HomeStreet(US:HMST)2020-01-27 23:39Financial Data and Key Metrics Changes - Consolidated net income for Q4 2019 was $11 million or $0.45 per diluted share, down from $13.8 million or $0.55 per diluted share in Q3 2019 [24] - Net income from continuing operations for Q4 2019 was $13.1 million or $0.54 per diluted share, compared to $13.7 million or $0.54 per diluted share in Q3 2019 [25] - Core net income from continuing operations for Q4 2019 was $14.9 million or $0.61 per diluted share, up from $14.3 million or $0.57 per diluted share in Q3 2019 [25] - Net interest income decreased by $1.6 million to $45.5 million in Q4 2019 from $47.1 million in Q3 2019 [27] - Non-interest income decreased by $2.6 million from $24.6 million in Q3 2019 to $21.9 million in Q4 2019 [35] Business Line Data and Key Metrics Changes - The company originated $675 million of commercial real estate loans in Q4 2019, a quarterly record [13] - Loans held for investment decreased by $66.7 million to $5.1 billion at the end of Q4 2019, primarily due to $450 million of prepayments and $295 million of transfers to held-for-sale [28] - Core deposits increased by $38.1 million or 2.4% and consumer core deposits increased by $71.8 million or 3.9% during the quarter [13][30] Market Data and Key Metrics Changes - Deposit balances were $5.4 billion at December 31, 2019, an 8% decrease from September 30, 2019 [29] - Non-performing assets totaled $40.3 million, remaining at 21 basis points of total assets at December 31, 2019 [32] Company Strategy and Development Direction - The company executed a significant reduction in its mortgage banking business, including the exit of standalone home loan centers and the sale of related mortgage servicing rights [9][10] - The Board initiated a quarterly common dividend of $0.15 per share for Q1 2020, reflecting confidence in the company's future performance [19][21] - The company aims to improve efficiency and profitability through organizational and operational changes, targeting an efficiency ratio in the low-70% range and a return on average tangible equity of approximately 11% by Q3 2020 [48][49] Management's Comments on Operating Environment and Future Outlook - Management noted that the lower interest rate environment and flat yield curve have adversely impacted loan balances and net interest margin [14] - The company expects to achieve substantial progress toward reducing expenses and increasing profitability by Q3 2020, despite delays in some cost-saving initiatives [47][49] - The company anticipates stabilization of the single-family mortgage portfolio later in 2020, with a focus on commercial real estate and general commercial lending [76][95] Other Important Information - The company adopted the CECL accounting standard on January 1, 2020, resulting in a $3.7 million increase in the allowance for credit losses [34] - The company plans to repurchase up to an additional $25 million of common stock, reflecting confidence in future performance [22][92] Q&A Session Summary Question: Discussion on Board's strategic changes - Management highlighted the ongoing Board refreshment to enhance diversity and expertise, with recent appointments aimed at addressing business goals [60][61] Question: Core expenses and guidance for 2020 - Management indicated a downward trend in core non-interest expenses, with expectations for continued reductions in salaries and related costs [62][64] Question: Loan growth and pipeline outlook - Management confirmed a strong commercial loan pipeline and anticipated continued growth in commercial real estate lending [78][81] Question: Buyback activity and future repurchases - Management is analyzing future repurchase activity, with plans for continued repurchases depending on capital planning discussions with the FDIC [90][92] Question: Tax rate expectations for 2020 - Management advised an effective tax rate range of 19.5% to 20.5% for 2020 [118]