Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HomeStreet Inc (HMST, Financial) reported stable noninterest-bearing deposits and an increase in total deposits, excluding broker deposits, by $111 million.
- The company has a well-diversified loan portfolio with strong asset quality, particularly in Western states multifamily loans, which are historically low-risk.
- HomeStreet Inc (HMST) has managed to reduce noninterest expenses by 3.5% in the third quarter, reflecting a focus on cost reduction.
- The company has a low level of uninsured deposits at 8% of total deposits, indicating a stable deposit base.
- Despite operating losses, HomeStreet Inc (HMST) saw an increase in tangible book value per share from $28.11 to $28.13 as of September 30, 2024.
Negative Points
- HomeStreet Inc (HMST) reported a net loss of $7.3 million in the third quarter, an increase from the previous quarter's loss of $6.2 million.
- The company's net interest margin decreased from 1.37% to 1.33%, impacting net interest income negatively.
- Higher interest rates have led to increased deposit costs, affecting the company's financial performance.
- The proposed merger with FirstSun did not receive regulatory approval, creating uncertainty about future strategic directions.
- Noninterest income decreased due to lower levels of single-family and commercial mortgage banking originations.
Q & A Highlights
Q: What prevents HomeStreet from seeking other bidders for a potential merger, given the current interest rate environment?
A: Mark Mason, CEO, explained that the merger agreement restricts HomeStreet from soliciting interest from other parties. However, if presented with a superior offer, they can consider it under their fiduciary responsibilities. If the merger agreement is terminated, they will be free to explore all strategic options.
Q: Can you elaborate on the alternative regulatory structure being considered for the merger?
A: Mark Mason stated that they are not prepared to discuss the details of alternative regulatory structures. Any new structure would need to be significantly different from the previous proposals to the OCC, Federal Reserve, and Texas Department of Banking.
Q: Is there a regulatory concern regarding HomeStreet's commercial real estate concentration?
A: Mark Mason clarified that there were no regulatory concerns related to HomeStreet's commercial real estate concentration that would have prevented the merger approval. The concentration was not an issue on a stand-alone or pro forma basis.
Q: What is the status and impact of the proposed $800 million multifamily loan sale?
A: Mark Mason mentioned that the current CRE concentration is about 600%, and the sale would reduce it to approximately 500%. The sale aims to quickly return the company to moderate profitability and stability, allowing them to consider future strategic paths.
Q: What are the current yields and duration of HomeStreet's multifamily loan portfolio, and what rates can be expected on new loans?
A: The portfolio's duration is roughly 2.5 years with a yield around 4%. New multifamily loans are yielding between 5.9% to 6.2% for portfolio quality loans, while Fannie Mae loans are more competitive, recently in the low 5% range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
