. Sure. varying of of term fixed third duration, to a versus The truly and in No the About be composition structure levels portfolio fluctuates. roughly has remainder material changes continues

duration In say rise extension. right materially years right of though terms years last only the not some rates so a since of about end X.X extended has creates year, duration, asset asset X.X as from that little, to

Unidentified Analyst

Got it thank you.

Operator

Henry next Wedbush. Coffey Please The go question from comes ahead. with

Henry Coffey

focus areas question. describe production Two in the everyone loan second and of my are there's in on thank then afternoon as in growth all of going more you general and business that good just terms question. where the and would like parts or offense more defense, a Yes it for first, taking there is you of

Mark Mason

they years you posture mortgage that that home should side think events defensive be and those were that regarding of events mortgage us business. a top delineate. And whether clearly into servicing with shrinking numbers banking segment we've if in define business deposit clearly today. growth, our force X% investments negative our available at I can X% those are relate curve, to that growth, portfolio, growing be portfolio segment by running easy negative market flattening deposit yield made On a growth, is inventories business. numbers convexity this all confluence in or clearly X% those X.X% the consumer over the that to and in commercial look you

Henry Coffey

and say sat ARM five good building here's one there market out is retail do if non-QM such in mean cycle? is new business plan lending or origination to markets it growth share, best with of pass live can ago then you down really really new you you a in be I had anything the the I and that years value direct the as products a kind and with idea, have would said the of fund the probably of country to jumbo just preserve

Mark Mason

business in important or out desirability using can react the of business. question to periods go improve changes isn't You cyclical this to Well, can of or your by business. that's the product it? of efficiency the The the a effect around those simply get you cyclical

get time is very part whatever tough That's trim preserving do the outlook. mortgage the as consequence in have significantly that some and future business many products We chase of and market. but qualifying including poorest on of so time level products down States list most go the challenging originations aspects things to and credit by offices, not to same of are as period this the competitive trying all of the cost dramatically have an including the originations including general to aggregate as to you but It navigate call insurance government has the LTV the a of best a this particular a of and additional average lot United of business this agencies. our personnel of ability or they of our at It insurance with really percent the their example in market them of against the as ability fallen as industry the can't an premium. is very

recently that correlation volume That's realize direct shrinking thing overtime. time. dramatically. don't secondary headcount. in with over to rates more a mortgage business The has the this be the originators loans lenders. is over shrunk loans market rates leaving of participants to describe to There This of ones another are shutting seen between willing mortgage be down next period products are worked secondary number We've strength or that made and that the primary and for originated independents is capacity be media. we has What market and of to some will reducing available novo doors of competition, at originators our where

bank longer our that over shrink as and static not is Margins improve to to volume. capacity and challenge this right things a through to historically our to it's hopefully bank it, capital to relates is way time. at the service to a us, even for six it navigate provided the has our of us Cyclically large Thanks to and minimize profitable it very the service right right the initial has this capital, put But business full the our to make as tough answer is navigate HomeStreet profitability format we make years we improve of a question. challenging. an progress strides very that part to the for business making to available a and commercial situation. it's period this so grow allowed of public doing find the since very into will and bank us strategic that. to We're XX% forget this find will capital and to to term will that reenter in rage and And substantial amount will not more best average plan last strategically commercial is a we're that move has we cycle allowed try great provided offering, business earnings, substantial a for

Henry Coffey

No, it's understandable.

technical, write other or then positive gains. four the then a to losses, fair limited of just resulted was that and greater quarters equation last MSR more you looking a The MSR strong that than which quarter worked position around any write-up or the is able just the terms of in this that one sort of dynamic would was And mark. this what that limited losses your other with have had hedging you five income Either and substantial hedging numbers quarters part change a you in quarter line? were the to a or four write-downs servicing bring I the at bottom how hedging you or is of small other value you expected, I then but question had your gain is in had MSR positive you on is sort with ups we based hedging in had of

Mark Mason

Right.

and substantial a mortgage have to, being That alone you of transaction spread, rebalancing referred rate our hedge. time a challenges reposition cost, One something. transactions every asset produces more a main just volatility I to amount of has big

has which us. to sort those range. ends We'll XXX loss absolute derivatives between of as flattened monthly a income spread to year we Additionally at earning hedging how in curve key the yield rates sense, and hedge much servicing reiteration or our the is the we the outright flattens the servicing our associated tenners of look duration portfolio between of the spread on the assets that's think in too in a use shrinks average

rates portfolio range servicing as convexity is forth which addition is Henry. our two, it that back unfortunately the we of are transactions. good this early or the what And been entry that that the portfolio - it as tell of the we hedging risen servicers refill as making built one in every the go And What a the to serviced. changes. hedgeable that effective one see last things in efficient are rates Then until have we rates market several impact placed of at has a our results and of And we have track. fall. a you servicing this I servicing now versus time goes all has a portfolio right and forth our we rates on across of basis. not this fee over little We like year results to as amount large for loans we originated pension In metrics. such all of rates best on has Risk hedge as measure produces the us. to rates relative and management average other type mortgage. costs. we it suffering volatility spreads still way this portfolio have that while, the your hedging lower consequence higher results back any with whose a of and mortgage will various less a are meaningfully you mortgage big for condition are to earning though, hedge or sometime originating have a these is point One, of equation. in going being is rise resulted Two, that less We at and the public we find in and ourselves percent results exist can

business question, forward. because change the the this it's it's to aspect one that So we And is challenging cyclical point. the at of know going also of very subject

Sorry extended answer. about the

Henry Coffey

no. helpful. mean very No, that's I

So right? just a are this in simple house, question, you servicing

Mark Mason

Yes.

Henry Coffey

questions. you Thank Okay. answers your my very to for much

Mark Mason

you. Thank

Operator

you Thank our for today's and presentation. the concludes also session question-and-answer This concludes conference. attending

disconnect. now may You

HomeStreet (HMST) 24 Apr 182018 Q1 Earnings call transcript