HomeStreet(US:HMST)2022-04-26 20:10Financial Data and Key Metrics Changes - In Q1 2022, the company's net income was $20 million or $1.1 per share, down from $29 million or $1.43 per share in Q4 2021 [5] - The annualized return on average tangible equity was 12.2%, and the annualized return on average assets was 1.10% [5] - The efficiency ratio increased to 77% in Q1 2022, compared to previous quarters [15] Business Line Data and Key Metrics Changes - Net interest income decreased by $2.5 million in Q1 2022 compared to Q4 2021, primarily due to lower average loan balances [5] - Non-interest income decreased by $13.1 million in Q1 2022, mainly due to a $4.4 million decrease in single-family gain on loan origination and sales activities [8] - The company recorded a $9 million recovery of its allowance for credit losses in Q1 2022, reflecting improved loan portfolio performance [6] Market Data and Key Metrics Changes - The ratio of non-performing assets to total assets improved to 17 basis points [6] - The ratio of allowance for credit losses (ACL) to total loans was 66 basis points as of March 31, 2022 [7] - The company noted a significant decline in Fannie Mae DUS national loan production, which decreased by 23% quarter-over-quarter [14] Company Strategy and Development Direction - The company aims to grow its loan portfolio organically, with a focus on permanent multifamily loans, which are considered low-risk assets [11][40] - The strategy includes retaining all permanent multifamily loans this year to establish a foundation for future earnings growth [12] - The company plans to improve its efficiency ratio to 60% or below for the second half of the year and to the mid-50% range in 2023 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a return on average assets in excess of 1.25% in the second half of the year and targeting a return on average tangible equity in the high teens for 2023 and beyond [18] - The company anticipates that earnings growth will be more of a step function upwards rather than incremental [18] - Management acknowledged the challenges posed by rising interest rates but believes they will benefit from a stable or rising interest rate environment [56] Other Important Information - The company completed a $100 million subordinated notes offering and used part of the proceeds for stock repurchases [10] - The first quarter dividend of $0.35 per share represented a 40% increase over the prior quarter [10] - The company has consistently outperformed the KRX benchmark in total shareholder returns over one, three, and five years [20] Q&A Session Summary Question: Loan growth sustainability and geographic strength - Management confirmed that all loan origination is organic and highlighted strong performance in Southern California and Western Washington [26][27] Question: Buyback appetite and stock repurchase plans - Management indicated continued interest in stock buybacks and plans to discuss reentering the repurchase market [34] Question: Commercial real estate concentration limits - Management stated they are comfortable allowing commercial real estate concentration to go to 600% of capital, emphasizing the low-risk nature of permanent multifamily loans [40] Question: Outlook for single-family mortgage revenue - Management expressed caution regarding future single-family mortgage revenue due to low inventory levels and rising interest rates [54] Question: Credit costs and reserve ratios - Management indicated that they expect to start provisioning on a regular basis beginning next year, with current reserves reflecting a recovery in expected losses [70]