HomeStreet(US:HMST)2021-04-27 21:10Financial Data and Key Metrics Changes - In Q1 2021, the company's net income was $30 million or $1.35 per share, compared to core net income of $32 million or $1.47 per share in Q4 2020 [5] - The annualized return on tangible common equity for Q1 was 17.3%, and the annualized return on average assets was 1.65% [6] - The efficiency ratio was reported at 60% for the quarter [6] - The effective tax rate for the quarter was 19.3%, benefiting from tax-advantaged investments [6] Business Line Data and Key Metrics Changes - Loan originations in Q1 totaled $769 million, including $123 million of PPP loans [8] - The net interest margin increased to 3.92%, primarily due to lower deposit rates, although net interest income was lower than in Q4 2020 due to a decrease in interest-earning assets [7] - The net gain on loan origination and sales activity decreased by $3.4 million compared to Q4 2020, primarily due to lower volumes of multifamily loans sold [11] Market Data and Key Metrics Changes - Outstanding loans in forbearance in commercial and CRE portfolios decreased to 11 loans and $22 million as of March 31, 2021 [10] - The ratio of non-performing assets to total assets remained low at 32 basis points [10] Company Strategy and Development Direction - The company plans to increase commercial real estate loan originations, both for sale and for its portfolio, due to strong fundamentals and demand in its markets [27] - The company is focusing on cost reduction and profitability improvement, with meaningful reductions in non-interest expenses [16] - The company is exploring M&A opportunities to enhance its deposit franchise and create greater density in primary markets [56][58] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery driven by government stimulus and the normalization of economic activity [19] - The company anticipates lower origination and gain on sales activities in the single-family mortgage banking business as long-term interest rates rise [22] - Management expects to release some of the allowance for credit losses in the near future due to low levels of problem loans [17] Other Important Information - The company repurchased 3% of its outstanding common stock at an average price of $44.56 per share and declared a dividend of $0.25 per share [12] - The company expects to recognize approximately $9 million of deferred fees from PPP loans over the next three quarters [77] Q&A Session Summary Question: Loan demand and growth expectations - Management expects total loan growth this year in the high single-digit percentage range, subject to prepayment activity [37] Question: Funding costs expectations - Management anticipates continued decline in funding costs, with expectations of lower single-digit basis points over the next couple of quarters [39][42] Question: Capital management and buyback plans - Management indicated an expectation to continue the $25 million per quarter repurchase program [44] Question: Liquidity deployment from PPP loan forgiveness - Management plans to pay down borrowings first and then return excess capital to shareholders through dividends and share repurchases [53] Question: Gain on sale margins outlook - Management expects single-family profitability margins to normalize this year, with potential volatility [67] Question: Non-interest expense expectations - Management anticipates total non-interest expenses to decline in the second half of the year as mortgage volume normalizes [26] Question: Allowance for credit losses outlook - Management expects the allowance for credit losses to normalize to levels at or below pre-pandemic levels [125]