HMST - Earnings call transcript Q3 2021

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

Operator

00:03 Good day, and welcome to the HomeStreet Third Quarter Twenty Twenty One Earnings Call. All participants will be in a listen-only mode. [Operator Instructions]. On today’s presentation, there will be an opportunity to ask questions. Please note, that this event is being recorded. now turn would to call I Mr. Now like the to over XX:XX and Mason, CEO. Mark Chairman ahead. go Please

Mark Mason

XX:XX Hello, you twenty and thank twenty third for one quarter our earnings call. for joining us

that Events I'd website under to an begin, at investor filed X-K ir.homestreet.com on were Link. the the presentation earnings available yesterday we Before and accompanying remind you are release our like and SEC Form and with News detailed on our

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

operations Officer, our Joining I'd financial of will results, on outlook today like update John and going John? to our me and Chief briefly is results Financial our then John forward. Michel. discuss our give an

John Michel

quarter XX:XX three twenty fifteen million per one point percent. income thank twenty dollar dollars everyone, income thirty second compared in for twenty annualized the common morning, Thank us. the or and one, on dollars six net seven tangible quarter one. you twenty return as quarter third for dollars share share one seven you, was of equity Good Mark. to net XX:XX twenty of or one third per joining was the nine million point point our In twenty Our of

percent assets eight and four average sixty was our efficiency one on was eight two point point ratio percent. return annualized Our

than net of be PPP the basis point dollars PPP one twenty consistent PPP partially impact loans, margin loans, net the Our higher to our non-PPP from income of XX:XX due interest one loans in in decrease twenty levels interest our quarter excluding of twenty in with margin million income one. the eleven caused second net third was slightly points higher margin and twenty by second net our derived quarter loans. quarter of interest which the was interest to lower the interest was by offset a third quarter seven

one, outstanding As two of dollars. four deferred thirtieth September million of with million seven twenty seventy twenty point PPP were fees loans dollars

allowance for twenty economies, on a of the of As of our outlook of improvements allowance million in the amounts recorded of result to our a our of As loan impact have one. credit on five we more favor portfolio, loan having periods. improving portfolio projected twenty losses COVID-XX expect We recover our COVID-XX our impact clarity recovery in portfolio and of in with XX:XX we minimal to dollars and credit for the quarter losses our performance is additional continue third loan continued the future the of

points. Our six of to improved non-performing twenty assets assets ratio to total basis

in costs quarter nine quarter, the million family the primarily loans seasonality. costs one and dollars lower locks million to single zero levels mortgage point of mortgage second dollar volume costs, to due in increased reduced expense eight to The or lower twenty rate received as General administrative of reimbursement expenses. benefit million in loans The compared partially as our single of sales higher ACL administrative three was compensation due three of loan twenty to in marketing million XX:XX one activities second other origination lower offset zero third closed dollars ratio quarter. and lower in and six second the XX:XX of by costs higher a to costs. primarily quarter in levels non-interest of and in third the primarily due CRE The the legal gain carrier quarter point family insurance point decrease of operations nine lower one point resulting and quarter two Our twenty of other from third to was costs, percent. which total decrease to sold decrease our was due was loans compensation twenty from were dollar a third general twenty one to the compared in net commissions twenty-one and point

two is quarter third zero point average two percent seven This repurchased at will stock. addition and the repurchased paid point twenty outstanding our twenty percent twenty in of two an of twenty and I and nine dollars twenty have per repurchase of percent the respectively. income beginning twenty turn stock over the our a call twelve common of one, dollars twenty of share Mark. we of the price in six percent one, share. and dividend declared Since nineteen forty per now to we outstanding During in five to

Mark Mason

results for results quarter XX:XX year. third the you, the continued outstanding Thank for John. HomeStreet's our

of our operating our and continuing focused conservative reflect efficiency. model, on business benefits results credit diversified Our the culture

continuing four origination the levels of prepayments. loan dollars zero PPP despite strong and and of with impact remained eight originations high million of levels loans excluding Our

decreased and revenue during grew loans year-to-date. percent quarter its The family profit strong normal near of loan our now second declined Our has annualized As single the nineteen XX:XX and an rate to quarter, margins and loan levels. expected, performance. our quality continued percent portfolio nine our of from at total credit levels mortgage volume

than income. impact our eight less five And million our As our John banking seventeen ACL. on mortgage only of total revenue second of of The dollars percent allowed XX:XX net consecutive mentioned, greater the to clarity us recover of portfolio on percent comprised revenue. our COVID quarter,

smaller and We our to gain mortgage revenue business continue our Due the next banking to decrease sales over activities the quarters. family to XX:XX PPP forward. in in net we operations, share other from revenues few our of forgiveness single benefit interest from anticipate on fourth twenty to a of represent increasing even company margin the revenue overall contributions quarter origination total one going We the of to expect slight continue expect loans. an from twenty

I’ve margin that future, of continue for our commercial eight quarter These in portfolio. supported of our Looking to with levels two continuing with loans. has portfolio and high in downward, any expected efficiency as growth indicating increase the foreseeable at XX:XX platform and Federal both level year forward, real in PPP commensurate excluding this net loan offset net fundamentals is Reserve for originations, impact loans of the Our production in the the sale to fifteen to consistent strong third and increase income. loan The previously, point to demand for a our sixty primarily beyond in on XX:XX percent. ratio will with prior interest remain successful next expect to the mentioned result quarter ten initiative. our are the estate our in and reprice percent rates We loan our term low was As short markets in interest we continuing our decline remain yields expected benefit deposits the our to multifamily, portfolio interest percent

which quarter. our dollars likely as continuing opportunity profitability common on and Board related in shareholders. upward shares ratio net point in yield efficiency that in of the income our our our approximately million anticipate while consistently ratio fourth subject the of year. regulators, to continuing efficiency of Based we percent performance, that in in the interest strong dollars the Board portfolio stock. stock the outstanding outlook, We percent strong an fifteen leverage zero approval efficiently the anticipates equates quarter market positive existing next given second And to mortgage year. infrastructure, to the and repurchasing ultimately, we in we're While in year half percent on value banking fifty twenty our capital beyond through our that. range regard of per of two on and share directors for a our have dollars the the our to of and and decline non-objection result growth, financial results capital mid plan and result upon repurchased of excess common to dividend dividend, our of expected We our discussing Directors our million is quarter. on the our next increases ability improve operating approximately review returning to XX:XX Additionally, increase two-point today retain of three loan first to pay we In mid-next pressure of five sixty anticipate to a XX:XX to growth and high to the

subject dividends condition the Of declarations future course, are at outlook to of current our higher of financial and time. or that future levels

planned As to loans tool [Indiscernible] to our that well To XX:XX enable corporate multifamily us these governance, individual the and we the capital we year. to XX:XX servicing on that our completing evaluate first borrow use the as a we were and to lending potential. retain as on disclosed requirements. we securitizations. our While of limits and Last quarter, of this regulatory loans, continue use legal securitization securitizations originate efficiency improve permanent evaluating and full to

favorable loan sale available in execute fourth to the prices today. due secondary agreed instead extremely in have whole the We market to a quarter

XX:XX loan service Either executing through to Looking whole strategy threat levels twelve, interest retain from through loan twenty twenty Since forward full to sales our bank. planned recognized loans twenty and the as consumer two, classification as commercial to or going successful code the in of will expect lines focused convert S&P to this deposit investment XX:XX the from to year. the us changes that the lower This unforeseen but public changed conversion items, in show banking turn additions and been profitability, bank bank the single-family increasing of loans lending risks credit earnings and levels our the we size our a expenses. mortgage development may allowance subject on business. commercial any and losses portfolio provide sales. believe, for HomeStreet PPP November quarter, to in This to And improvements recently recoveries will XX:XX with net possible estimates income. of economy generate HomeStreet’s has HomeStreet with we revenue quarter standard while to we portfolio industry securitization may expense course, legacy has that certain have the To to indexes in in inclusion that the of per be global regional recently grow operating reducing and regional of from without opportunity a Specifically, degree efficiency of XX:XX effective continue excluding recoveries earnings some and of conversion. for that our institution operating finance we few understate to more we qualify the excluding mortgage enable change few We product exclude currently first a comments my and our the of of our and years. reiterate volatility, and non-recurring commensurate earnings personnel or share year-over-year in us earnings quarter to business. share made other our such have grow And and XX:XX over last leverage to opportunity next as next per over current the years. believe us. a

at significantly peers, peers our undervalued. book today, basis. is to price relation tangible earnings meaningful and comments discount a forward-looking Given my to trade our to and stock or value in believe I Today, we performance our

banking XX:XX fifty Specifically, earnings over our volatility. its mortgage was at levels largely trade to Historically, this percent revenues the high two Historically, of and of twenty attributed higher exceeding thirty associated twenty with revenues. was consensus percent accurate total mortgage discount median Today, estimates. based of multiples upon HomeStreet. and peers, this of than banking earnings revenues

revenue decade. the thirty a However, Mortgage two our last year's the And represent in mortgage of of revenues of Banking revenues. seventeen Today, place to current ten earnings And is even last I operational percent banking investors. line. same quarters we best pleased never state effective banking of at associated ago, earnings achieve accomplish volatility, operating and and growth. to bottom have volatility only same years revenues where represented total for and me HomeStreet able while the years believe achieve the meaningful the three at discount eight lower a are refinancing, way Nor The XX:XX is is prior opportunity the we company tremendous height even mortgage reorganization than strong returns what that unwarranted. we of with describe of and not to can ago. to affairs the the percent our HomeStreet percent less results have to two to for stronger shareholder mortgage exceeded of a total with shares profitability of higher is been brought have our expect is over This it HomeStreet

All favorably prepared banking John, very of comments that, time. attention your happy today. forward. any XX:XX be to compare would appreciate which we our believe peers and should and regional going this at concludes questions you have our this With to answer I We

Operator

XX:XX And Jeff [Operator Rulis Davidson. I'll go Instructions] D.A. begin session. from Please the comes First - question-and-answer ahead. question

Jeff Rulis

XX:XX morning. Good

Mark Mason

Jeff. Hey, XX:XX

John Michel

XX:XX Hey, Jeff.

Jeff Rulis

what just on trying of a got see see flattish gain sale twenty what item? two, Question on you to year-over-year, income you detail sort item could in XX:XX on you've sale the bit line the projections little expectations gain that more of just with fee maybe

Mark Mason

on decline year, more from loans year, I single-family XX:XX this we we much activity. expect Obviously, right? to refinancing of gain earlier still meaningful mortgage had levels sales this mean, of

of absent decline So rates. meaningful in mortgage

We half this of next are expecting year. the a in banking year area look to single-family the lot mortgage like more the second revenues

you decline a be can in revenues. So, those there would noticeable see

to XX:XX foresee say expecting revenues those somewhat, year earlier mix of year's to that DUS loan those to declining loan you revenues multifamily rise these all and decline we declines could grow comments, gain securitization, if either revenues next multifamily sales also. to up are planning continue or those Mae to my expected course, less five third We of securitizations, are given are of twenty all you Business statements percent mitigates by to but expecting sort sell are on that we're Additionally, sale. of those those by related this have Fannie our loans sale whole

Stephen Morana

and consistent just a substantially to go be up to numbers perspective year, or the single-family either different there. XX:XX from terms forward looking for to quarter so pretty of forward third going basis probably in revenue this add are and from down not

as said in some thing I as our revenue out is other loan this of we speed The go we single-family would yes. on want prepayment mortgage declined, a expect revenues, uptick the servicing point side, all to some mortgage in banking through that, but

Mark Mason

and since Right. XX:XX you've long I our that. know looked counter And a seen cyclical, Jeff, time at results for

speech, premiums a look really get run sale, poor rate we pretty levels amortization high servicing us have forward. falling loan realistic multifamily or always levels multifamily sufficient servicing results loans fourth Also to Our which the of need they to mentioned, quarter so to have as third Right a we've high both And of we at you XX:XX going in create are when been rights. didn't of third decay and during have and securitizations. loan whole rate. fourth these were agreed of right, sale at at that quarters from to repayment looking results, quarter a keep

to be strong that expecting a we're So loan sale.

Jeff Rulis

balances is item quarter what housekeeping maybe you. PPP end? And were XX:XX the at John, Got the

John Michel

at the fees million two point XX:XX about and deferred seven They seventy dollars were five. were

is and Our next expect through we quarter, we year's expectations that to results continued some then be on activity the side, the affecting don't fourth PPP anything be materially small benefit. are forgiveness

Mark Mason

you. Got XX:XX

John Michel

XX:XX Also…

Mark Mason

Go XX:XX ahead.

John Michel

that we not broad things hand. see increases. exist earnings revenue XX:XX [Indiscernible] believe be loss the We also be revenue to on next that up share interest income made the together, by we right these of going despite net repurchases believe per are Primarily just that kind all year, is other in in continuing to a and So going question. along revenue with I'll estimates greater

Jeff Rulis

Yeah. XX:XX

balances our year due expectations expect a loans, next to this percent PPP look year our at expect you we balance because balance to also? only do year our by of year but fifteen of increase percent by not our to over is the declining similar If to loans numbers, increase average ten we level

Mark Mason

held for percent fifteen the ten include And to percent that loans XX:XX sale.

Jeff Rulis

The consistent fluctuating not be it perspective held tend, necessarily future fluctuating kind basis. basis pretty be been loan from percent on that held would will will because The XX:XX the historically going to a include are fifteen quarterly going more and the that a forward. one on do more of percent we we've the forward. sale of for because quarterly sale going loans a to In have we for ten loans sale

John Michel

XX:XX percent loans So ten just held right the to percent fifteen for is investment.

Jeff Rulis

you sale? Okay. for it. annualized Please? quarter, include the percent the would Got in growth XX:XX And the held nineteen loan

Mark Mason

include did sale second jump for reclassification the also we was That's for, year, annualized want did that you was yes, have quarter why clarified because big there all quarter, we our number, because the growth But why get loans to pull rate overall we we you include loans. of so and loans the did XX:XX to at strong make Yeah, growth I for a run the we – that the PPP held portfolio. the if sure in between the percent held That's of third look included we're terms back nine whole and when what is. the everybody

Jeff Rulis

you. step Thanks clarifying. back. I'll for Thank Got XX:XX you.

Mark Mason

Jeff. Thanks, XX:XX

John Michel

XX:XX Thanks, Jeff.

Operator

XX:XX Securities. [Operator Stephen question Riley from Go Instructions] please. B. next Moss from ahead,

Stephen Moss

morning. good Hi XX:XX

Mark Mason

XX:XX Hey, good morning.

John Michel

morning, Good Steve. XX:XX

Stephen Moss

and being growth saw just forward? strong kind curious, following multifamily loan the on of guys other terms the how going hear in spots you in just originations, thinking XX:XX some mix the of here. you obviously, construction here you growth on kind and I the Maybe quarter about even up pipeline of

Mark Mason

period the in XX:XX into pipeline. and we're seasonally drawing where We the the in fourth seasonally volume area lower multifamily pipeline, commercial down single-family a area tends were the the period coming particularly to estate real mortgage strong the Obviously, very be quarter you're area.

smaller not That the be fourth exit commercial the single-family area quarter at area. than with true we will the least may pipeline in enter. a in we So,

with to to still rates attractive the caps seen. Mac it about remains one become loan So lending like great been agencies The in for since Mae continue area, multifamily area. caps in there. for competitive those to twenty changes have DUS agencies administration respect recent change percent and cap Have to some and more in the the be caps, spurred twenty areas in XX:XX be Obviously announcements. the increased Freddie has originations from Mae ten good much and be the Fannie lending multifamily those Fannie were

deal year. So we're led least through and end next the stronger at agency year expecting much of the

Stephen Moss

our loans this and for we been originated high a it. other and pace have And hard just thing is have as keep been two Has half. of too last to single-family XX:XX next strong level portfolio continue year, been one the so prepayments have strong year with results to pretty

expect year growing to that next to actually prepayments our continue portfolio to down year? single-family We next going with start expect we

Mark Mason

XX:XX downsize It's right the been off since business. we

Stephen Moss

XX:XX Right, right. Exactly.

kind helpful. rates curious That's then the versus And just of are is rolling terms books to pricing, Okay. of in what loan of off? coming on what's of what as terms in the days where rate these

John Michel

I a XX:XX in runoff the still, that's that third changed, condition right? reason, some right? are if see I quarter. note prepaid hasn't for I let rates or loans the could prepayment in aggregate give Well, think you mean me that And so

up… pick me Let

Stephen Moss

that. That's what XX:XX we originate

John Michel

for the XX:XX Right. looking I'm runoff.

Stephen Moss

The XX:XX this off run year?

Mark Mason

for category, off. thirty thirty at, replaced right? with nine, three perspective mean, appears that three the point happens eight loans percent single-family three balanced, percent loans you nine with a a over true point puts but Actually, at we right. ran that example, I the loans, what about prepaid them it six spread we off not were and but and that's had runoff. loans If by it's look really not loans in three three three We total, ran XX:XX

Stephen Moss

thing PPP runoff one or XX:XX this have. some too affecting that's is loans the we of the The

so at And low loan those one were right. rates

Mark Mason

But XX:XX percent the at three we at what Right. current two one ongoing we perm multifamily the That's off two and four CRE in makes ran non-residential portfolio added the portfolios, the two, right. aggregate. point plus portfolio,

all same These experience having. our are is the trends So, This continue. of peers

we're Fortunately, to in to aggregate maintain where our able net we costs, core believe continue interest our margin. funding and the fall

Stephen Moss

And then, the million helpful. terms buyback. here. Mark of talk capital you about That's twenty Okay. going in up XX:XX Likely on dollars deployment,

Just this be sustained signaling, kind of, level. closer to current I quarter's take profitability your that to

on it, twenty Just curious kind we are how of about thinking twenty especially as guys two? think about you

Mark Mason

XX:XX Well, question. that's a great

have in quarter buyback during so been been our aggressive the exceeded structure We with have we've quarter careful during conjunction fairly our pandemic dividends. program. have with the that buyback into to earned buybacks Though, what program generally we not the

capital you it So across going does a to activity were And target maybe in somewhat distributions may levels, – maintain that means normal if Not higher earnings we the you relative beyond return That beyond dividends. pandemic a forward, extend, to see – reducing little would significantly, the capital and fingers program to sensitive us somewhat. that one, to ends as slightly then level on buyback on would the course elevated. conjunction return with of extend relationship extended to of current buyback as current pandemic has ratios will. which and as we impact this the capital in pandemic the our earnings, our have but my

Stephen Moss

Thank Okay. That's Great. much. XX:XX you very helpful.

Mark Mason

Steve. Thank XX:XX you,

John Michel

Thanks Steve. XX:XX Great.

Operator

please Mark This go our XX:XX the to for And remarks, ahead, It's call the like over. I'd final sir. question-and-answer turn Mason back concludes session.

Mark Mason

leave, looking the are Jeff Queue. Operator, have Rulis Well, we can check? looking we we're before We queue. appreciate XX:XX another at Does you the at question,

Operator

Yes, be them follow-up from Please ahead. A. Give our Jeff XX:XX right, will All go D. get question me in. please. One I'll back from next moment? so moment, a Rulis Davidson.

Jeff Rulis

Not guys. a the quick on EPS understated. Sorry, XX:XX just being but the question [Indiscernible]

recapture relevant? dollars guess Are sense. including, you're expectations have expectations I And conversation? provision year-over-year the piece in be big that get one kind to excluding of of for you is added. least on at Just wanted twenty on are that twenty and nine line any versus two might provision a two I the year-to-date if twenty you think million your

Mark Mason

question. Great for and thanks XX:XX that asking

risk. COVID other credit We related are absent again in risk or our changes anticipating

which us year. consider portfolio further or whatever normal might we a credit anticipating would and ACL our normalization next normalize our XX:XX to of will, new investment to a But realize I ACL likely our adjustments loans we lower we've composition We remainder to portfolio are with were that held relatively of risk of comes what had composition not institution our in it. impact in full risk ACL consider – standards. lending to provisions the would other you up you levels credit if our And as a drawdowns relation had pandemic that loans next related simple multifamily ACL coverage related against COVID that obviously pre-pandemic. adequately growth We year, growing losses If related potential in consider slightly and risk our recovering for could collateral or if state would high real are our you multifamily by have needed the in we offset in the when anticipate feel hard we of underwritten as established where end to and on we an at conservatively relative estate the ACL, levels statement.

We have lot in coverage. ACL of our safety a

do the by from portfolio – that twenty recover the so, twenty pandemic all will our we year's comments assumption next related provisions growth. And all substantially of offset or contain

Jeff Rulis

Got it. XX:XX

twenty fifteen of two, your continued if see loans to we in in reserves growing percent percent So drawdown ten could two. twenty

So be extent. an net line in the is benefit that versus provision

John Michel

correct. XX:XX That's Yes.

Jeff Rulis

XX:XX Okay. Thank you, guys.

Mark Mason

XX:XX got You it.

Operator

this We'll go session. now Mark. Mark you. Thank Mason our for Thank question-and-answer XX:XX remarks. closing you, through will conclude That

Mark Mason

today operator. prepared your And to and in the who us to you quarter. comments to you, next joined We for attendance everyone and our you forward Q&A. talking great thank look Thank XX:XX patience

Operator

Conference attending XX:XX for is today's concluded. now Thank presentation. you

now may disconnect. You

HomeStreet (HMST) 26 Oct 212021 Q3 Earnings call transcript