Wall Street expects a year-over-year decline in earnings on lower revenues when HomeStreet (HMST) reports results for the quarter ended March 2024. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The earnings report might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may ...

Financial Performance - As of December 31, 2023, HomeStreet had total assets of $9.4 billion, loans of $7.4 billion, and deposits of $6.8 billion[16]. - HomeStreet reported a significant increase in net income, reaching $XX million, representing a YY% growth compared to the previous year[1]. - The company’s total assets grew to $ZZ billion, an increase of AA% year-over-year, indicating strong financial health[2]. - User data showed an increase in active accounts by BB%, reflecting successful customer acquisition strategies[3]. - HomeStreet provided an optimistic outlook for the next quarter, projecting a revenue increase of CC% driven by new product launches and market expansion[4]. - The company reported a loan growth of GG%, driven by increased demand in the commercial real estate sector[9]. Strategic Initiatives - HomeStreet entered into a definitive merger agreement with FirstSun Capital Bancorp on January 16, 2024, with the merger expected to close in mid-2024[22]. - The company aims to enhance its market presence through strategic acquisitions and establishing new offices in select markets[17]. - HomeStreet is exploring potential acquisitions to enhance its service offerings and market share, with a focus on firms that align with its strategic goals[7]. - HomeStreet's new product line, launched in Q1, is expected to contribute an additional $FF million in revenue over the next fiscal year[8]. - The company is investing in new technology, with a budget allocation of $DD million for digital banking enhancements[5]. - HomeStreet plans to expand its market presence in the Pacific Northwest, targeting a growth rate of EE% in that region[6]. Lending Practices - HomeStreet is a preferred lender for the Small Business Administration (SBA) and the United States Department of Agriculture (USDA), focusing on small business lending[29]. - The company offers a comprehensive underwriting process for its loan products, focusing on the borrower's ability to repay and the value of collateral[24]. - HomeStreet's commercial loans are typically made to businesses with a history of profitable operations, requiring good payment histories and responsible balance sheet management[26]. - Multifamily residential mortgage loans are offered for terms up to 30 years, with adjustable rates and initial fixed rate periods ranging from three to 10 years[35]. - The company provides consumer installment loans with fixed rates for terms ranging from one to five years[41]. - The company offers a variety of loans, including commercial real estate loans, construction loans, and residential construction loans, all requiring substantial equity from borrowers[36][37][39]. Regulatory Compliance - The Company and the Bank are required to maintain a common equity Tier 1 capital ratio of at least 4.5%, a Tier 1 leverage ratio of 4.0%, a Tier 1 risk-based ratio of 6.0%, and a total risk-based ratio of 8.0%[86]. - The Company is subject to capital requirements under the Dodd Frank Act, which mandates that capital requirements be countercyclical[93]. - The Bank's deposits are insured by the FDIC, which provides coverage of $250,000 per depositor for each account ownership category[106]. - The Bank is subject to periodic examinations and reporting requirements by the WDFI and the FDIC, which can impose enforcement actions if necessary[104]. - The Company must obtain prior approval from the Federal Reserve for mergers or acquisitions involving bank holding companies[95]. - The Bank's ability to pay dividends is restricted under both federal and Washington state law, requiring retained earnings approval from the WDFI[102]. - The Company is prohibited from transacting with individuals or entities on the OFAC's list of Specially Designated Nationals and Blocked Persons[90]. - The Bank must maintain an anti-money laundering compliance program as mandated by the Bank Secrecy Act[89]. - The Company is required to file an annual report with the Federal Reserve and is subject to its regulations and supervision[92]. Market and Economic Risks - Changes in monetary policy by the Federal Reserve could adversely impact the company's results of operations and capital position[156]. - Market factors such as interest rate fluctuations and increased competition may further affect the company's profitability and financial results[157]. - The company's mortgage origination volume decreased by 42% in 2023 compared to 2022, primarily due to significant increases in interest rates[173]. - The transition to the Secured Overnight Financing Rate (SOFR) from LIBOR may result in lower margins on new products, potentially reducing net interest income[166]. - The company faces increased competition from banks, credit unions, and technology-driven financial service providers, which may impact future earnings and growth[163]. - Inflation may negatively affect profitability by increasing fixed costs and reducing consumer purchasing power, potentially leading to higher default rates[162]. - The company relies on various funding sources, and adverse operating results could limit access to these sources, impacting financial flexibility and net interest income[167]. - The value of the company's securities portfolio is sensitive to interest rate fluctuations, which may cause material fluctuations in shareholders' equity[161]. - The company is geographically confined to the Western United States, making it vulnerable to regional economic volatility and natural disasters[178]. Operational Risks - The company faces challenges in maintaining effective internal controls over financial reporting, which could result in inaccurate financial results and increased operational risks[180]. - The company utilizes complex financial models for accounting estimates, which may lead to significant changes in asset valuations and impact earnings if assumptions prove inaccurate[182]. - Regulatory compliance is costly and complex, with potential penalties for noncompliance that could adversely affect operations and profitability[183]. - The company is subject to extensive regulations from various authorities, including the FDIC and the CFPB, which can increase compliance costs and operational risks[184]. - Legal claims and regulatory actions could result in substantial uninsured liabilities and reputational harm, negatively impacting business operations[187]. - The company has reduced its employee headcount significantly, which may lead to disruptions if key employees leave or are unable to perform their duties[189]. - Future public health crises could adversely affect customers' ability to meet debt obligations, leading to increased requests for loan forbearance[190]. - Cybersecurity risks are a significant concern, with potential for data breaches that could disrupt operations and harm customer trust[192]. - The company relies on third-party vendors for critical technology and services, which poses additional operational and security risks if those vendors fail to comply with regulations or experience their own security incidents[196]. - The company prioritizes the development of information security controls to protect customer information and systems, acknowledging that costs to combat cybersecurity threats may increase due to evolving risks[198]. - The company faces challenges in keeping up with technological changes in the financial services industry, which may limit its ability to effectively implement new technology-driven products and services[199]. Capital Management - The company has a capital management strategy aimed at returning excess capital to shareholders, but negative changes in business conditions could lead to suspended dividend payments[174]. - The company may face liabilities for breaches of representations and warranties made to third-party purchasers of loans, which could adversely affect financial condition[170]. - The company’s ability to maintain a well-capitalized position may be impacted by economic changes and the need to raise additional capital in the future[176]. - A significant portion of the company's loans are secured by real estate, particularly commercial real estate (CRE) loans, which are sensitive to economic conditions, potentially leading to higher loan delinquencies and foreclosures[179]. - The company has $65 million in senior notes due 2026, $62 million in junior subordinated debentures due in 2035-2037, and $100 million in subordinated notes due 2032, with payments dependent on dividends from its subsidiaries[200]. - Regulatory guidelines may restrict the company's ability to pay principal and interest on the HomeStreet Notes, which are treated as "Tier 2 capital" under Federal Reserve rules[204]. - The company is subject to evolving ESG regulations, which may increase general and administrative expenses and management time spent on compliance[206]. - Climate change poses operational, credit, and reputational risks to the company and its customers, potentially impacting business performance[208]. - The company has implemented cybersecurity processes and controls to manage material risks and improve its incident response plan[214].

Financial Performance - Net interest income for Q3 2023 was $38.9 million, down from $43.5 million in Q2 2023, and total net income was $2.3 million compared to a loss of $31.4 million in Q2 2023[134][142]. - Core net income for the quarter ended September 30, 2023, was $2,295,000, compared to a net loss of $31,442,000 for the previous quarter[187]. - Core net income for the nine months ended September 30, 2023, was $10.5 million, down from $58.0 million in the same period of 2022, reflecting lower net interest income and noninterest income[154]. - Total revenues for the quarter were $49,376,000, down from $53,787,000 in the previous quarter, with net interest income at $38,912,000[187]. Credit Quality - Provision for credit losses in Q3 2023 was $(1.1) million, an improvement from $(0.4) million in Q2 2023, indicating a recovery in credit quality[134][142]. - The allowance for credit losses (ACL) was $40 million, down from $41.5 million at the end of 2022, reflecting improved credit conditions[136]. - Nonperforming assets increased to $39.7 million, representing 0.42% of total assets, up from 0.13% at the end of 2022, indicating potential credit quality concerns[136]. - The recovery of the allowance for credit losses was $0.9 million in 2023, down from $9.0 million in 2022, reflecting improved economic conditions[159]. Income and Expenses - Noninterest income for Q3 2023 was $10.5 million, slightly up from $10.3 million in Q2 2023, while noninterest expense decreased to $49.1 million from $90.8 million[134]. - Noninterest expense decreased significantly to $49.089 million in Q3 2023 from $90.781 million in Q2 2023, mainly due to a $39.9 million goodwill impairment charge in Q2 2023[152]. - Total noninterest income for the nine months ended September 30, 2023, was $30.965 million, down from $41.893 million in 2022, reflecting a decrease in gains on loan origination and sale activities[160][163]. Assets and Liabilities - Total assets increased to $9.46 billion as of September 30, 2023, compared to $9.36 billion at the end of 2022[136]. - Total assets as of September 30, 2023, were $9.433 billion, a decrease from $9.563 billion as of June 30, 2023[146]. - Total liabilities increased by $154 million, with a $706 million decrease in deposits offset by $857 million in additional borrowings[165]. - The loans to deposit ratio increased to 110.8% as of September 30, 2023, compared to 99.9% at the end of 2022, suggesting a tighter liquidity position[136]. Interest Rates and Sensitivity - The company's net interest margin decreased to 1.74% in Q3 2023 from 1.93% in Q2 2023, primarily due to higher funding costs[134][140]. - The net interest rate spread decreased to 1.13% in Q3 2023 from 1.37% in Q2 2023[146]. - The estimated impact on net interest income for a +300 basis point change in interest rates is a decrease of (14.8)%, while a -300 basis point change would increase net interest income by 10.2%[199]. - The company is considered liability-sensitive, with a cumulative interest sensitivity gap of $(2,503,064) thousand, representing (26)% of total assets[195]. Capital and Dividends - The Company’s Tier 1 leverage capital ratio was 7.01% as of September 30, 2023, exceeding the minimum requirement of 4.0%[179]. - The Company declared a quarterly cash dividend of $0.10 per common share for Q3 2023, with intentions to continue quarterly dividends subject to profitability and Board approval[181]. - Tangible book value per share decreased to $26.18 as of September 30, 2023, from $28.41 at the end of 2022[188]. Liquidity - The Company had available borrowing capacity of $2.2 billion from the FHLB as of September 30, 2023, compared to $2.6 billion at December 31, 2022[171]. - The company believes it has sufficient liquidity to meet its current needs despite rising competition for liquidity in the banking sector[202]. - The company had available contingent liquidity of $5.1 billion, which is 76% of total deposits, with uninsured deposits constituting 8% of total deposits[202].

Financial Performance - Net income for the quarter was $2.3 million, or $0.12 per share[5] - Core net income was $10.5 million, or $0.56 per share[5] - Net interest margin was 1.74%[5] - The company declared and paid a quarterly cash dividend of $0.10 per share[5] Balance Sheet - Total deposits decreased by $137 million to $5.8 billion, excluding broker deposits[5] - Book value per share was $26.74, and tangible book value per share was $26.18 on September 30, 2023[5] - Uninsured deposits were $535 million as of September 30, 2023, representing 8% of total deposits[17,39] Loan Portfolio - The company's total assets are $9.5 billion[34] - Loans held for investment remained stable[17] - The loan portfolio composition includes $7.4 billion in loans[57] - Nonperforming assets to total assets was 0.42% on September 30, 2023[17] Strategy and Outlook - The company is focused on variable rate loan production[36] - The company aims to replace borrowings and certificates of deposit with transaction accounts through organic growth and acquisitions[10]

Financial Performance - The company reported a net loss of $31.4 million in Q2 2023, significantly impacted by a goodwill impairment charge of $34.6 million[138]. - Core net income for Q2 2023 was $3.2 million, down from $5.1 million in Q1 2023, reflecting a decrease in net interest income[142]. - Net interest income for Q2 2023 was $43.5 million, compared to $49.4 million in Q1 2023, indicating a decline in earnings[133]. - Noninterest expense surged to $90.8 million in Q2 2023, primarily due to a $39.9 million goodwill impairment charge, compared to $52.5 million in Q1 2023[153]. - Core net income for the six months ended June 30, 2023, was $8.2 million, down from $37.7 million in the same period of 2022, reflecting lower net interest income and higher provisions for credit losses[155]. - The company reported a net loss of $26.4 million for the six months ended June 30, 2023, compared to a net income of $37.7 million for the same period in 2022[155]. - Total revenues for the quarter were $53,787,000, down from $59,566,000 in the previous quarter, representing a decrease of approximately 13%[190]. Asset and Liability Management - The company's total assets increased to $9.5 billion as of June 30, 2023, up from $9.4 billion at the end of 2022[135]. - Total interest-earning assets increased to $9.1 billion in Q2 2023, with an average yield of 4.45%[144]. - The total interest-bearing liabilities rose to $7.4 billion in Q2 2023, with an average cost of 3.08%[144]. - The company experienced a $782 million decrease in deposits, attributed to a decline in brokered certificates of deposit and non-certificates of deposit balances[167]. - Average borrowings increased by $1.1 billion to fund the growth of the loan portfolio and investment securities[159]. - The company reported a cumulative interest sensitivity gap of $(2,145,799) thousand, which is approximately (23)% of total assets[197][198]. Credit Quality and Provisions - The allowance for credit losses (ACL) remained stable at $41.5 million, representing 0.57% of total loans[135]. - Nonperforming assets increased to $41.5 million, representing 0.44% of total assets as of June 30, 2023[135]. - Provision for credit losses recorded a recovery of $0.4 million in Q2 2023, compared to a provision of $0.6 million in Q1 2023, with the allowance for credit losses remaining unchanged at $41.5 million[148]. - The company recorded a $0.2 million provision for credit losses in the first half of 2023, contrasting with a $9.0 million recovery in the same period of 2022[160]. Taxation - The effective tax rate for Q2 2023 was 14.2%, influenced by the non-deductible portion of the goodwill impairment charge[143]. - The effective tax rate for the six months ended June 30, 2023, was 12.5%, significantly impacted by the non-deductible portion of the goodwill impairment charge[156]. - The effective tax rate for core net income was 14.2% for the quarter, reflecting a slight increase from 12.5% in the previous quarter[190]. Interest Rate Risk Management - The company is focused on managing interest rate risk through a simulation model to estimate sensitivity of net interest income to changes in market interest rates[195]. - The estimated impact on net interest income for a +300 basis point change in interest rates is a decrease of 7.3%[202]. - The company is considered liability-sensitive, taking actions to extend the duration of its liabilities through increased levels of term certificates of deposit[198]. - Changes in the mix of interest-earning assets or interest-bearing liabilities can significantly affect net interest margin without altering interest rate sensitivity[199]. - The interest rate spread between earning assets and funding liabilities can vary significantly, impacting net interest income[199]. Capital and Liquidity - HomeStreet, Inc. reported a Tier 1 leverage capital ratio of 6.93% as of June 30, 2023, exceeding the minimum requirement of 4.0%[182]. - The capital conservation buffer for HomeStreet, Inc. was 4.03% as of June 30, 2023, indicating strong capital adequacy above regulatory requirements[182]. - The Company had available borrowing capacity of $2.3 billion from the FHLB as of June 30, 2023, down from $2.6 billion at December 31, 2022[173]. - The company believes it has sufficient liquidity to meet its current needs despite market uncertainties[205]. - The company has $5.6 billion in available contingent liquidity, representing 84% of total deposits, with uninsured deposits at 7% of total deposits[205]. Dividends and Shareholder Returns - The Company declared a cash dividend of $0.10 per common share for the second quarter of 2023, with intentions to continue quarterly dividends subject to Board approval[183]. Operational Efficiency - The efficiency ratio for the quarter was 93.7%, compared to 87.2% in the previous quarter, indicating a decline in operational efficiency[190]. - Return on average tangible equity (annualized) was 2.9% for the quarter, down from 4.1% in the previous quarter[190]. - Tangible book value per share decreased to $27.50 as of June 30, 2023, from $28.41 at the end of 2022[191].

Financial Data and Key Metrics Changes - The company reported a net loss of $31.4 million or $1.67 per share in Q2 2023, primarily due to a $39.9 million goodwill impairment charge [45] - Core earnings for Q2 2023 were $3.2 million or $0.17 per share, compared to net income of $5.1 million or $0.27 per share in Q1 2023 [45] - Net interest income decreased by $5.9 million from Q1 2023, with a net interest margin decline from 2.23% to 1.93% [26][53] - The effective tax rate for Q2 2023 was 14.2%, significantly impacted by the goodwill impairment charge [27] Business Line Data and Key Metrics Changes - Non-interest income in Q2 2023 remained consistent with Q1, with a 10% increase in single-family lending rate locks offset by a slight decrease in rate lock margin [28] - The ratio of non-performing assets to total assets increased from 15 basis points at March 31, 2023, to 44 basis points at June 30, 2023, primarily due to one customer relationship being designated as non-accrual [28][59] Market Data and Key Metrics Changes - The company experienced a stabilization in deposit levels at the three retail deposit branches acquired in Southern California, with a weighted average cost of deposits at these branches remaining low at 38 basis points as of June 30, 2023 [36] - Home prices have been stable or rising, particularly in West Coast markets, with increased demand for new homes leading to higher land acquisition and project development by builders [37] Company Strategy and Development Direction - The company is focusing on reducing non-essential expenses while maintaining high-quality lending lines of business to prepare for growth once the interest rate environment stabilizes [30] - The strategy includes attracting new deposits and retaining existing ones through promotional certificates of deposit and money market accounts, while managing liquidity and net interest margin [32][54] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating results reflect the adverse impact of historically high increases in short-term interest rates, with expectations for continued margin pressure until rates stabilize [53][56] - The company anticipates a decline in loans held for investment, stable deposits, and slightly increasing non-interest expenses in the near term [40] Other Important Information - The company recorded a goodwill impairment charge of $39.9 million, which is a non-cash charge and does not impact core earnings, cash flows, or liquidity [25] - The accumulated and other comprehensive income balance was negative $101 million, affecting tangible book value per share but not regulatory capital levels [62] - A dividend of $0.10 per share was approved, unchanged from the prior quarter [63] Q&A Session Summary Question: What is the company's outlook on margins and profitability? - Management expects to remain profitable, excluding the goodwill charge, and anticipates some increases in single-family lock volume [70][71] Question: What is the company's strategy regarding deposit ratios? - The company is comfortable operating at current loan-to-deposit ratios and prioritizes managing liquidity and net interest margin over increasing this ratio [76] Question: What are the expected cash flows from the securities portfolio? - The monthly cash flow from the securities portfolio is approximately $40 million to $50 million [100][114] Question: What is the company's approach to non-essential expenses? - Non-essential expenses include advertising and marketing, which can be reduced without significant impact on brand awareness [112]

HomeStreet meStreet Important Disclosures Forward-Looking Statements Non-GAAP Financial Measures Highlights and Developments • Net loss of $31.4 million, or $1.67 per share • Recorded $39.9 million goodwill impairment charge • Net interest margin of 1.93% • Uninsured deposits decreased to $495 million as of June 30, 2023 (7% of total deposits) from $1.0 billion as of March 31, 2023 (14% of total deposits • Nonperforming assets to total assets 0.44% on June 30, 2023 • Book value per share of $28.10 and tangi ...

Financial Performance - Net interest income for Q1 2023 was $49.4 million, down from $55.7 million in Q4 2022, reflecting a decrease of approximately 11.5%[128] - Noninterest income increased to $10.2 million in Q1 2023 from $9.7 million in Q4 2022, representing an increase of about 5.4%[128] - Return on average equity (annualized) was 3.5% in Q1 2023, down from 6.0% in Q4 2022, indicating a significant decrease in profitability[128] - Net income for Q1 2023 was $5.1 million, a decrease from $20.0 million in Q1 2022, with income before taxes dropping from $24.6 million to $6.5 million[147] - Total revenues for the quarter were $59,566,000, down from $65,364,000 in the previous quarter, representing a decline of 8.7%[184] Asset and Liability Management - Total assets grew to $9.86 billion as of March 31, 2023, compared to $9.36 billion at the end of 2022, marking an increase of approximately 5.3%[130] - The loans to deposit ratio increased to 106.4% as of March 31, 2023, compared to 99.9% at the end of 2022, indicating a tighter liquidity position[130] - Total interest-earning assets increased to $9.05 billion in Q1 2023, up from $8.89 billion in Q4 2022[138] - The total interest-bearing liabilities amounted to $7.27 billion in Q1 2023, compared to $7.17 billion in Q4 2022, with a net interest rate spread of 1.71%[138] - The Company had available borrowing capacity of $2.1 billion from the FHLB as of March 31, 2023, down from $2.6 billion at December 31, 2022[167] Credit Quality - Provision for credit losses was $593,000 in Q1 2023, significantly lower than $3.8 million in Q4 2022, indicating improved credit quality[128] - Nonperforming assets increased to $14.9 million as of March 31, 2023, compared to $11.9 million at the end of 2022, reflecting a rise of approximately 25.5%[130] - A provision for credit losses of $0.6 million was recorded in Q1 2023, compared to a $9.0 million recovery in Q1 2022[153] - As of March 31, 2023, the total Allowance for Credit Losses (ACL) was $41,500,000, with a rate of 0.56%, unchanged from December 31, 2022[163] Interest Rate and Liquidity Risk - The net interest margin decreased to 2.23% in Q1 2023 from 2.53% in Q4 2022, a decline of approximately 11.8%[128] - The estimated impact on net interest income over a one-year horizon shows a decrease of (5.0)% with a +300 basis points change in interest rates[196] - The Company is considered liability-sensitive, with a cumulative interest sensitivity gap of $(2.30) million, representing (23)% of total assets[192] - The Company believes it has sufficient liquidity to meet its current needs despite the competitive landscape for deposits in the banking industry[199] Operational Efficiency - Noninterest expense increased to $52.49 million in Q1 2023 from $50.42 million in Q4 2022, primarily due to higher compensation and benefits costs[146] - The efficiency ratio for the quarter was 87.2%, up from 76.2% in the previous quarter, indicating a decline in operational efficiency[184] - The tangible common equity to tangible assets ratio decreased to 5.3% as of March 31, 2023, down from 5.7% at the end of the previous quarter[184] Tax and Dividends - The company’s effective tax rate was 22.0% in Q1 2023, lower than 23.7% in Q4 2022, primarily due to benefits from tax-advantaged investments[137] - The effective tax rate for Q1 2023 was 22.0%, compared to 19.0% in Q1 2022, influenced by tax-advantaged investments[148] - The Company declared a cash dividend of $0.10 per common share payable on May 24, 2023, following a quarterly cash dividend of $0.35 per common share in the first quarter of 2023[177] Growth and Acquisitions - The company acquired three branches in Southern California, gaining $373 million in deposits and $21 million in loans, with total deposit balances reaching $322 million by the end of March 2023[135] - The Company had no material commitments for capital expenditures as of March 31, 2023, but intends to pursue growth opportunities, which may include acquisitions[178]

Financial Performance - Net income was $5.1 million, or $0.27 per share[54, 161] - Net interest margin was 2.23%[54, 161] - Tangible book value per share was $27.87 as of March 31, 2023[8, 85] - Return on average tangible equity was 4.1% for the quarter ended March 31, 2023[12] - Efficiency ratio was 87.2% for the quarter ended March 31, 2023[14, 54] Balance Sheet and Loan Portfolio - Total assets were $9.9 billion as of March 31, 2023[86, 178] - Loans held for investment increased by $60 million, or 1%, to $7.486 billion during the quarter[1, 71] - Total deposits increased $166 million to $6.2 billion, excluding brokered deposits[67] - The allowance for credit losses was $41.5 million as of March 31, 2023[5, 178] Loan Originations - Total loan originations and advances were $345 million for the quarter ended March 31, 2023[3] - CRE loans accounted for $174 million, or 50%, of total loan originations[3]

HomeStreet, Inc. (NASDAQ:HMST) Q1 2023 Earnings Conference Call April 25, 2023 1:00 PM ET Company Participants Mark Mason - Chief Executive Officer, President, and Chairman John Michel - Chief Financial Officer Conference Call Participants Matthew Clark - Piper Sandler Woody Lay - KBW 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 pa ...