HomeStreet(US:HMST)2020-10-28 04:39Financial Data and Key Metrics Changes - In Q3 2020, the company's net income was $26 million or $1.15 per share, compared to $18.9 million in Q2 2020, representing a significant increase [6] - Core income for Q3 was $28 million or $1.23 per share, up from $20.2 million in Q2 [6] - Pre-provision core income before income taxes was $36 million in Q3, compared to $32 million in Q2 [6] - The net interest margin increased to 3.20% in Q3 due to decreased funding costs, while the cost of deposits was 36 basis points [7][8] Business Line Data and Key Metrics Changes - The company recorded a decrease in non-interest income due to a $4 million drop in loan servicing income, partially offset by a $3 million increase in gains on sales of loans [12] - The increase in loan sales was attributed to higher volumes of commercial real estate loans sold in Q3 [13] - Non-performing assets to total assets remained low at 30 basis points, with total loans delinquent over 30 days decreasing to 76 basis points [8] Market Data and Key Metrics Changes - The company experienced a favorable performance in its loan portfolio, with a decrease in loans in forbearance and stable low levels of non-performing assets [8][10] - 97% of commercial and industrial loans granted forbearance prior to Q3 have resumed payments [10] Company Strategy and Development Direction - The company plans to focus on growth and maintaining capital to support growth while returning excess capital to shareholders through repurchases and dividends [35] - The transition to a more consistent and durable level of core profitability and efficiency is emphasized, with a focus on cost control and technology investments [36][39] - The company reorganized its Fannie Mae business to enhance profitability by offering larger loans with higher profitability [30][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the credit quality of the loan portfolio, citing strong performance despite pandemic challenges [25][27] - The company anticipates that mortgage volumes will remain robust due to low interest rates, although profit margins may decline as capacity normalizes in the industry [17][18] - There is significant uncertainty regarding the pandemic's long-term impact, but management does not foresee a need for additional provisions for loan losses at this time [27][93] Other Important Information - The Board of Directors declared a $0.15 per share common stock dividend, with discussions of a potential increase in the first quarter of the following year [33][34] - The company completed a $25 million stock repurchase authorization, buying back 20% of its outstanding shares over six quarters [29] Q&A Session Summary Question: What is the core expense baseline excluding facility impairments? - Management indicated a stable expense environment, with expectations of $53 million to $54 million per quarter in the future, accounting for inflation and normal expenses [50][51] Question: What are the expectations for loan runoff and growth? - Management expects loan balances to stabilize and grow somewhat by the end of next year, despite high prepayment speeds and PPP loan runoff [108] Question: What are the current loan yields and funding costs? - New loan yields are lower than desired, with construction lending in the high 4% range and single-family mortgage rates around 3% to 3.25% [66] - The cost of deposits was 36 basis points at quarter-end, down from the 40s earlier [68] Question: How is the company managing excess liquidity? - The company plans to grow its loan portfolio again, but acknowledges the challenges posed by high prepayment speeds [72] Question: What are the expectations for mortgage banking income? - Management anticipates a decline in mortgage banking income over the next few quarters, but expects volume to remain strong due to low mortgage rates [110]