HomeStreet, Inc. (NASDAQ:HMST) Q4 2017 Earnings Conference Call Transcript

Jan 23, 2018 • 01:00 pm ET

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HomeStreet, Inc. (NASDAQ:HMST) Q4 2017 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to the HomeStreet Inc. Year End 2017 Earnings conference call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there would be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Mark Mason, Chairman and CEO. Please go ahead.

Executive
Mark Mason

Hello and thank you for joining us for our year-end and fourth quarter 2017 earnings call. Before we begin, I'd like to remind you that our detailed earnings release was furnished

yesterday to the SEC on a Form 8-K and is available on our website at ir.homestreet.com under the news and market data link. In addition, the recording and transcript this call will be available at the same address.

(Forward-Looking Cautionary Statements)

Additionally, information on any non-GAAP financial measures referenced in today's call, including a reconciliation of those measures to GAAP measures, may be found in our SEC filings and in the detailed earnings release available on our website. Please refer to our detailed earnings release for more discussion of our financial condition and results of operations.

Joining me today is our CFO, Mark Ruh. In just a moment, Mark will present our financial results. But first, I would like to give an update on the results of operations and review our progress of executing our business strategy.

In 2017, we continued executing our growth and diversification strategy toward our goal of building a regional bank with representation in major coastal markets in the Western United States and I'm very proud of the progress our dedicated HomeStreet management and employees have made in such a short period of time. American reported net income for the fourth quarter of $34.9 million, or $1.29 per diluted share, which included a $23.3 million benefit from lower corporate tax rates as a result of the signing of the Tax Cuts and Jobs Act in December. Excluding the impact of tax reform, core net income for the fourth quarter was $11.5 million or $0.42 per diluted share.

Highlighting our progress last year, our Commercial and Consumer Banking segment achieved record net income, increasing by 32% from $35.4 million in 2016 to $46.6 million in 2017, excluding the impact of tax reform and acquisition-related expenses. We accomplished this growth organically without the benefit of a whole bank acquisition during 2017. Our acquisitions of the Akamai National Bank and Fortune bank in 2013, Simplicity Bank in 2015 and Orange County Business Bank and the Bank of Oswego in 2016 contributed to these accomplishments. These acquisitions provided us with new markets, customers, product lines and employees that made our success in 2017 possible.

The Commercial and Consumer Banking segment finished in the second half of 2017 with an efficiency ratio of 65% compared to the first half's, 72%. We expect this trend to decrease in the efficiency ratio to continue in 2018 and beyond. To support our growth in 2017, we opened three de novo retail deposit branches