HomeStreet, Inc.

Good day, everyone, and welcome to the Home Street Incorporated year-end and fourth quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please also note today's event is being recorded. I'd now like to turn the conference over to Mark Mason, Chief Executive Officer of HomeStreet. Please go ahead, sir.

Hello, and thank you for joining us for our fourth quarter 2020 earnings call. Before we begin, I'd like to remind you that our detailed earnings release and an accompanying investor presentation were filed with the SEC on Form 8K yesterday and are available on our website. at ir.homestreet.com under the news and events link. In addition, a recording and a transcript of this call will be available at the same address following our call. Please note that during our call today, we may make certain predictive statements that reflect our current views and expectations about the company's performance and financial results. These are likely forward-looking statements that are made subject to the safe harbor statements included in yesterday's earnings release, the investor deck, and the risk factors disclosed in our other public filings. Additionally, reconciliations to non-GAAP measures referred to on our call today can be found in our earnings release available on our website. Joining me today is our Chief Financial Officer, John Mitchell. John will briefly discuss our financial results, and then I'd like to give you an update on our results of operations, credit performance, and our outlook going forward. John?

Thank you, Mark. Good morning, everyone, and thank you for joining us. In the fourth quarter, our net income was $28 million, or $1.25 per share, with core income of $32 million, or $1.47 per share, and pre-provisioned core income before income taxes of $41 million. This compares to net income, core income, and pre-provisioned core income before taxes of $26 million, $28 million, and $36 million, respectively, in the third quarter. Our results included unusual activities that occurred during the fourth quarter, including as part of restructuring and consolidation of our space at our corporate headquarters in Seattle, and to acknowledge the impact of the pandemic on the leasing office market, we recognized a $6.1 million charge related to the impairment of our lease and related fixed assets on space we have vacated. We estimate that this will result in occupancy expense savings of approximately $1.3 million per year through the next seven years. We paid off certain fixed rate FHLB advances and incurred a prepayment penalty of $1.5 million, with the benefits expected to be realized evenly within our net interest income over the next five years. We recognized a $1.8 million reduction in our self-insured medical benefit costs, which is due to lower usage of medical services by our employees in 2020. We are not anticipating similar savings in 2021 and future years. Continued decreases in our funding causes had the result of increasing our net interest margin to 3.26%. As a result of the continuing strong performance of our loan portfolio and a stable low level of non-performing assets, no provision for credit losses was recorded in the third or fourth quarters of 2020. Our ratio of non-performing assets to total assets remain low at 31 basis points, while our ratio of loans delinquent over 30 days to total loans decreased to 68 basis points at December 31st from 76 basis points at September 30th. Loans remaining in forbearances in our commercial and CRE portfolios were $41 million at December 31st, 2020, representing 1.2% of such loans' outstandings. and new forbearances granted in the fourth quarter for our commercial and CRE portfolio were less than $7 million. Single family and consumer loans remaining in forbearance, excluding those guaranteed by Ginnie Mae, were $76 million. In light of the recently passed Coronavirus Response and Relief Supplemental Appropriation Act, we anticipate that some single family loans may request an additional forbearance in 2021. Our single-family loan origination and sales volumes and profit margins remained strong in the fourth quarter, driven by the ongoing mortgage refinancing boom. The increase in non-interest income in the fourth quarter was due to higher sales of multifamily loans, including Fannie Mae DUS multifamily loans, and higher servicing income, which resulted from more favorable risk management results on mortgage servicing rights realized in the fourth quarter. The increase in non-interest expense in the fourth quarter over the third quarter was primarily due to the previously mentioned restructuring charges, higher lending commissions and management bonuses, and the prepayment fee on the FHLB advances, which were partially offset by reduced medical costs. I will now turn the call over to Mark.