HomeStreet, Inc.

Good afternoon. Thank you for attending today's fourth quarter 2022 earnings release call for HomeStreetBank. Joining us on this call is Mark Mason, CEO, President, and Chairman of the Board. I would now like to pass the conference over to our host, Mark Mason. Please go ahead.

Hello, and thank you for joining us for our 2022 fourth quarter 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 on Friday 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 will 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 Statement included in Friday's earnings release, our investor deck, and the risk factors disclosed in our other public filings. Additionally, the reconciliations to non-GAAP measures referred to on our call today can be found in our earnings release and investor deck 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 and our outlook going forward. John?

Thank you, Mark. Good morning, everyone, and thank you for joining us. In the fourth quarter of 2022, our net income was $8.5 million, or 45 cents per share, as compared to net income of $20.4 million, or $1.08 per share, in the third quarter of 2022. For the full year of 2022, our net income was $67 million, or $3.49 per share. In the fourth quarter of 2022, Our annualized return on average tangible equity was 6.4%. Our annualized return on average assets was 36 basis points. And our efficiency ratio was 76.2%. These results reflect the adverse impact of the significant increase in short-term interest rates on our business. For the full year 2022, our return on average tangible equity was 11.5%. Our return on average assets was 79 basis points. and our efficiency ratio was 72.4%. Our net interest income in the fourth quarter of 2022 was $7.3 million lower than the third quarter of 2022 due to a decrease in our net interest margin from 3% to 2.53%. The decrease in our net interest margin was due to a 90 basis point increase in the cost of interest bearing liabilities, which was partially offset by a 29 basis point increase in the yield on interest earning assets. Yields on industry assets increased as yields on adjustable rate loans were higher due to increases in the index on which their pricing is based. The increase in the cost of interest-bearing liabilities was due to higher deposit costs, higher borrowing costs, and an increase in the proportion of higher-cost borrowings used as sources of funding. Our cost of borrowings increased 150 basis points during the fourth quarter, while the cost of deposits increased 58 basis points. Additionally, our average in borrowing has increased by $187 million. Our effective tax rate for the fourth quarter and full year for 2022 was 23.7% and 21.4% respectively. In 2023, our expected tax rate is expected to be approximately 23%. A $3.8 million provision for credit losses was recorded during the fourth quarter of 2022 compared to no provision in the third quarter of 2022. The provision recorded in the fourth quarter was primarily due to the growth in our loan portfolio and a $2.2 million increase in the collateral qualitative factor in our allowance for credit losses. This increase in the qualitative collateral risk is related to projection declines in future home prices. Going forward, we expect the ratio of our allowance for credit losses to our loans held for investment portfolio to remain relatively stable and provisioning in future periods to generally reflect changes in the balance of our loans held for investment, assuming our history of minimal charge-offs continues. Our ratio of non-performing assets to total assets remain low at 13 basis points, declining from 15 basis points last quarter. The decrease in non-interest income in the fourth quarter of 2022 as compared to the third quarter of 2022 was primarily due to a decrease in other income due to a $4.3 million gain on sale of five eastern Washington branches recorded in the third quarter. The $0.5 million increase in non-interest expense in the fourth quarter of 2022 as compared to the third quarter of 2022 was primarily due to higher information services costs related to the maintenance and replacement of our ATMs, higher FDIC fees resulting from our larger deposit base, which were offset by lower medical benefit costs and lower commission and bonus expenses. Consistent with prior years, we expect seasonal increases in compensation and benefit costs to occur in the first quarter of 2023 related to wage increases and seasonal increases in benefit costs. I will now turn the call over to Mark. Thank you, John.