HomeStreet(US:HMST)2021-01-26 22:39Financial Data and Key Metrics Changes - In Q4 2020, the company reported net income of $28 million, or $1.25 per share, compared to $26 million in Q3 2020. Core income was $32 million, or $1.47 per share, up from $28 million in Q3 2020. Pre-provision core income before income taxes was $41 million, compared to $36 million in Q3 2020 [5][6][18] - The net interest margin increased to 3.26% due to continued decreases in funding costs [9][17] - The return on average assets for the full year 2020 was 1.23%, and for Q4 2020, it was 1.73%. The return on average tangible common equity was 13.4% for the full year and 19% for Q4 2020 [18][19] Business Line Data and Key Metrics Changes - The single-family and consumer loan origination and sales volumes remained strong, driven by a mortgage refinancing boom. The increase in non-interest income was attributed to higher sales of multi-family loans and servicing income [12][17] - The company recognized a $6.1 million charge related to the impairment of lease and fixed assets due to restructuring, which is expected to save approximately $1.3 million annually over the next seven years [6][20] Market Data and Key Metrics Changes - Loans in forbearance for commercial and CRE portfolios were $41 million, representing 1.2% of such loans outstanding. New forbearances granted in Q4 2020 were less than $7 million [10][11] - Single-family loans in forbearance, excluding those guaranteed by Ginnie Mae, were $76 million, with expectations for additional forbearance requests in 2021 due to recent legislation [11] Company Strategy and Development Direction - The company plans to maintain and build on cost efficiency gains achieved over the last two years, focusing on profitable growth and strong infrastructure [33][37] - The transfer of the Fannie Mae multifamily lending business to HomeStreet Bank has already resulted in higher loan origination volumes and is expected to continue [25] - The company is evaluating real estate space needs in a post-COVID environment and implementing scalable technology solutions for greater efficiency [26][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit quality of the loan portfolio, which is primarily secured by high-quality real estate [29][30] - The company anticipates that single-family mortgage volumes will remain robust due to the low interest rate environment, although margins may normalize as capacity in the industry adjusts [23][24] - The company expects to continue returning excess capital to shareholders through dividends and share repurchases [20][35] Other Important Information - The company returned $73 million of excess capital to shareholders in 2020 through dividends and share repurchases, with tangible book value per share increasing by 16% [20][21] - The company has a centennial anniversary in 2021, marking its long-standing presence in the community [38][39] Q&A Session Summary Question: What is the impact of new money loan origination yields and PPP on the margin? - The impact of PPP on the margin was less than one basis point, about $0.5 million in income, with most to be recognized in 2021. New originations saw a yield decrease of about 16 basis points in Q4 2020 [46][48] Question: How is the commercial business performing relative to CRE? - Loan growth in the general C&I area is slow, with a reasonable origination quarter in the commercial business. The focus for growth is expected to be in multifamily loans [49][50] Question: What are the expectations for capital levels and potential buybacks? - The board will review the loan portfolio and credit status before making decisions on buybacks. Consistent authorization sizes are expected going forward [53][54] Question: What is the outlook for non-interest expenses? - The company expects operating leverage, with revenues growing without a commensurate increase in non-interest expenses. Some costs may increase due to inflation and technology spending [62][63] Question: What are the expectations for mortgage volumes in 2021 and beyond? - The company anticipates elevated mortgage volumes, with a potential stabilization in the single-family portfolio as prepayment levels decrease [122][135]