HMST - Earnings call transcript Q1 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and welcome to the HomeStreet, Inc.

First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mark Mason, Chairman and CEO. ahead. go Please

Mark Mason

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

Before like was begin, and under release to I the I'd SEC is and detailed that the Events website accompanying earnings available our News on investor at Form and presentation on furnished our afternoon to yesterday X-K remind ir.homestreet.com, you link.

expectations financial call to a risk call. in today, other forward-looking at the course the following our Please likely company's investor In predictive yesterday's that about reflect available subject of may statements statements factors statements addition, same our disclosed Harbor the the and the in included we performance be our a results. These and make certain current transcript filings. will recording the Safe note and made in public that address earnings and that are release, are deck views

to found release call non-GAAP to our today on reconciliations on be can available measures Additionally, earnings our our referred in website.

is today Officer, pandemic, and and will discuss to our Financial me results our COVID-XX progress to operations our Joining our executing the in strategy. Mark the give results of I'd like response current our then update review Mark briefly business on financial Ruh. an Chief

Mark?

Mark Ruh

you, for everyone, Thank Mark. and morning, again joining us. Good thank you

treatment terminated we income accounting effective continuing net to net income $X.XX share, or income Note operations fourth from to million X, net first consolidated $X.X the continuing diluted XXXX. quarter diluted of consolidated quarter HomeStreet the as $X.XX for $XX.X per prior compared 'XX. Our million income net are of January comparing share 'XX or was operations for period that current from of per operations, period discontinued

of core the per first 'XX income $X.X of fourth net million share net from with compared million or or income quarter diluted was operations of continuing share. $X.XX $XX.X the $X.XX per diluted for Core 'XX for quarter

income of from Excluded the of first tax. decrease in was income core before $X A the $XX.X income net methodology quarter. in to net for pre-provision million quarter, CECL provision decrease taxes core the in a under the be net new was allowance later prior expenses net estimated in discussed our Our million credit quarter - primarily to for approximately to income, loss compared restructuring-related compared $XX due presentation. was million the

lower net 'XX due decreases points in While increased first basis volume of the our our margin significantly X interest in both investment, rate decreased expense. interest income held loans by quarter interest the on for and net to due to

declined rate our on decline of XX% the rates our impact at quarter-end, our net which at the margin. the interest approximately loan quarter, of was mitigated variable in interest contractual general during rate While loan interest portfolio floors rates

This of X.X% we from XX. decrease $XX.X and or was previously servicing and maturity XXXX. balances decreasing at deposit were decrease X.X%, increases by transfer respectively. XX, high primarily related of March of billion X.X% of decrease December in core driven certificates Deposit the This in that deposit consumer brokered a deposits deposits, or and the business $XXX.X of deposit to offset deposits promotional certain was million issued in fund by million $X.X rate

of maturity lower of on FHLB decreased certificates in paid paid and rates proactive rate cost brokered higher to rates on higher deposit. promotional deposits, interest due our cost Our lower reduction interest-bearing of deposits, advances, balances the

was quarter-end basis basis cost XX points In versus at fact, of our XXX year-end. points deposits at

Credit consideration CECL. quarter, the X.XX% referred net of lifetime reserve Current allowance within January replaced X.XX% estimates. allowance information methodology reflect credit range and for for the loss reasonable broader model As expected that a Accounting fourth loss X, margin CECL incurred a of losses requires up the interest Standard adopted of the credit 'XX, of to these lease Losses result quarter losses to and increased On to changes, last credit Expected from in for forecast our loan year. inform we losses

The allowance materially credit XXXX, $X.X regulatory December order January to net approximately or of resulted This reserve our and ratios. increase as levels. retained was our X% recorded for income, of not a adjustment 'XX at million in Day-X losses capital CECL adoption impact compared earnings X, in aggregate in impact in XX, did to

of first million recovered approximately the pandemic. we Absent was to of in $XX the the entirely for million provision impact quarter. the forecasted $X.X crisis, quarter would Day-X due the have The economic COVID-XX provision

non-performing loan as our evidenced strong, by loan-to-total remained ratio. quality low Asset

have or restructurings debt However, note risk at most loans been downgraded troubled guidance. on regulatory based not yet that designated as

$XX.X Non-interest mortgage 'XX. lock on loan and from to related by low higher to income due increased activities and 'XX to of was commitments first origination to a the increase rates gain quarter. interest the the fueled in million of during fourth margins quarter in sale single-family quarter This from historically significant strong primarily in $XX.X rate due refinancing activity, profit higher million

sharp mortgage results. in to interest loan to increase decrease risk rates by caused was Our rates fall servicing of end the quarter. record triggering activity lows, in the mortgage market A surge in March higher in towards a income management refinance initially caused

responded and primary locks $XXX of included, quarter mortgage surge million rate to in by gain the quarter 'XX, volume both HomeStreet constraints on the 'XX. were market fourth million margins. Participants in of uncertainty, sale compared in market, large increasing created to by have $XXX capacity Single-family the first the

between the the fair primary related and mortgage quarter, in instruments. hedge declining positive secondary our rates our the as resulted variance change during the This of single-family pricing MSRs in values mortgage rates change extent same not in the to driving mortgage

ending 'XX primarily XX, $XX.X $X quarter, the equivalent employees from XXX, to X,XXX number compensation in at the first stock-based The in XX.X% fourth million $XX.X a of decrease XXXX. of the $X an quarter increased million June quarter recovery expense million below expense of to Noninterest fourth of quarter, in million the 'XX. fell during due full-time since

I Mark the over turn for back to now call you your will Mason. Thank attention.

Mark Mason

Thank you, Mark.

all you markets where substantial states, February, been in have beginning have As do to orders increases created unemployment. know, business, the business Stay-at-home we impacted and in by significant in coronavirus our disruption significantly contributed pandemic.

and adversely be this company Nevertheless, trying to crisis feel that successfully. will ways still affected crisis positioned customers are quantify. the HomeStreet by we our navigate strongly in we Our well to is

and have Tier at-risk-based and a of We X base respectively. capital and XX.XX% XX.X% ratios strong X consolidated Tier ratios XX.X%, capital with capital XX.XX% bank of at-risk-based

have the result crisis. losses credit potential anticipation losses we for occur may substantially allowance our Additionally, a of in increased credit as of that

meaningful future credit losses. current to allowance absorb and capital additional capacity our base losses, Beyond strong provide increased our for credit earnings

Federal sheet Additionally, from Loan on-balance existing our capacity today have Today, to and Reserve additional ample more available Federal borrowing we and lines access unpledged including and sources. is the liquidity our the $X.X collateral Bank, Home from billion. contingent

most our During commercial portfolio of with loans the crisis, deterioration quality, some credit risk. loan expect certain at we

Our our loan design, risk of exposure limited product by and of the concentrations industry, one by market. order to type, part to portfolio has, any limit geography, in

lending, and To our industries, most certain mitigate things, to adversely mortgage we who're construction suspended lending in new risk most borrowers additional portfolio, affected lending commercial commercial operating have suspended other to products. the among

underwriting standards estate our increased and tightened commercial We've our real margins.

strongest, composition, by our is nation. a portfolio fastest history economies most portfolio and loan result estate the secured real As growing our high-quality of in of of in the some

multifamily assisting single-family homeowners better portfolios well and Great underwritten Our portfolios performed forbearance. with Recession. some of banks portfolios These than mortgage are during despite performing other substantially the conservatively

the lending Additionally, homes of business. scarcity our conservative in our markets continues to new standards given perform and construction we which this well, residential portfolio operate the continued with

lending portfolio shelter-in-place Accordingly, our credit commercial operate. risk orders and and states by our which in most in certain to-date impacted in we segments business is concentrated the shutdown the

at and composition. further yesterday our disaggregating providing We added underwriting published the data today. risk parts information additional standards of also detail deck the portfolio slides, a good investor portfolio Our our on and on contains few most

requests risk borrowers orders for manifested our to itself to business. them in loan payment Our allow get to the shutdown get forbearance, back has past and by

type. these requests by summarize me loan Let

that XX, aggregate representing $XX.X sheet our mortgage been or of have of million, XXX granted we X.X% forbearance, an mortgage single-family requested and As April this have customers portfolio. have on-balance

we forbearance comparison, to X.X% compares of bank for X% This as for nationally For for granted of our have industry approximately XXth representing forbearance, services. customers of balances the others. X,XXX levels April current serviced loans

also underwriting and The disciplined substantially default, as industry our strict we outperformed the whole Great Recession, forbearance policies adherence reflecting and a and to conservative agency on mortgage guidelines. single-family of application

that is $XX.X believe $XX XXX after have requested also owner-occupied million commercial forbearance. shutdown their who real of in loaned at $XXX dentists, to estate, the million We soon of and lifted. conservative with amount customers will orders practices underwritten loans, payment restart this loan primarily we balances are of successfully values Included relatively aggregate million have

million. we million real of restaurant and $XX brewpub one another are $X.X balance of XX% and of is for this estate the recently represents arranged total operator real aligned in Also, of $XX.X and secured collateral. which million by this them, liquidity secured $XX.X million bars, regional restaurants estate

Additionally, we for $XX Paycheck them. Program just Protection loan maximum funded million

an from future. of to in which extremely a base, customer their operations loyal benefited confidence time historically us the have appropriate at in level resume We gives ability higher an

pool In borrower our $XXX.X a occur. of liquidity granted. To-date, We and need some requests, experience, borrowers all risk XXX XXX operated million need, forbearance well never remainder company, request the advance with been request balances regional experience. forbearance. The cash who flow and a in have church, very well borrowers totaling it, of actual companies. this granting may other loans which in actual forbearance before our includes quality of forbearance evaluate Not transportation

that Mae, stay our Fannie allow under We yet only requests have estate current million April. In current make But these their loans have one underwriting, none the been only payment. granted. current estate performance The loans, conservative portfolio forbearance. had that those April to we April, commercial loan, real loans were that strong in XX reflects $XX.X conditions. requested one didn't commercial real service of have U.S. which All we generally

deck We a Page investor underwriting have yesterday. characteristics published of provided on XX our on detailed portfolio

million, To-date, XX been with residential requested totaling borrower request loans, has one construction this Additionally, not has forbearance. $XX.X granted.

that loans more Great than conservative construction before Recession. residential of underwriting Our use substantially the common in is

have XX portfolio of detailed these Page of underwriting deck. loans characteristics We on provided investor and our loan

numbers the These or and impact duration cannot certainty and we businesses. predict our these represent on the of everyone state orders shutdown with to-date, only like shelter-in-place experience

concentrations at the to we out well navigate came invaluable today manageable to the capability and believe remain HomeStreet Great the are the our be the of to initially as in will experience fact us current Adding earnings. today of clear confidence the including risk company level defined, me, This that the key crisis. is of positions. and our with current Recession, we guide and reserves, bank team to that current credit that capital much It is challenges

our and Program. significant processing while also communities We under protecting the time are resources Business employees. customers and our working the hard peers, Small our like by Protection backed Paycheck devoted our have to support We, Administration to loans

We taking total all and these approved $XXX.X on Treasury XXX April of X, and as funds allocated, for a loans April for applications that XX, been available registered have advised loans when Department we began million. the of

opened of X,XXX $XXX additional loans begin of appropriation. funds Production SBA loans the to registrations before the customers not were current the accepting these register registered was We program first to hope for the get approximately allocation Paycheck for their fund Yesterday, under million to that portal under we able Program exhausted. and

all be portal, able And are hours a it to literally experienced at unclear uptime and our throughput XX to challenges since Unfortunately, we'll But successfully time opening. E-Tran, this is the customer day applications. so. input do we working has whether of SBA

steps taking also to COVID-XX-related layoffs. no We're and employees, committed We've customers, vendors. protect our to

doing our critical certain operationally so are employees on-site. employees of remotely branch with who working employees, to are able All work including only

social frontline provided our limited off costs Additionally, paid sick our workers, eliminated COVID-XX paid-time we time access equipment, with to have and distancing provided out-of-pocket and appointment-only personal protective for branch employee additional lobbies COVID-XX procedures, care. medical for

closely the the ahead with has our While our and we ultimate by to as is execute adjustment, business and an Board of the There is the is Management of advisors and work the it largely caused plan our impact much unknown. has continued interruption. of Bank been working significant crisis. pandemic disruption response us still without significant

X. impact Directors Board crisis, of common be a as Reflecting stock our paid our strong well the of share dividend of the pandemic, first record as confidence to navigate even quarter to May with ability the $X.XX declared shareholders the successfully per to in on results,

risks courage behalf goals Directors, want On and Board dedication I the personal in of the of uncertainty. during communities this pursuing and of and commend our entire our of customers employees serving and time our to

important an help we bank, positioned communities a to is pandemic. our in community this HomeStreet HomeStreet and plays this customers As through and regional role crisis, supporting move Bank past well our communities believe

some revisions we guidance. forward, have our Looking made to

prior called Our guidance held investment. average loans flat-to-slightly for increasing for

quarters a expected of the activities a originations ongoing year, For temporary This the loans growth lending flat will SBA run investment. third and certain somewhat held balance the continued our as now this in be expect portfolio average in of and of we off second Program. and related result multifamily suspension to by loan of our Protection offset for Paycheck portfolio,

prior guidance decrease called for in Our we which continuing. deposits, a average are

mitigated continued of the deposits. business the core expect in growth We meaningful and by continued broker deposits reduction consumer

continuing. net which we prior increasing margin, Our guidance are called interest for

costs. now year, this deposit more we the rate our the curve, of meaningful we expected. is Assuming margin current to previously The level shape of we meaningfully of than low now likely yield our expect interest interest lower net increase rates expect increase to reflecting and market be

we resulting reflecting these salaries expense. related lower recurring expense base expected These expected. same headcount quarter, occupancy still and lower Last decrease to non-interest reductions in are periods,

However, originate is levels higher closed. they higher of expense refinance our current by commission be as continuing log as and continues single-family may the business pipeline mortgage to loans, offset

due pandemic, guidance. ratio the ongoing high to surrounding COVID-XX efficiency of level uncertainty profitability previous are our withdrawing Finally, the and we

stress like color it have the I we further the continue loss previous at some any to here. that previously However, our targets to provisioning, achieve important to timeframes excluding for offer that opportunity is would me stated. to believe we loan

on quarter common first of equity XX% applied that income to $XX.X completed tax a million, million. core an on our and imply assets of of it $XX.X pre-tax return rate just would XX.X%. average we return pre-provision If Consider annualized effective tangible after-tax X.XX%

forward. Our to core realize in was opportunities ratio and have we efficiency going efficiency QX improvement continue to XX%,

common by prior of third core which XX% return average these low Compare approximately average on was on now the basis withdrawn return a ratio our ratios guidance, efficiency XX tangible achieve all to core in of of to XX%, an and a year. quarter approximately assets this points, range, equity

measures two the acknowledge three consider. factors and many should one of to superior already quarters that meaningful There all Obviously, are, we to that guidance most course, are Maybe early. is that we are is business the case. long currently much expected. to benefiting anyone's guess from mortgage of of how we level profitability in we're our previously that a It than higher be going single-family had

origination economic both the forecast purchase and that recent robust the support mortgage continuation of note rates this a any and refinancing and extend margins do I remain But foreseeable market. in predict low volume period today weakness for future, which should

Additionally, substantial levels net an should going earning margin, and interest assets. forward, costs potential our improving reduction lower support deposit borrowing of mitigating in

least will this, this mark is industry big question for line bottom the credit So, things. entire at of among for remain year, undoubtedly banking the rest other hopefully, the the

we to investor as our our and we crisis of loan credit, enter this our quarterly call, approach characteristics reflect and disciplined deck in COVID-XX have discussed The environment. portfolio well are provided have on this we positioned that

have and our and in environment. team into will the preparation HomeStreet faster circumstances addressed crisis The for with the have background we credit going with optimism than the and you strongest in navigate these that operate markets to-date diligence the to a we which unique we expect experience be the management today a cautious our of the damage were this in successfully which we and nation clients' mitigate to markets. otherwise provides foundation less Hopefully, recovery this lenders The losses. at

questions Operator? this be today. Mark for you This have comments. time. I Thank answer concludes would happy to your and any our at you prepared attention

Operator

Our with D.A. come Rulis Instructions] Davidson. from Jeff question will first [Operator

Jeff Rulis

get progressed provision, the timing. as the that to behind and trying for there's a the Just macro on we of last a month, view the thought over volatile sense been Clearly, pretty economy. question a

for how as that's was quarter, of something just, economy or a read the the on late so you And that or and X/XX April adjust first in first for kind quarter? posted provision mid CECL more

Mark Mason

first upon Forecast. provision based the on is the - Well, quarter March Moody's March the Economic substantially

of you which the March, substantially pandemic end the on If provision, by XX, economic the Moody's, deck forecast as Page their of almost drivers look is our key of the describe we at exclusively forecast.

came numbers, using pandemic we substantially the we results than the severe same April's and we compare also Moderate the Recession our March's, is In after close books, more impact a then forecast. up later, forecast, as the have much and took model, what took And at right. which we March, that would with look of had

So, is not How driving our will ultimately pools loan real sensitive losses. probable and right? the loss, risk migrate much is what is reserving total expected to that know that driving It's the and answer, or migration to-date. about which important losses, it will imply to of ultimately what's

this loans. $X.X At balances. to this been regulatory loan we unclear. downgrade not it's not in provision, Absent upon and performance of reversing The would to virus, million all of point, guidance to really these been based have has migrate the

$XX.X So, frankly this where million delta from a million provision is read. $XX quarter, we

Jeff Rulis

fluid Appreciate a pretty the detail. It's environment.

go that. Is kind the is that think to of decrease you into down is to the you're sense, are Just - impact, provision from at dovetail where positioning or quarter Maybe guidance year-to-date understanding largely through any establish or expense there just that continue to an how if we full-time and much your right-sized? employees kind XX might could the trend I it's headcount how I expenses, kind to But then core more count. there, quarter. And on figure? of backdrop your on going to trying of separate on reductions gears - COVID-related it the trying switching the guess, that's get head to but you helpful get know a this forward.

Mark Mason

is course in right? having going because we're abates, wave little volatile number a I be because It's single-family the primarily a until below That mean, of a target. will fluid the So, the, have personnel, a little to refinancing area in next to of number couple the current the this current We increase FTE that. add some that over numbers because mortgage are of headcount last quarters of volume. see on you substantial

that, fluid give kind a but from of have standpoint. would I business a FTE we changes the basis, of: two, an the other end on up, the and one, efficiency stabilized we're will said of some reductions today, But nearing number changes. substantial this. little a occurred. below because Having you Yes, end it's single-family;

the love amount as of a and would changes We to over require lesser from, changes that's and target get into going to estate. just system the maybe greater a mid-XXXs, real dollar cost of say, clearly first, technology, a to next mortgage half, coming be extent change The let's business. someday, the sort downstream a some from in but will and year

the will frustrated technology suggests so to we're been we've discussion some service on able as provider prior that inability restructuring providers about There a our our by not to from because I'm We've and of to calls on agreement. these contracts relying renegotiate recent far get yet, perhaps restructure talked early. reality. XXXX, been we get primary be in being core that has a that

waiting count instead be to some as discussion that, to I XXXX, some the suggests perhaps and but of recent lesser that with we can't agreements in XXXX, agreement of get in able well. may help on meaningful most that

those hope into changes out that holding pull some 'XX. will I'm be to we of So, able

real estate unfortunately, worse, environment, has gotten the right. And

going greater get it's If that who bit, little probably There savings office is are and create me companies this that get those cost right. will an are pricing pushed vacancy a going environment, readjusted. to to space you think about in out will subleasing fail, to clear

may the it of timeframe. part not at least that our in happen, or savings delayed So, make

Operator

question Riley Our comes from next Moss B. FBR. with Steve

Steve Moss

side. Want banking to with just start on the mortgage

quarter Just the mortgage wondering, were and hedging this total any if was impact gain on there originations quarter sale on income for here? what

Mark Mason

There Steve. was. question, good very a That's

sure income mortgage banking I quarter, quarter. have hedging description. effectiveness pipeline rights The that's disrupted. this substantially markets been were I'm not and about people enough the hedging other monitoring even mortgage a results fixed servicing have you talked assume strong If during mortgage other

volatility volatility. instruments The greater the amount mortgage in in that markets, historically disconnect of March, of for between than fixed income experienced related seen, was hedging, yields. maybe very was the And the normal spreads largest widening to particularly particularly we've challenging we or the early anything ever

decline combination levels increased, to the of securities Mortgage in rated because increase which volume, investment mortgage that that for de-levering actually significantly. supply product, shocked widened spread rates all liquidation us. and accordingly, during lower significant A the much funds, to of led of in of significant mortgage-backed even rated period, demand refinancing a

they've back Now, then. come down since

sale actually Again, origination the XX All mortgage on ineffectiveness, impact on lost created for our basis of that, hedge. that our certain hedge. quarter amount of The a was. points. money significant how pipeline gain particularly We that's in that was impact about on

the basis was Our the approximately margin, XX have fourth margin in quarter, our would for quarter. profit been the about first quarter, as it points But higher. the same

would basis repeat rate of So, FHA/VA in what wide. basis are going XXX XX-year Mae rate at fixed margins conforming, in I are does XXX loans, loans, historically points. profit forward? wide today. Historically Example, of excess Fixed agency, priced Mortgage statement: excess points. that Ginnie Fannie/Freddie that profit margins loans imply

implies that reasonable approximations positive the so on effective profit income fixed of markets you're position thankfully, to is much hedging understand what more a prior in to Today, pipeline today. we're And margins settled So, hedge. today. into spreads, going have our

that's is today. everything hitting cylinders, of so, sort on all And

times even servicing better very in about the but was. March, asset how our $X it the see That's well, ended and don't in hedge volatile up, month for was of live We I want things the was results the management substantially more risk you our And April. change to down million. the up and for to it of volatile predict as for at million value much and volatile. quarter, times, $X outcome relative as our are wild the quarter, In

into all markets of steady substantially. fixed volatile the as Reserve is a consequence income And stepping to bid. believe, Federal this of and and be I'm the just and that providing Again, those may a worse. spreads still they have we would sufficient Otherwise, settled markets be happy report as

Steve Moss

Okay, look that's the to I at pipeline guess terms production here a about here; helpful. your of first in as quarter, that thinking similar is level then, just And today? you

Mark Mason

strange going now, given would across you million And environment in quarter? and it changing imagine, interest for $XXX $XXX consistent right? versus The million-ish fourth right? the or quarter. total looks few But $XXX right was a the the over alone, quarter, as is quarter's right? - go. - March we locks, so be, if but that, changing quite in locks? a like $XXX days April, we in were better rates, was right. less imply, last than But would quarter million But that got million production maybe it was something Was what our half $XXX So, to than to it little the million, produced it about that's $XXX million, - of

but And remember, expenses, locks for most that all closing. commission now we're going increase the expenses, our is to most be of to during And example, going quarter, right, this closing not quarter. upon significant first the

profitability good. may may mortgage banking as be So, or not quarter next

end up. we margins additional we profit be substantially where have better, That to just don't cost. see think discussed. We might will know. really offset as We'll I the

Steve Moss

for margin, $XX income that Okay, gain sale that's in - it, you're running just around, production on here $X the If on look a helpful. sale the million numbers month right? million and implied to gain from call about for take of is April; I your April

Mark Mason

me X Hold sec, some on high. - do math. one What did that's say? you let too

Steve Moss

$X million Okay. is too high?

Mark Mason

of right? a in estimate, given be I gave, could Yes, I numbers $X is high. too gross that's million, the $X but it excess very mean,

Steve Moss

And this portfolio impact there next you normal I'm - then of significant in are the of then, given paydown. in any build? on helpful. you what commitments had continuing your shut mix you pretty the that's that down terms the wondering to in construction But expectations in during time quarter. portfolio gears here just a here, probably is expect from for and wondering of decline the terms Okay, if couple quarters of shifting here, see what

Mark Mason

slowed most right? slowed an constructions progress restarted no and is projects made There they Which week, nearing been of until construction have But obviously And impact, construction. construction our has most of are nearing new multifamily means, on our completion down, it projects mean, of loans ago. We those months commercial no in in balances commercial most and draws construction this down I are either. completion. many-many Washington,

Customer kind business. that's just ongoing home construction, of an

many soon. considering reopening We last there customer be lending phases construction. we're it and construction did We have suspend houses in month, new low But sometime of will a there.

sale of we as these Homebuilding, obviously most lighter sales about week, have pro traffic, would was, a basis. part continued. point these out ground has and State our a have you pretty profit come this substantial that in pretty great any equation to expect, the on the at about of is, forma projects. projects, continue, build The homebuilding feel Washington halt until but The least is of and this at in builders good it margins than sales but

pricing decrease do to they these need to a they of lot so. have if room to houses, So, move

Operator

question Our Piper Clark with next comes from Sandler. Matthew

Matthew Clark

the ROE the I be on which incorporate guidance, efficiency first why - ROA can the you those wouldn't the ratio, just guess pulling understand Maybe guidance costs able It see But just margin on year? March. the this to mid still of substantial the like year, here, based I expansion hit provisioning. the costs, deposit credit is doesn't some those at and outsized seems end that on for more going to targets next mid

points. prior else achieve to are to witnessing basis here guess they I his down what allow were that ratio I you think XX goals? wouldn't efficiency

Mark Mason

can. we believe We

a Our by were specific We overarching comment, an comments should have margin - really believe believe can. guidance we and We on - been larger maybe I my efficiency. today. with more regarding

Matthew Clark

for yields, the just Okay. to just securities that where or AM just were Can purchases, they unusual was there, sense there I And get XX basis premium us down new points. on give want quarter-to-quarter think go? then a yield might you anything or sense repricing, X.XX% if a

Mark Mason

again, up. question. I mean, Well, excellent an

have is for Our accounting security the names securities date knowledge. the literally It had then official I for us forward but purchase and current standard as the it, if date retrospective method. re-calculate the through we from that's perfect to we mortgage-backed requires different one. the

when imply prepayment forward a in speeds, so, have balance. And spikes that you different

You security. for yield birth level ownership the that must to grave recalculate of a

life-to-date. And of so, our of yield And run you like interest write you a implies securities in net the recognized was to did, and they course when rates have a have $X $X income, million off, that million portfolio. fall down about faster that

course, expect Not income yield we But to net interest yield the recover. from quarter. a can in next meaningful to And was of the in securities down you the portfolio expect slightly. life yield came because before, it the recovery yield

Matthew Clark

Just And those just you and forth? granted, me, of on some what one the the getting from that's better Great. an but are, overall maybe last amount I increased how recover, bars, estate the so like quickly know for dentists, these - kind request, forbearance give portfolios to can Slide CRE on real us scrutiny asked of and investor XX, industries the those the - days. handle on and industry specific overall then a exposure are? can the some then dentists, transportation, entertainment, large the sense get for you've request, restaurant, the this within that's

Mark Mason

estate. can breaks million groups. C&I see owner-occupied $XXX frankly, by million portfolio our We real healthcare, dentists, that deck, includes the of dentists, Page you C&I it's XX% is which component the And down The owner-occupied excludes $XXX Sure. in right? estate, mostly which added includes real that these XX

correlation So, there. there's a of a little bit

real component, you not XXX% in order. million be the But dental the have to liquidity owner-occupied roughly estate. obviously May - through a high, I back of which that that of we shutdown of near or $XX is But that means to healthcare, $XXX I think on approximately that we including think to they XXX%, lot not have that. could have have get Gerhard total, practices sufficient get quite million

slide. give we some to proportionality. fair will add the portfolio you When probably again, here criticism of republish That's we this this a total

Matthew Clark

that is hotels - thinking breakdown. CRE - that's I don't on And Okay. about but example, recall just it, seeing another then portfolio as

Mark Mason

on in look a slide permanent you CRE the other, there's detailed footnote. If of

Bellevue, category loan loan, Of which other loan large that dollar believe is flag that a I It's well-known $XX $XX bullets million, million the in by property. $XX.X under and So, land largest secured million. the is XX% largest of the think in and $XX of million, yes, million. schools, $XX value other the I includes hotel $XX.X single - a That loan. hotels is million,

good about risk well are and in very-very that very-very they're secured. feel today, we're they right? operating But strong loss very So, Obviously, loan. owner we not

$XX the obviously have and hotel million, smaller And between of the total of we that couple difference exposure a exposures.

one have our relatively franchise ones. participation another banks, peer is smaller and which small, hotel with We of of another flag one then even

exposure. little relatively So,

Matthew Clark

you me. from last then of guess, them the third Okay. And by just come quarter end how loans? modeling go on I of the You expect them? one are PPP the and most just

Mark Mason

Yes, right. that. love mostly, hear view your I'd to on

somewhere between experience to think we're XX% going forgiveness. and say I XX%

there accomplish forgiveness. payroll be that will subject within think who or some companies the forgiveness requirement to XXX% XX% on period, that least at spend or can't I

will X%, and equity obviously you and I fees, months, much between X%, return seen XX%. months, months, various analyzed profitability on yet, between forgiveness XX% the we amounts period and quite of six accordingly, XX% runs X%, tell it - haven't right over but and three on nine assets those analysis forgiveness are on of return I XXX% And we high, that right. of levels assuming a have

that is is Aggravation and through. aggravation they're run. aggravating. we what certainly show our for even what my employees and for been can't they've maybe highly and true express should this I sadness It's program as going you be through, customers speak, our a [expletive] a profitable. miserably be program. to a of We'll So, highly real

Operator

[Operator with Jackie Bohlen Instructions] question from Our will next come KBW.

Jackie Bohlen

those the I sure with that numbers I PPP, want right. just make to Sticking have

$XXX So, million that loans working you're have then an through approved you I $XXX that And right? Do in had $XXX for additional two. applications million for million of X/XX. were round for X,XXX that as

Mark Mason

now loans that we've straight. to the to enter will just million XXX add what on only XX last correct. people hours XX we for with working XX been that That's script. $XX.X That's decided in I able hours,

Jackie Bohlen

frustrated. you why see can I are

Mark Mason

sorry - just, just Sorry, level of my for aggregation.

Jackie Bohlen

that's helpful very to information No, have.

lot loan loan was sounds part it million you have, a is you the - my that of to the like Because round with questioning and trying at numbers average that the - getting round, the between I'm and Where breakout is spoke size you. the just I seems thank round. the fee first just So, of first second it I'm of using think higher for know that. $XX that

loans, that some So, X,XXX the I'm they're loans assuming larger the And with XXX additional I'm then, assuming smaller application, much is with accurate? loans. other there's

Mark Mason

And have that could about maybe we or more the That's gotten people were of idea, applications. politically one, the borrowers think sophisticated wrong reasons; occurred. the I accurate. take ready minute A otherwise, couple why

have complete documented. sense, were that tied packages out, fully We made

responsibility provide They it And get get while seems provide it of back you the sizes, to minimal into tie any actually the just forget like have the representation less As smaller the we business of a or back reasonable often up, accept loan. loan just owners. do of much things. you and up, we're doesn't make borrower, delineated to SBA application they sense the to by to certain calculation sophisticated supposed

in is a many to last half a that with of get applications what week XXX left. that the these X,XXX spent do these did and doing force about And delay of And we reconciled. smaller

Jackie Bohlen

as fee about obviously assume perfect and somewhere how that I is the between for reasonable and maybe first probably the is maybe that, maybe X%. $XXX,XXX, be apply think it mean that of X% an it? the receiving round And about an makes think X%, And for with over then loan balance between to around a somewhere fees sense. is I X% I - you're X%, with around so X%, average between, when would that that the second And would to probably way of tranche that those all average

Mark Mason

think was group, cut-off first $XXX,XXX - the right. $XXX,XXX, in If the probably I X%, X% right. than to to from X% from mean, we're X% little I averaging better it's that, a $XXX,XXX, right, go to

there's a imply couple X% deals, a $X ones would that lot of we of a because lumpiness that or that. larger bucket, in of know $X to like processed million million loan, $XX million the X% some So I things the like

closer to be probably maybe even will little it X%, a better. expect We

Jackie Bohlen

I assume the that then the would some you're And higher second those? Okay. to round extent in fund able of to

Mark Mason

much difference between and Yes, the is second the group. the because closer the median in average

Jackie Bohlen

significant loan and segments Okay, of maps it heat and open-ended about speed doing how past, for kind economy to markets? that a very know no state terms are lastly, your you longer potential happen timing? as of factors about you what that's about happened. thinking you indicators into now, the I and but you reentering right those helpful. how obviously on it just one in the think how looking in of to portfolio, then overall relates able is of and get talked this the outside thinking and with And of a we've your question, lot no this the are relates amount are back control, When you're to just that and expected loan

Mark Mason

level businesses. marginal relative Two, who understand had loss, may hurdle, and who We this - their some level activity, their think there a may I to companies be of profitable of they have right. right. steps. obvious reopen need we have activity prior their the Well, to biggest reopen to One, reopening, are are

flow, lend not maybe certain look fully they can just cases. probably but that make ready it's flow, to in absorbed net circumstance you except into income, If at positive not cash cash right,

so, additional working capital, about payroll working to thing I for starting who in in a they for final the are reserves struggle those I for could. will some that these and going industries think suppliers of capital worry extent credit And while. one their paying paying that most But are to capital require exhausted

Well, yet this cash and that - have need the cash really in reserve that they've on, those flowing keep not that capital It's unaddressed. of think I restart. to I pipeline consumers, order There's that And hasn't area but to Congress to focused an working got this to refill restart restart you as of think enough right. market capital. is employed employees that's that

Jackie Bohlen

growth about fair? my think you that, you assumption that time, them that your for you re-entering timing of that segments that forecast have during XXXX, is that assumes of Okay. be exceeded, you And when when is period won't gave the that average the

Mark Mason

generally. is It

certain, be higher end accomplish probably surely will in than we can immune not experience at were expected. as may of We expecting I different of think XXXX than homebuilding. even about will right. of homebuilding I'm portfolio of levels to is our C&I decline lending we going the had for not end this, markets. up that levels I risk, will somewhat. velocity a consequence. credit Surely, lower from our We homebuilding worried the but say

quite with and feel It's we our up, something not operate are the area targets mortgage safely good currently that our over year. could the be but an we reviewing will actually obviously and just eye lending Mortgage we're an to increasing on lending successfully potentially in at. activity we remainder multifamily of lending

So, these going for earning our year. to the are the of what assets now rest things we're about thinking are about think be we as right

Operator

like to our remarks. concludes to Mark question-and-answer conference back turn any the over This session. for closing would I Mason

Mark Mason

We is to to Appreciate joining from you week standpoint. Thank everyone busy today. an view you market. to listening on appreciate you. for talking next you Good a I our our know forward earnings this luck. quarter. us Look

Operator

The has now presentation. concluded. today’s attending conference Thank for you

may You now disconnect.

HomeStreet (HMST) 28 Apr 202020 Q1 Earnings call transcript