HomeStreet, Inc. (NASDAQ:HMST) Q1 2018 Earnings Conference Call - Final Transcript

Apr 24, 2018 • 01:00 pm ET

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HomeStreet, Inc. (NASDAQ:HMST) Q1 2018 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Jeff Rulis with D.A. Davidson. Please go ahead.

Analyst
Jeff Rulis

Thanks. Good morning. Just a couple on the headcount reduction, are those 86 employees, have they been let go as of today, I mean, is that a Q2 event?

Executive
Mark Mason

All of those reductions are in April, yes.

Analyst
Jeff Rulis

Okay, and so the mortgage quarter-end employee count of 1,307 does not reflect, those additional 37 have been subsequent to quarter end, is that correct?

Executive
Mark Mason

That's correct.

Analyst
Jeff Rulis

Okay. And I guess, within the expense save, is there any, I guess, severance offset to that? And I guess, if there were any portion of layoffs that were sort of self-selecting in that process?

Executive
Mark Mason

We have had attrition in both of our business segments that reduced the need for the reduction in force. And that's more true in the mortgage segment. Unfortunately, that also includes some significant loan originators due to competitive recruiting pressure. Though, the numbers that we cite in the expense reduction details are all affirmative reductions in headcount.

Analyst
Jeff Rulis

Okay. And, but maybe I wasn't real clear. Is there any severance offset, is there an increase in expense or is that 12.4 a net number?

Executive
Mark Mason

The $12.4 million is...

Executive
Mark Ruh

Is in our run rate. There is going to be a severance expense in the second quarter, it's going to be quite small, it's only about $400,000.

Analyst
Jeff Rulis

What was that number?

Executive
Mark Ruh

About $400,000. It will be a small number.

Analyst
Jeff Rulis

Okay. Got it. And I would anticipate the annualized number, I guess, to hit the run rate in -- granted, we got your guidance on the seasonal increase in expenses. But that would take effect in 2Q?

Executive
Mark Mason

That's right, with respect to mortgage origination commissions, primarily.

Analyst
Jeff Rulis

Okay. And then maybe last one on the expense frontier. Is that all comp line then, I mean, can we back into the per employee, I guess, comp line? Or is there other cost saves outside of the compensation line that is associated with that 12.4?

Executive
Mark Ruh

Yes good question, Jeff. That is actually, the $12.4 million annualized breakdown is $9.1 million of that is salaries related, you know, employment costs, and then other expenses are $3.3 million.

Analyst
Jeff Rulis

And the other would just be support or facilities of?

Executive
Mark Ruh

It's a potpourri of all sorts of different things, various operating expenses. It's going to be consultants, temps, you know, other odds and ends that all add up to that $3.3 million. We'd gladly give you a detailed breakdown further if you want to contact us later, but I don't have the specific detail right here.

Analyst
Jeff Rulis

That's a high level enough, I appreciate it. Then maybe last question for Mark Ruh. The tax rate then -- so the one quarter - was that a one quarter thing or is the new guidance on tax rate going forward at 24.5% or are we back down to that 21% to 22%?

Executive
Mark Ruh

We're looking like we'd be in that range, that was a