Earnings call transcript Q1 2023

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Operator

Good afternoon and thank you for attending today’s First Quarter 2023 Earnings Release Call for HomeStreet Bank.

Joining us on this call is Mark Mason, CEO, President, and Chairman of the Board.

I would now like to pass the conference over to our host, Mark Mason. Please go ahead.

Mark Mason

Hello, and thank you for joining us for our first quarter 2023 earnings call.

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

predictive at that a following certain our address financial recording of that during In will same call statements a addition, we this call and results. current expectations Please note our the transcript and will our today, the the be views, available uncertainties and reflect call. company’s make the performance about

are in factors our other These to included Monday’s subject earnings made public filings. release, disclosed in deck, that forward-looking risk likely our are the statements the safe harbor investor statements and

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

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

John Michel

net return our in These has adverse efficiency XXXX, continuing of average compared our interest results Thank significant annualized In X.X%, was $X.XX $X.X you, to quarter our everyone, was our business. us. first on on In XXXX. the per fourth the our increase million the and $X.X morning million to was XX average annualized as share impact, the net first $X.XX reflect Mark. income on per of of XX.X%. had points, or rates XXXX, you share for equity or assets quarter the quarter thank return Good was ratio joining income of in and short-term basis tangible

decrease $X.X The X.XX% Our the lower basis interest our than XX a on quarter income the in Due bearing was the was XXXX bearing the net was million of due in interest decrease from to which our first fourth net basis increase X.XX%. to liabilities, of assets. cost to in XX of XXXX. net a in quarter yield interest point margin interest point by in increase offset interest margin partially

interest on interest increases improved costs. the investment which due the bearing loans, their indices was loan and due rate adjustable yields overall as increased and securities increased on yields borrowing liabilities earning the in The in based. deposit higher rates Yields of cost assets to to the in increase are

during quarter, Our the cost points. of points borrowings XX cost basis basis XX while the first deposits increased increased of

tax the of is primarily The rate was quarter as portfolio tax for quarter the for was X.X [ph] rest provision losses million. compared a $XX of in million] which the first only effective for the to XX%, credit for the related XXXX, XXXX increased provision of first billion XXXX. net first the fourth overall A the quarter realized loan quarter credit charge-offs of during Our expected provision rate of XXXX. to recorded XXXX, quarter for losses [X.X in the balances

to our of loans our losses held to provisioning held expect and relatively the of loans remain changes assuming credit to reflect periods stable our our balance for we charge-offs future allowance investment forward, Going for investments, ratio of generally for continues. history in the portfolio in minimal

compensation in primarily quarter of services lower the costs, to to non-interest information at of of activities. assets XXXX due The increase single by in the higher million quarter The XX XXXX lending non-performing compared as due increase and primarily first the fourth basis in was non-interest gain-on-sale as $X.X compared to million expenses quarter partially XXXX low costs. was remained $X.X benefit in to family of offset first fourth income in to total a of XXXX quarter the ratio Our points. assets increase

costs The of and a and lower of taxes employer in was seasonally benefit and deferred primarily due to to higher reduction XXX(k) production. costs matches, benefit level due compensation cost higher levels loan

Additionally, layoffs impact loan our the first operations offset of levels the were from employees Southern by in added branches during acquisition the of staffing first benefits the in and quarter of origination resulting raises lower the from in of given the three quarter California.

turn Mark. over I to now will call the

Mark Mason

in industry velocity quarter, first during Thank now and you, Federal record magnitude Reserve's experienced the during John. The cycle. of this historically by the increases banking turmoil short-term driven rates the significant

banks, As March depositors to very deposit in community as beyond few with from experienced move banks that, date, we a funds some from banks, outflow we actually. deposit other competition regional to few marginal which experienced have national

peers with substantially among flares] deposits abated these in in of environment to [ph] the [deposit in uninsured our is be anxiety at that the fortunate We're out our appear Consistent banking deposits April. level however, at of this of or March. XX% lowest end

Reserve Federal ultimately However, rates rate continue and to competition deposits rates. stops we expect based reduces till raising the for

not took appropriate material on-balance have or we anxiety, And steps any While a in that more sheet while are this we than $XXX we time. At at we to cash would liquidity we normal more. felt liquidity held million the continue we our unlikely improve to temporary increase over substantially seen practice, in at was quarter-end quarter-end, deposit position. course

account ICS FDIC with secure insurance additional where customers changes either a through appropriate, CDARS’ or are and few in working through of programs. the to vesting Also we coverage our IntraFi

the rates Fed us in which funding wholesale funding penalty, refinanced the term that for cost is for could without which provides a utilized the bank fixed decrease. rate funding program, option, we quarter, lower be a Additionally

the program At given of was Xx level utilization. contingent our this $X billion, representing rates, and collateral deposits deposits. of replace the quarter-end, greater in XX% and funding part term borrowings structure, availability We’ve uninsured total lower used to FHLB

level are price and offer first to us promotional which immediately loan the competitive better products, reduced promotional without migration and repricing we our During though to of time Over retain of products deposit bearing allowed and customers to originations expected migrate deposit quarter, non-promotional course, this slow. our base. very significantly in deposits, has continue attract yielding the deposits our interest to been existing

deposit continuing upon environment has the to this in in run through of costs. reductions part our a rates rate overall is migration commentary time on net later continue increase expected Today, fall. are from the competitive ongoing of based until this to which appears resulted in Reserve, stabilize The year. margin, interest However, end the Federal that

tax loss, in We concerns material in seen have and deposit deposit about stability to not identifiable seasonal our we've than deposit other April. experienced balances security payments, related

to at will have borrowing a treasuries, fortunate and below certificates money who of franchise customers in with market funds, well wholesale are invest We brokerage money deposit retail valuable rates. and deposit accounts rates deposit market

customers Additionally, time. these we full deposit customers new on will expect experience, based our to core many deposit convert relationship of over promotional

to addition retail gathering, deposit acquired California. our Union Bank, In Southern three branches deposit organic in we U.S. ongoing from Bank

and levels branches closed February. both During higher our before after than anticipated the experienced of on XXth of run-off these the quarter, transaction

million driven anxiety customers. in XX number to outflows and the the U.S. The factors, environment, banking and conversion balance to in cause deposits customer of of deposit including data the acquired footprint than challenges a to concerns we greater was at security by depositor $XXX size Deposit relative sensitive Bank. experienced in-part turmoil that declined frustrations caused rate March due about by HomeStreet industry, million, versus branch due $XXX which expected

Bank, we the conversion We which resulted these constructively issues premium deposit reduction U.S. in with work a to paid. through

originally As was the reducing result, runoff majority book did the premium anticipated, substantially this we in goodwill a than a not post-closing a of And the lower we for acquisition additional pay the on experienced tangible from impact our quarter. recorded value.

communities only the transaction, large about the branches these banks joined of These national served bank by to we're did our now and communities. Despite and base challenges, in grow teams until our excited been choice. bank this opportunity a not community and these have that they customer new have

addition at a to portfolio remained primarily first This increased total the the in credit the allowance loan minimal the net of to our the of losses. the $X.X quarter, and relates low charge-offs during we quarter. addition were as million In for assets X.XX% barely non-performing for Charge-offs recorded ACL assets. million quarter replenishing level $X.X

basis delinquencies higher the slightly XX versus quarter. quarter Total in were XX points points basis prior in at the

in was loan collateralization over that remain due has at one now construction the This project, low, and of the increase category substantial due of residential XX-day been matured are past While to still sales and XXXX. end which level over a accruing an completed delinquencies has occurring.

we So, no concerns it. have about

book. of project low for happy are today we payoffs this with are available. the than and a conservatism This residential despite cycle, new completions Overall, point appropriate developer velocity level the level projects. in we homes higher sales the ongoing in our of is getting of construction Generally,

again growing mortgage loan normal We and once spreads. to rates expect begin rates stabilize homebuilding return volume to

historically. Western in concentration risk highest our one with diversified, the types, multifamily well remains of loan lowest portfolio loan Our State's loans,

remain Our at historically delinquencies, levels. assets non-performing assets, low and classified

remains conservatively currently Our very quality portfolio underwritten a see horizon. on any solid, is Credit with credit the and potential. meaningful expected we do challenges low not loss

of the improved historically quarter. to in are to low family fourth levels We commercial which fell but estate in real year, loan marginally downturn in first mortgage continuing only last cyclical single volume, the in experience quarter the

continue the of prepayment One speeds, loans. multifamily us low impact levels, has challenges on at been for for which particularly largest the historically

loans create working to We DUS borrowers today of today with the the these prepayments We're loans, periods rate or making increasing on interest Mae multifamily loans. extend loans exception not we advance more are to existing sell. proceeds modify appropriate generally for fixed Fannie or exchange which in any to rate existing new with focused on where our

expect our in portfolio. a on we these and time, multifamily the efforts improvement meaningful make size Over yield to both

only X%. only noted, we – quarter, or $XX previously our during portfolio As million loan first the by grew

as We equity primarily loan and rate on our activity, are growth commercial loans. portfolio loans, floating origination continuing loans, our home loan residential products limit focusing such to construction

to is a balance, million. value not comprehensive our but overall equity capital of of it $X.XX per rates. also increase a our negative due our was XXXX. loan loans in has is component are levels. demand generally, represents anticipating level portfolio share, At experiencing regarding shareholders' for tangible mostly and equity which the permanent our XXXX, we are book the regulatory other to of value in This sizable impairment a higher Accordingly, a We impact $XX a the in on reduction no our and diminished March our XX, modest income only economy, accumulated uncertainty interest

we needs, liquidity, sell realizing available earnings, anticipate flow write-downs. so cash securities to to a meet of our and we any of bank, our these anticipate these the temporary don't Given need don't cash

the our is While rate lower by current has it than environment. less of materially interest driven exogenous us, been level profitability adequate to

reduce provide expenses, financial are required we time, or sheet performance our limit doing We environment all rates can damaging an for look can forward whenever Until balance business. reduce for of stable that maintain that we bank. [indiscernible] to to to improved without staffing liquidity, comes growth, levels our defer

As on last make the timing we other difficult future flows, this significant of financial environment providing and at too of shared quarter, the deposit and time. guidance targets levels things the uncertainty economic among rates, interest

such We expect to these to substantially guidance uncertainties return have subsided. after

respect to with performance Our peers or long-term to our goal our meet financial is exceed remain.

last rate experiencing while today. unexpected. We disadvantages than repeat my our I'll the such And higher allows lower in and environments. painful an earnings over in changes more our one us of model The bank environment XXXX to and from note quarter. [earn of and that cyclical was great relative period [ph] rates our expected We makes are to as current that both existing this the earnings acknowledge is structure somewhat comments we sensitive interest in similarly unexpected, declining] XXXX

our we these reduce level repeat I it's low perspective. of cyclicality, this to them earnings, current comments to the again acknowledge important While of earnings cycle worked put not impact through excuse the to performance. in have but to

at We attendance questions With would that, prepared any today. John time. comments our and appreciate have be happy this this and attention. to continues answer I your you

Operator

[Operator Instructions] on first of the Piper lines Clark have Matthew Sandler. We phone you. Thank the question from

your You question may proceed Matthew. with

Matthew Clark

good Hey, morning.

Mark Mason

morning. Good

Matthew Clark

in the First one you for the a average for give me, the could the on sense just on deck month in us margin of deposits, saw March? but spot what rate the margin, was I

Mark Mason

to, love margins, we I disclose Matt. but don't monthly

Sorry.

Matthew Clark

And the acquired, million at us the replace the you I then that day, those of what stand the you And deposits CD quarter? use XXX branch remind where the or the us just you those? CDs, was weighted assume could end brokered to end Okay. brokered give first at of average of the cost

Mark Mason

either today. respect above they With year, brokered CDs, funds Fed to generally brokered were Fed Last below track generally funds. a They're below. lot or CDs closer

John Michel

deposits, we XX earnings May the out, have brokered included release, of see to quarter I. what balances your for our the Actually balance in are. question broker last on can so response Page of you

Mark Mason

cost so And funds… of

John Michel

I funds them our should were acquired system little points. higher not on but substantially. they because when we branches right increased are have be put bit But a and The but the our them the new Obviously, than less it we what basis of number higher, now, cost don't of XX rates cost in slightly. a were exact they little

Matthew Clark

Do just Okay, to hold And for liquidity trying on plan pay the while going then kind for you're a borrowings? billion like them got you sense of it. to get with a what's off the the to those and of settle situation? down $X cash or then feel until things, for excess

Mark Mason

a of next important that think we at the to We high going of did necessary anxiety because to not from largely quarter. has more of we're that's tell could carry quarter demonstrating Well, people would think at the today, the on end certain I out level or balance be March we time. that view through liquidity abated. what don't this market sheet cash

of million to borrowings billion forward $XXX already over right. down. gone our about So, our those plan reduce to It the to is down $X – borrowings is has look, going

new primarily doing plan that continue we through balances. raise deposit continuing certificates we to And of there. raise So, to on money

done into So, point. this is that next to not. will We'd at We little continue year. have a by love how it to long uncertain year-end. It's may take likely

Matthew Clark

had Okay. reserve terms then change it, criticized trends, and And classified on you any quarter? then in the year-end the update office And rate on of there if CRE? this of between your

Mark Mason

we the office office office. have now. several And on an those made could in that you years First CRE, loan characterize as haven't are, we office, CRE books small suburban

think. average the you in deck, I single-digit at might look it's the detail investor its but granular up. millions don't loan pull amount see of dollar you size, you and can John, that I our have as pretty that If well,

John Michel

Yes.

Mark Mason

Sorry, question. that Matt. I part of forgot the second

John Michel

[indiscernible]. cross and [Multiple Criticize Speakers]

Mark Mason

disclose Can't don't them the stable. we Relatively if quarter in do We remember not. release. in XX-Q or the

John Michel

it’s call report the In disclosed.

Mark Mason

It's in the call right. report,

the check report levels, can call relatively the you stable. So, for but they're

John Michel

average and million Office, in the total of is office, $X.X XXX. our portfolio balance

much pretty So, down. broken

Matthew Clark

Yes.

okay. – that's So

– Okay. thought right more just kind operating flat I one last are size me. there for expenses, your but you And Is expenses then from anything there know anything of can is is even persist for side? here, to to, NIM are outlook maybe sheet some pressures shrinking the pressure there going the given kind the, the expenses of alleviate that the balance to here? on And or consideration about funding do

Mark Mason

Matt, quarter. pretty obvious continue of continue We additional much things, Those And we're baseline the on are we right. first all at think to work work as We've had, today. We the noted, levers, that layoffs those expenses. some on staffing we in right right. to

those not today can in when that lines. to business are lines careful very trying we about lean though we our changes, of so thoughtful are We that of businesses be and that rate take getting environment lending advantage the

of shrink Balance shrink multifamily We'd rate the it, is, low And little things as The historically, sort of course, our runoff sheet will of There right. shrinkage, quite historical at, more that a love parts but we the to not of running bad. single-family change prepayment certain quickly. portfolio would more quickly, those rest portfolio speeds. love is speeds. prepayment of are to sort

rates lower going significant one, prospect of forward. most course, the of the is So,

them, for rates quarter. typical of The from this value as with The rates they some the borrowers particularly That's additional with of LTV raised those focused originated. increasing on multifamily some why that expect, meaningful either loans in when those we in were X% to extension working quarter to this given sticky, we're on exchange portfolio And on advances to those has on rates. deal you the X% the change been might provide very or That's low done to got periods range low-to-mid rate fixed a X.XX%. loans loans.

loans. those for we a rate fixed lot of rebalanced extended that. those have loans, we period simply pooled And a In some. the in cases, for we opportunity And

to that be on unlikely more for but to see as trying are some significant I going easier we fall get hope as rates, going to than think prepayments we're that's occur, to relief rates until pre-payments. soon

right. levels we're certain of revolving, of all commitment those is The given to balance X% while primarily you doing loan, that new But we're other has levels a that X% amount, and rate And interest of variable our the is X% marginal new X% may looking origination and reduce between And Rates balances. need margin new to lending lending revenue, ways generally. current And are right. see our very not rates, right. at Because sheet. spread lot a more for still today. other we than substantial net of funding

know to magnitude and be are prepayment that raise more given on, the ways new I the on new market. a we things attractive think continue as just if Obviously, great to very will Those relief don't work competitive deposits. speeds. some as to continuing of while

Matthew Clark

you. Thank Great.

Operator

of you. Investment. We [indiscernible] now Thank have Clutch

You may proceed.

Unidentified Analyst

one question, questions, color strategic give several And got strategic some is, then puzzled. I've this. me tactical. on ask a and that I'm just please three the Hi. little I'll very just and

You're the crime, world and And governance? one a to the states in in in patch] put the nation one in [ph] extremely institution the foot of [manure into would with your nation. you worst high financial a premier the why very poor states want in taxes, best of outstanding high

the banking you're overview? Now, the has do review. away the have mean all and of accounts. increased want mean read plane. economic the have read have that in last my state you the And no hours in I I presence, close places to do I your people only XX,XXX four California the discount with I I mean, all state people to I've anything But by set at skill there's to I nation to of year. mean, comes anywhere U-Haul, the huge you left is their a and look because feet. voting XXX,XXX out-migration value, XXX,XXX sort of

I'll go strategic through the strategic. the question. Those are

the some plant me – of where as franchises, but why was you sense and your and give you're idea away be [gee] sort someone we you want manager." Southern Southern go? playing do I do strategically, where going you take I moving banking that and say, where North you in is community think of can the four-hour be California does that mean a then you right see "Gee, Carolina put yourself Just How and – to that that to and understand work? say, [ph] to plane want to thought to How California? from you flag with in

Mark Mason

I don't know members other Well, or background I my came of appreciate question. all Southern you management, we from if the know California.

And so...

Unidentified Analyst

though, there ahead. But go you're out now but

Mark Mason

– not we're But I'm headquartered there.

If me to allow finish. you'd

Northwest to look, are attractive incredibly The reasonably in the you have have market, and relative California. Southern So, to you grow, an have have small product, Pacific to to right? a sized markets

with market California the the is individual largest California. Southern We're States. in United arguably Southern very familiar

Southern entered Today, branches. acquired number point. We've California. banks. of acquired a ago two We've a novo California of We of a about this de We've opened Southern branches. are our branches number many at in years third

new with to that communities a community to in smaller fairly in So, these because three up easy one, decision match network branches well that add particular, banking. our was are branch

rate-insensitive, in we valuable. very They well branches match which small sticky. with highly very deposits are balances, are The up and those They're those markets. consumer are today super primarily

They on negative your comments so, I are completely spot look, And on. California. understand

easy this a and However, not there, one, to market and and going we're timely. was already large going very be California anywhere. fairly forever, It's a is decision still

Unidentified Analyst

employees buy what other immediate members in my Board the some, at all encourage absurd. tactical Board acquires kind if and looking that buyback all I'd the my stock management each mean – I I signaling have in member shares and you to this of you questions. I'd of be some just aggressive stock kind of XX, were is very Do have Three the from XX,XXX and now, simple have the at Okay. future,

and just value money thousand real tremendous a real signaling a of your putting the to And market are where is. book I shares, a there's If your it close and phenomenal XX, mouth a gives that guys you type by lifetime disconnect comfort signaling, mean, the opportunity. buying of stock's to XX that have you

Mark Mason

Understood.

time, As a right. to not a position at company, buy stock this back we're in

Unidentified Analyst

that. saw I

Mark Mason

Right.

much but So, love over we've that to, our discuss on and with today, been opportunity. of Board lot the the obviously, have purchasing rather the cards. a several done last stock that's We'd We years.

amount kind We that, end do their of not not have but we most, members it's all for the do it. we with never Board discuss if to stock but price. requirements of think We've of annual the them, are is individual our insignificant. to believe I close it's faced this, a And been certain an own stock. I At which discuss retainer, day, low that. decision, of Xx

what see which take. we'll so, points we'll And happens

Unidentified Analyst

if Two impairment. years. between this other went or into after There's tactical I correctly, there's understand questions. roll X difference goodwill But kind book X those and quick some, basically a And that assets value. of the off

that were that into So you purchased, the you're those Is now that year. about what have come assets about X maturity, is, at mean, of a for value part, the most X book I market to bucket right? about years? or every years going is rate XX% less back the than question

John Michel

intangible, the deposit is It that core for would be correct.

You'll X] amortized. is It's based the be years. on to [X [ph] of a amortizing that books. goodwill But over not the period

Mark Mason

securities are about talking value? Or you the

Unidentified Analyst

I'm about those the maturity the roll-off. those security No, roll-off. talking securities I mean things,

John Michel

sorry. I'm it. got Oh

Mark Mason

thought. That's I what

average right? duration correct right? of the envelope, or is, think the if portfolio X.X the your today you is back calculation about X So, So, in years, kind of

Unidentified Analyst

for. Yes. I'm what looking That's Yes.

Mark Mason

back a But maybe Speakers]. might that more with the consideration practical is discount [Multiple come sooner

coming obviously back, it's between right. so And the two,

Unidentified Analyst

maybe XXX last level. know deposits of your some your, of back you you are the gone question XX% the to And have is, above

good. $XX Don't million where a have about these repos have reverse $X money large is ever deposit, you done it. or If worry million million, $X you say, you your "Look,

and you our go them – a who large to give individual way can deposits will stay have back people investment comfort give find sort a of you of your account." the Have game? to in you to, piece We

Mark Mason

a it's First XX%, XX%, level of all, not

Unidentified Analyst

off I ahead. okay. news was Go your reading release, that's but

Mark Mason

I I do to XX%. we the think But right sure got want number. it's make

not to each had those, about repos, really I you're you feel customer. okay, And check I'm you can go surprised if to stay doing that, – CDARS. familiar the a And somewhere. want get IntraFi might but products, customize us. familiar. have FDIC are we we are anxiety. best do guess insurance but do it to that's don't not way some, we the rates that because where ICS And – reverse I fortunate XXX% then, I have good So, that. have had that with They want many customers use much and they we with with that out don't feel we we them

So, we products. have the utilized

Unidentified Analyst

responsible and that crazy when we from out away Chicago governance I areas or just of you're just congratulate we presence. don't feet. everybody investors all rate, San I basically and Southeastern stay we any doing. tax I see as act And – Francisco, low their where opportunity put to want I in marginal good been together. states – or have too can't assets to Baltimore XX% property is mean you at own you to get with is were into, their worked where run a We mean, I Well, continue you long we we – equity what time. on crime, think major our we've because government for a least But governance,

gives presence Southeastern what a premium is time. you So, over real your the

for job. to you your doing a good thank Please So keep good job.

Mark Mason

the thank Well, the We you. questions comments, sir. and appreciate

Unidentified Analyst

Okay. you. Thank

Operator

We now have KBW. Lay Woody with

You may Woody. proceed with your question,

Woody Lay

guys. to afternoon good on deposits. touch Wanted Hey

trying really declines can what to think the mostly down you the you to drove XX% losing decline and they brokered broker deposits bucket. were the balances, dynamics sort the competition? in segment? just about play you out the that Just deposits continue if for that which Can was due acquired So, through that deposit from were adjust quarter-over-quarter, do of that walk at here? increase from to figure from Were

Mark Mason

we borrowings. with So, use deposits interchangeably broker

to We the attractive of And deposits And are less broker in broker last of the more right? to Federal look the relative recently. little loan-to-deposit of at conscious cost attractive but see the cost plus the I attractiveness Reserve ratio, program, much our deposits was borrowings, a you It's year, decline initial. we why forget that's funds, the of borrowings.

John Michel

[Indiscernible] term.

Mark Mason

everything of though, think, the use term the of We question, that real very in in larger small the March, highlighted We did well. Bank quarter, program. funding is as amazing well lot and a was have for right? in the slowly opportunity. me all a March good the And to To deposits It's how happened opportunity thing, – deposits market. recognized that I that primarily in it's the yield change decided this some banks, of yield loss highlighted in true and January March. to in February.

the rack find money money move banking and move rate a money on out. to a CD rate you promotional example, say, is we rate not in CD And An yield products, promotional highest absolute But or to market customers, absolute market very with make is today time, of that – they promotional let's from products, account to have inside than are our competitive the willing our some lower right. a the that decision, a to either our loyal it structure and/or certain maybe of find us and highest like X.XX%. accept over month That each even marketplace. highest they're do marketplace, the place can our promotional us really customers in yield of could always number sort a really though

the they It existing a not today you reprice not kind to the And accept. over than higher of customers you're did today. market raise of your new with at we can attract. And can would price of. Because of deposit art, you'll happily if costs you and little a you number customers And in it's X% yet, increase recently. that bit deposits. levels an careful, Obviously, that them not find an art kind is

we found And last materially that one higher any level. new money just point a month, more money. a rate. We over existing we at repriced higher had didn't raise the We X.XX%

we that, uninsured smaller down because run-off, that a I an level deposit Because feel do customer the of X.XX%. it to deposits, yields. dropped the believe. happens I just last that, It's So, the right? back our that low motivation going It we to higher to include have to smaller interesting and for is balance, date, experience such market. year's seek like the the slow, run-off

have out move money in That's around franchise, that's and A the And don't very has it why of very because service. depositors money the the of like sticks but savings – with right? them. to happy They value. this lot They're large accounts.

So, full of that's answer, sort don't that's, experienced. if know I but a we've what

John Michel

Yeah. one deposits. on comment the Woody, broker other

Woody Lay

Yes.

John Michel

broker get We relationships go We do We dealers. have utilized not deposits. broker as deposits. the are way, classified market usually in broker and open through that traditional deposit that

be relationships don't out, are deposits, So, decided in us and in we coming have that to sense. and with that broker not makes they our if

Woody Lay

sense. about stabilize Have at quarter-end, maybe those Yes. far Got in XXX balances they're deposits makes you No, acquired seen so it. And then million. that on those April?

Mark Mason

reductions. tax hard little through outflows April next payment have, a seasonal now better going right losses though and other We We're what to believe for it's we know or month. taxes, to our read has

Woody Lay

give And you all suspending then maybe lowering capital the right. your Can of Got some And it just to All if $X.XX position. of us could through it. talk me. you on sort together? rationale overall for the thoughts dividend versus last just

Mark Mason

Sure.

X%. that believe position, solid we is CETX still capital Our right? have we a still about First,

John Michel

X%. Over

Mark Mason

Over level of X% substantially the at capital and today bank, course, of right. more

provide have So, for any sufficient we feel we that comfortable to today capital growth.

do to today. course, the sheet and balance not Of lower profile risk we dividend? Why trying our we're the grow

Well, the sufficiently sufficient profile. relation be of not pay that the are we we are Part the this level And caution. we in over feel make profitability do dividend last had continuing risk that an of in job company, as quarterly may our sure to our bank the in is conservative of the year to concerned regular to because that the abundance of needs managers we of capital distributions lowered that the to we've comfortable year. dividend

and to of Board reduce led believe the dividend. did because uncertainty environment company to the the the profitable. not is with the level range of dividend the eliminate today, going about results the environment We we remain future the decision in And the

range We the profit outcomes about this year. of level the are concerned of given the predictability of

Board was this the they And the felt to determined so, comfortable with. a lower dividend at time appropriate to it that level that very

Woody Lay

taking Got questions. it. for That’s Thanks all my Alright. me. from

Mark Mason

Woody. Thanks,

Operator

you. We Thank have now [indiscernible].

proceed your may You question. with

Unidentified Analyst

times on that listening good Christian hoping my speak waiting page interest hour or not gentlemen. I rates are you go about down. the Hi, for and Koch] out that, to you've biggest an cited for concern level to all strategy. [Dr. but that's you're It's on I guess Mark, same is, think afternoon several a after all [ph]. we business And

down to a prepared playbook versus going have long Obviously, Could about hope to do with talk your on point business. where I'm And – manage bit worst rates and best. guess the be not I'm is, your the how that? positioning for you of little you that's you just I my struggling So positive, just a the X% rates you for X%? go or hope need but

Mark Mason

not – which mortgage and balance insignificant having and to somewhat interest of relate Sure. really a structure environment we balance focused rate Well, pressure mean, funding, look, performed today, of right? the the to liquidity, lower I lines rate markets. that comments to is, sheet, stable manage of sheet we're is maintaining and structured Everything right. reality is managing the balance product essentially better these and falling deposit trying lending, today for are on My a our this positioned competitive liability-sensitive. on about And do they business, we sheet. we

business on to is for necessarily a not hoping only is structure so strategy decline our businesses. observation true. an It's our the say And of

So, strategy hopefully, I didn't hope. our suggest was only a

John Michel

between And FHLB put the I the to taken worst steps rate – advances those and prepare and fixed add hope for funding $X.X We've potential for would as our say, our you have program the we over the that rates. for, lock in term of to financing address billion bank in best.

rates that. impact And have of if go do significant not do adverse a we borrowings our that then So up, today. portion from that's

Unidentified Analyst

just then one other And Excellent. follow-up.

a X average duration I investments to on portfolio you your was that had comment, the mentioned excuse prior think about me. years, X.X in

earnings be you going pulled in actually earnings is net in back dynamics could kind share, those theory, assessment your Is down, because be being your balance net your going but of, a we where that's of are – could per margin So, and book how position sheet. yet interest equity up, into the a that work? fair

Mark Mason

among obviously a including could happen. of a stuff, volume you're bunch depends costs, deposit But that in loan general, rates, could That right, and right, of whole on things, lot expenses and right? and right? It occur,

Unidentified Analyst

And Okay. but clarify that psychological that? clarification, just new disorder you funny had is anxiety, then would security or deposit you said how a like a

Mark Mason

but depositor what banks Well, know popular don't of lot the several is, deposits that March, a I anxiety, right. term would in lost – call notably when I right.

much. did we not Now experience

identify a was at marketplace the fact, but it material very was any issue of end In about, hard the quarter. to that

Unidentified Analyst

Alright. Thank you guys.

Mark Mason

questions. the Thank you for

Operator

a Sandler. follow-up from Thank Matthew Piper you. have We now Clark of

Matthew. You may proceed

Matthew Clark

Thanks for follow-up. the

as you on X view linked the into Holdco, I and back down bit most at I based Tier capital your do ratio? Just [XX.XX] the the [ph]. think, Board think, little risk constraining What mean, mid-Xs. I Total is, a quarter capital.

lower margin coming, have You earnings. additional erosion

That's But kind to, help, stabilize view? dividends. view least going cut at you back constraining ratios. Fortunately, the some or the guess Board's of do I capital ratio what the I think, most of the to you capital as getting

Mark Mason

X. that sensitive That's that's think most ratio Tier I today, we Well, believe, today. the

John Michel

large sensitive multifamily our on side as the are part. which the portfolio, is risk-based XX% We risk-weighted of because most for

risk-based little so... to X X are – is we and other So, three are than measures, other Tier comparing sensitive a measures risk-based more measures, we're capital to to Tier the capital banks,

Matthew Clark

threshold Board Okay. to? that any Is there to minimum wants manage the

Mark Mason

all of We them. watch

each We risk of the for levels have appetite internal measures.

Matthew Clark

Okay. Thank you.

Mark Mason

Thanks Matt.

Operator

Thank had [Operator you, Matthew. no questions We Instructions] have registered.

hand for So, back final like to any the remarks. it management team I'd to

Mark Mason

today. Great. appreciate you. attendance. questions Again, you to your forward Thank next of quarter. We all look to we talking Great

Operator

conclude call. That all today's for joining. Thank does you

lines now your and may disconnect You day. enjoy the rest your of

HomeStreet (HMST) 25 Apr 232023 Q1 Earnings call transcript