HMST - Earnings call transcript Q4 2021

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Operator

Good day, and welcome to the HomeStreet Fourth Quarter Twenty Twenty One Earnings 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. I would now like to turn the conference over to Mark Mason, Chairman and Chief Executive Officer. ahead. go Please

Mark Mason

you quarter thank us our for Hello full for year fourth and earnings XXXX and joining call.

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

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

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

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

John Michel

as per and a XXXX. of to Thank our or fourth share the quarter joining net or net million million thank you, of in income $XX $X.XX income morning, compared Mark. us. third Good everyone, per $X.XX XXXX, for of you In the share was quarter $XX

income For company. a million, for or the $XXX $X.XX was share, net record our XXXX, per the full year

tangible of on quarter XXXX, return fourth average For equity was XX%. annualized the our

our average was on ratio assets Our XX.X%. efficiency annualized X.XX% was and return

XX.X%. equity our XXXX, assets on average on was was our and the full average our efficiency return ratio For XX.X%, year was X.XX%, return tangible

by substantially the PPP a be points derived due which caused hired by quarter. quarter net was the to loans in basis interest was loans. non-PPP third million net in levels income $X.X loans, income of three from higher than PPP lower to the offset the our Our slightly margin decrease fourth quarter in interest interest

our Excluding XXXX the the was XXXX. in PPP margin the margin impact net in quarter of third fourth net our quarter interest consistent loans, of interest with of

December loans million deferred fees PPP were XX, XXXX of $X As million. outstanding $XX with only of

a XXXX. the As of impact the of for XX the outlook our and recovery on our allowance improving result in our of million continued COVID portfolio we portfolio, performance of credit favorable loan a losses quarter of the $X of fourth recorded loan

of of and assets is to periods. recover our to continue have in loan loan credit of the clarity borrowing COVID affecting for changes expect the As loan losses developments in projected negative our portfolio, minimal our having with we we our impact more amounts credit our higher portfolio in to on and allowance composition additional portfolio economies, improvements quality future

to family loans a medical costs to in quarter. income, $X.X a lower of on activities and accrued the which costs general compensation costs our to income in the with in as due which quarter due compared by other ratio level the assets previously was in basis to to increased the to as permanent by were $X realized and due of higher an administrative the XXXX increase to third on third improved lower offset basis fourth ACL mortgage primarily total $X.X XX was net a of a assets fourth another of fourth benefit loan lower third million compared and to costs. and gain reversal partially non-performing and on locks to in $X.X cost The legal of million The costs, million benefits of other of was non-interest in $XXX included and points. reflect the the quarter sale positive $X.X incurred in medical benefit non-interest XX increase rate which in in primarily related Our of certain million million XXXX are $X.X due XXXX origination loans due total X.XX% experience million in compensation offset of quarter, expenses fourth quarter ratio multifamily program. gain our million Legal The to non-interest and primarily partially increase general the fourth volume higher sales REO gain of single the to quarter matters. of on administrator the a sale self-insured to quarter as compared points. was quarter the

XXXX, I repurchased and respectively. quarter have and XXXX we per the now we in a common beginning call of This $XX.XX price to X% to average Mark? declared the fourth and $X.XX our XX% an Mark. and X% stock paid XXXX, the repurchased of share and outstanding our common X% of addition of XXXX of During over the per outstanding is turn will repurchased Since dividend share. in of stock.

Mark Mason

XXX John. in love you, earnings symmetry. million. first year achieved $XXX Thank excess in HomeStreet, for the the time I which anniversary XXXX of celebrated its

of reflected efficiency. benefits record on model, our and business income our conservative success Our the operating culture of of the million XXXX $XXX our net focus credit continued in diversified

from Our in with $XXX portfolio fourth year. $X.X the originations remain for a levels full million loan strong quarter record origination billion the and

which third XX% returned single impact and of levels family the volume, closing quarter, seasonal as In prepayments, despite Historically quarter of decreased mortgage loans PPP our normal loan lower high income. lock than levels grew loan activity. reduces volume net is fourth levels our the banking mortgage single family total to of fourth loans during we XXXX. from Excluding quarter our volume

lock, is fourth of was loan As true the our particularly upon rate expenses majority closing. quarter. the majority at recognized in of origination interest revenue are recognized This the

its locks credit seasonal quality balanced volume allowed million lower COVID interest portfolio in us versus portfolio locks, mentioned, of Looking and the forward the the a our strong but normal $X of of ACL The in to our higher loan continued this the fourth our on impact anticipate John the on year, closings. cover volume clarity as of performance quarter first quarter rate greater we quarter. of or of

As the to HomeStreet has more the consistent New believe earnings. we we Year, and ability head into volatile provide less

volatility total Our past forward. were during share mortgage at revenues created banking are quarter normalize and expected to revenues, which revenue only in significant of smaller going the total of company a our the XX% fourth

growing sales. result interest Accordingly, loan our income lower consistent is of originations, component net are XX% portfolio and loan XX% years, in coming and and portfolio to reduced our growth a expected loan larger in focused We of a our on between as be our revenues. the more prepayments

units, our all primarily While we our in our loan multifamily growth to be expected of originations our coming estate real portfolio, driver commercial expect growth. the are from business primary

XX.X%. the quarter quarter the with at in fourth ratio consistent prior was efficiency Our

and half the interest access of to with and mid While program our we in continuing net in stock million mortgage to to below our of on forward. regulators, returning to during year common we approval efficiently sales will a ratio efficiency regard to a outlook, this and for going improve result to financial year, we offering and we of shares coming next to Board ability believe million And our through can growth. loan is the and continue increases repurchase as and decline repurchase the XX% share upward of XX believe while subject in that the of second positive we loans reduced outstanding our pressure continuing paid $XXX anticipate banking, and we and permanent Based of we our on we growth capital future our of multifamily income to Directors' capital $XX this month, inexpensive in XX% efficiency and and results trending notes leverage this our related profitability per in We non-objection likely the portfolio quarters. consistent million excess infrastructure, strong capital plan ratio anticipate our our the high to operating a last the subordinate support levels year. our ratio With of reduce our range two In to growth shareholders. retain years reposing upon existing $X.XX stock efficiency that our completion result our dividend. quarter review

and Additionally, given our an increase board first discussion our of discussing in consistently quarter dividend in the strong anticipate directors performance, the year. this

non-recurring well or any We adverse from on expenses. prior financial the opportunity our the Of operating PPP personnel reiterate for recoveries to quarters, course, revenue current profitability year-over-year to such items have allowance without you losses declarations our credit continue we the governance, requirements. outlook per earnings time, the other corporate and made believe unforeseen in additions commensurate to subject opportunity share. legal at that us the as or to are higher future and our told and loans to and have grow the levels excluding investments subject economy business, to we of comments and of as condition the we've or grow improvements my as efficiency of To dividends changes enabled and our regulatory previously

prospects we for as per share earnings our true hold consider XXXX. to this expect We

we increase expect to the the the We a multifamily our year, share of earnings year, per are year XXXX portfolio support on this should combined in lower to held guidance lower loan due and earnings reduced investment with permanent planning of to for Accordingly, position first last in which the sales be versus multifamily XXXX. of than growth a fourth permanent quarter loans, prepayments recurring for of our in sale. expected meaningful quarter absence this company

expenses due increases, the first the than each quarter match. to year of Additionally, XXXk in and higher employer compensation merit the taxes are quarter prior

earnings anticipate of quarter to Given in this expectations, the first lowest any year. these the quarter we be

mortgage year any, well while revenues, we multi-family we volatility of may permanent of foundation will year. the some believe for loans, meaningful retention upon into XXXX, the half of levels increase quarter-to-quarter the seasonality set year if this earnings strong earnings as sales that as So this a of move this loan part the banking growth of our depending our show decision early second to after as

a profitability, going of earnings our can favorably compare lower to As our to believe the expect to improve to regional we higher which initiative a of achieve where peers all and forward. have and we and banking brought growth our result place to will company continue volatility, restructuring, mortgage efficiency stronger and banking have earnings XXXX profitability, we operating

have and benefited. shareholders made have progress our We substantial

one was relation I level and which job XX%, and quality happy very year, to KRX, our XX% Despite Our well total the the remains and we've valuation XX% about recent shareholders. relative am our for a return and the years, five our I XX% for in three respectfully and versus doing current our was shareholder years XX%, been profitability below of our with believe price peers. stock bank performance, XXX% consistent

Before of concluding, bank ranked XX the top which Banking board recognize of banks one XXXX I Director as directors want Magazine the recent nationwide. boards to bank all of Ranking Report, our

of of I would the Chairman also that, Board, that our happy be the honor. to appreciate answer this Bank top the concludes And have any banks XX particularly recognized one today. As you questions your this nationally. time. attention, proud with Director as We prepared regional I'm and HomeStreet comments at of small John,

Operator

question from [Operator D.A. ahead. with comes first Please Jeff instructions] The Rulis go Davidson.

Jeff Rulis

Thanks.

stable mentioned into couple questions appreciate you rates that? Does on a expectations, on little the feds some two include and to within stability or commentary dig the just any a quarters I just guidance assumptions but bit assumption that Mark, or had to three margin out. slide, Just outlook, margin the

Mark Mason

it No, doesn't.

We movements. time are forecasters prognosticators fed -- or we're of inter-fed lousy

generally right? loans have rate adjustable could Given given historical an impact, that and and the obviously the we term, deposits. a impact lag positive, near So repricing have a

Jeff Rulis

pretty following Okay. lower And I mentioned origination. maybe just game volatility get and non-interest from the line, QX, in that income the decent up then decreasing, QX you on than

quarterly you how at could characterize QX, income, are that full of in to or 'XX? the magnitude as or it least range for So within stepped balance in about the have expectation any you in further relates non-interest the down year for

Mark Mason

-- see we'll We will a see decline.

expect decay We're some because little of or this will MSRs. expecting have of gain family volume. our servicing loan sale we our because on year mitigations single an We lower expected. to related be, lower part perform prepayments our lower of as example turn lower in But and offsetting better a income in

a still at both you quarter, quarter look If pretty was on quarter in first and over sale. first first gain XXXX in quarter strong of volume

or differences Additionally, anticipating say should first first loans make a real we are sale decline two quarter. sale multifamily gain commercial difference not first, quarter of estate meaningful for a in loans, of in Those loans -- quarter. the first over on portfolio

And our $XX no volume. gain I because levels in third down third The million, the of of higher low line but to there million sale was as over quarter loan came XXXX, quality quarter had as in of third right. quarter, on sale $XX multifamily quarter first believe was portfolio family still single it

if you that. 'XX 'XX, at $XX we So quarter a say to third level be quarter quarter over lower first million, of third of look the of than expect the little

John Michel

Yeah.

with revenue think I difference just fourth single family levels did sale the a going the is are perspective quarter the we consistent probably that the fourth to Jeff, be quarter. Otherwise biggest in and quarter. be in that going fourth quarter the the first the the per between somewhat from multifamily to and quarter first

Jeff Rulis

Okay. Very helpful

John Michel

of Because seasonality.

Jeff Rulis

Right.

I up. back. appreciate step frame that That Okay. I'll helps

Operator

with The go ahead. KBW. next from Lay Woody Please question comes

Woody Lay

$XX.X guys. at expenses, quarters, increasing off that you over looking to Hey, litigation your the just just some calls around but the guidance. I that, reported expenses. expenses be for taking you stripped that expensive, base I'm at them thanks my for Really number, ex guidance is had out that for on know off to looking number guidance outside Is question the million start of quarter's or out. the roughly looking trying so $XX the of some for of core One, slightly coming figure It's million.

John Michel

is expenses at some we fourth going do dollar we will costs the Mark million the that recurring. that be say and items are insurance that and are were first And biggest are think he's to two Yeah. fact One benefits. on the non-recurring to our going also recovery fourth two And quarter impact our had the quarter legal I the forward. for to being items always I perspective. or in was had the two, mentioned the compensation stated. expect that the we higher in that quarter compensation not from carried not perspective there's quarter looking that reasons compared the in Those fourth additional forward

$XX is provided basis think seasonality. Mark we of the quarterly I a provided So the and that on up in around million run obviously of rate down and has kind a and guidance little plus based past on fluctuates of a bit

Mark Mason

credit absence benefits. absence the things some like of both expenses in accrual on right? illegal go health So directions, you non-recurring The but have of a

to So if heart, just overall take you I over at quarter. would slightly the phrase quarter look that number

Woody Lay

Yeah.

that incurred Okay. That's helpful. current support And growth. then in the expense or guidance you higher to loan the talk about Is just to that for really on employees? be expenses expenses look is front retaining you'll signaling active portfolio hiring

Mark Mason

loan have additional think we're don't expenses generate to volume. higher going the materially We to

some have We number are open hiring, do we've significant a fair of not of anticipating positions, though level we that open had for a time.

we back lucky in in So, the FTE up, we'll we to of And, probably year; those us folks to kind where to get the year, FTE over that. last market. expect go but and XX really would earlier were which be not hire frankly, this range, XX our count to in

Woody Lay

you quarter Yes. another That me, And loan levels makes just prepayment to loan color seeing quarter run. you the in Are know couple then for sense. XXXX. some to of, drop is the sort on Could fourth any times last said that expect down in far? the you on I growth -- give great prepayment that to you levels so and a on

John Michel

quarter we're one the loan prepayment And, about better occurring. prepay And burn-out pretty with quarter, and we than a loan thing prepayment was speeds a second quarter. to factor third Boy, a starting we're prepayment is yet the is fourth begins there consistent in the to but rate -- And lot once, that that see types. you, only some starting right. can know

Mark Mason

Yeah.

that going portfolios be a I on significant a you're think a is we're in has, we of family a the our the more and when going single on to family experience. base multifamily that slightly expect prepayments. based multifamily, stable on definitely which wide not historically continue at down recognize with a next prepayment pretty level multifamily seeing trend, into year consistent decrease range looking what to It's and single

John Michel

Fannie the on the of quantitative both be with impact. so do Mae that, to easing, the obviously the Now, seen to total long-end short-end lot with kind have remains and a about

Operator

comes next from go Steve The Securities, question B. please Moss with Riley ahead.

Steve Moss

year guys not All -- just, estate it right; [indiscernible] that 'XX? time carry to just don't you XXXX or expect expect the be real a clear, million Good little the morning Maybe for relative throughout loan the, guys. guys loan you to think out quarter? for was do $XXX commercial sale Will sales do about, sales Is that full how in do it? first just a loan for we number the further. on what year to just

Mark Mason

concentrations decided in just to our the meet DUS our more say year, our not the that first multifamily those sales. are it one stronger In loans respect it's sales we're all, with to our not hoping I somewhat, today. in do sale that multifamily as and expecting --we Fannie quarter We quarter. Well, retain have always Mae a preference Remember have that something terms we second regard, to based would ability could watch retain to go portfolio. commercial loan growth is have loans. we, going upon success. real first up year estate of to we our We're to we're in in we targets, of this for our

though even the quarter, going amount we're seen If or haven't remains originating several we higher in target missed the less be this of we and successful to loan eliminated target or loan loans sale probably year. sale be to could hope may we're extent we really we years, if originations, could have up. the later So a it have for prepayments to that be second be our successful, keeps will deferred that

John Michel

Steve, is be important to providing XXXX. Mark's that's of higher of our mentioned going that's dependent and things that in closer XX% the last on is, quarter year, looking at remember We're that the goal to being of XX% the Yeah, range much kind answer think one especially we of of we're I why well, and we to kind and of conditions. end kind first

Steve Moss

loan know where, in you're to, as I Okay. then That's, for loan just days, but PPP pricing loan helpful. of here, what of just stuff, noise just forward. And kind curious going pricing these that's terms about maybe seeing thinking and and there's yields

John Michel

still a competitive it's Well, mark.

You three single today. about three, and be threes, mortgage family very continues range. say still in to and three, CNI five in have is the, the quarter. a is low Multifamily four to competitive

Steve Moss

Okay.

but That's, then just, in Fed as asset hikes hiker and sensitivity, Okay. that's just heard stuff, helpful. and Fed to about, of want thinking the a for thinking guess kind funding you're costs too. Fed a terms with of the, or on rates hike I deposit And don't to, what curious rate in

think If any see all? if at you you'll movement,

Mark Mason

And core rate, our And lower a deposit strategy try great us has our beta we market growth of, going stop CD re-orient like our to to sensitive where years hold growth to utilize and the deposits been XX% range, XX% we of relative peers. promotional decision growing deposit that fund but to in to most to in depositors toward forward. was the had XX%, by our couple That's question. interest also dominated a are years run-off mean, part. historically rates I of to history money going that many for depositors allowed that annual and

different. works as to lower. may to see, are be see it EBITDA you We going interested as our out. how hope So be We're to

John Michel

level is quicker reprice that, deposits is too in one than nominal of past, too. borrowing terms tends in Steve different think thing that and the I almost of wholesale our to than

still. rates So of we the that low coming lot lot looking of and pressure this see a market perspective because wholesale from level there's borrowing have, of when hell we're a the next on at don't liquidity in this, this, of we our then especially year,

raises don't a of rates we see couple if on lot rates, pressure Fed a times. So even

Steve Moss

maybe think little do you or, we terms investment your in Right. liquid would look of And sheet towards do the to remix balance just maybe less or then bit stable a as on about, here, loans of keeping more security a go here we forward? portfolio

Mark Mason

up. loaned try We to stay pretty

our recently, If peers in our fairly history, look XX% our XX% about loan remained XXX%. ratio consistent deposit at fairly assets. of particularly high and and keep at seek liquidity We to relation has you between our to

We to that have securities collateral. have or some do liquidity needs, with

a that fairly requires hedging program We collateral. large have

securities we intend but and of are, beyond portfolio our loaned its pledged portfolio intend part the liquidity as don't We stay up. is need. So to that to grow collateral, securities

Operator

from comes ahead. Piper question next Please The Matthew Sandler. with Clark go

Matthew Clark

in morning of loans million 'XX. wanted on about last? in good think commercial, year, levels of to CNI Hey, year did the to that of the guys. sold those terms last, $XXX relative and I hone CRE How that this you think relative in the to I level level we of sales a should

Mark Mason

really and questions and, and question great a probability. about sales and timing somewhat to That's prior

internally, we have if reducing considered that we loan meaningfully, think we sale. a number As have

year, loan so we've half numbers thinking of it's that And that have this that a sale. but will we number about assured not maybe been

going guidance, multi if outperform half the one-time we're loan opposed of quarter sale second but probably to know half. year, wanting if purposes, we're in see maybe and meaningfully your event, the have So be less a to that's being real to a sizing expecting the a for probably we clear event not I as to it again,

Matthew Clark

the coming thank reserve of I multifamily. on from Okay, is you. ratio, coverage growth And know your most then

provisioning that suggest that the to here. what's how for but looking your question, I -- guess XX How from the class, guess, down I it know you wouldn't negative reserve a it's, go point in question. like Simple it amount you, to lot where I that simplified near-term, would bottom? level guess. with a reserve You've quality but… comfort on what's got decent And that's should, I to it given would ratio multifamily asset persist that come a of ratio sounds where could expect your complex but below? the also basis the, and, assumptions, more a want you what's coverage you're would

John Michel

Yeah, can it the I we think perspective, provisioning. perspective more the from, probably think -- I, from our address of I

at of can rephrase year, have I'm to, are we mean with recoveries, I in I still else I I think the still tell still having mentioned, risk and you the it credit, the look process structure as have credit way. as that's portfolio anticipate of sure this freeing growth our portfolio as But up reserves learning and think It's the we're in is. everybody normal in we probably will from the the I the, shift set for still world don't stabilize. we first we're to that provisioning from near-term through portfolio kind excess and multifamily 'XX that but is half a And lower because this would, the COVID then probably then longer that. the We of going And also I our we into we looking the that in lower way 'XX, term. new diesel having can and analysis where the a the of would that number down our, we're going you provisioning. reserves tell we

Matthew Clark

much? the just to item, of loan at then And Okay. have do balance the the and you how PPP the happen housekeeping year end

John Michel

and my in, fees balances was million less have -- of the $XX of think only that in fees in, terms in than comments, we number a that the mention left about did million was left. it dollars I Yeah, I

in apologize, a dollars. million So, million $XX

that out six don't we amortization So loan any significant because nine impact think spread months. to be the expect over we from will PPP

Operator

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

Mark Mason

Thank with you to We again. us speaking all you for today. joining forward look

quarter. Next

Operator

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

disconnect. now may You

HomeStreet (HMST) 25 Jan 222021 Q4 Earnings call transcript