Good afternoon. Thanks for attending today's third quarter earnings release call for HomeStreet Bank. 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 call today. 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 8-K yesterday and are now 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 statements included in yesterday's earnings release, our 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 and investor deck available on our website. Joining me today is our Chief Financial Officer, John Michel. John will briefly discuss our financial results, and then I'd like to give you an update on the results of operations and our outlook going forward. John? Thank you, Mark. Good morning, everyone, and thank you for joining us. In the third quarter of 2022, our net income was $20.4 million or $1.08 per share as compared to net income of $17.7 million or $0.94 per share in the second quarter of 2022. In the third quarter of 2022, our annualized return on average tangible equity was 14.2%. Our annualized return on average assets was 91 basis points, and our efficiency ratio was 68.4%. Our net interest income in the third quarter of 2022 was $3 million higher than the second quarter of 2022 due to a 13% increase in interest-earning assets, which was partially offset by a decrease in our net interest margin from 3.27 - three. The increase in the average balance of interest-earning assets was due to the high level of loan originations during the second and third quarter. Our net interest margin decreased to 3% as a 67 basis point increase in the cost of interest-bearing liabilities was partially offset by a 27 basis point increase in the yield on interest-earning assets. The yields on interest-earning assets increased as the yields on loan originations during the third quarter were higher than the rates of our existing portfolio of loans, and the adjustable-rate loans increased due to increases in the indexes on which their pricing is based. The increase in the rates paid on interest-bearing liabilities was due to higher deposit costs, higher borrowing costs, and an increase in the proportion of higher cost borrowings used as our sources of funding. The increases in yields on interest-earning assets and the rates paid on interest-bearing liabilities was due to the significant increase in market interest rates during the first nine months of 2022. Our effective tax rate for the third quarter was 23%, which is expected to be our effective tax rate going forward. No provision for credit losses was recorded during the third quarter of 2022 as the benefits of the continuing favorable performance of our loan portfolio offset any required ACL resulting from the growth in our loan portfolio. 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 balances of our loans held for investment. Our ratio of non-performing assets to total assets remained low at 15 basis points. Noninterest income in the third quarter of 2022 was consistent with the second quarter of 2022 as a $4.3 million gain on sale of Eastern Washington branches was offset by a decrease in single-family gain on loan origination and sales activities due to decrease in rate lock volume as a result of the effects of increasing interest rates and lower loan servicing income. The $0.7 million decrease in noninterest expenses in the third quarter of 2022 as compared to the second quarter of 2022 was primarily due to reduced headcount due to the sale of five Eastern Washington branches, lower commission and bonus expenses offset by higher marketing costs related to our promotional deposit products and higher FDIC fees due to our larger asset base. I will now turn the call over to Mark. Thank you, John Michel. I'd like to start my prepared remarks today by acknowledging the challenges presented by the significant increase in short-term interest rates this year, and especially the rate moves over the previous few months. Combined with our recent reliance on shorter-term funding sources, the surge in rates has temporarily disrupted our progress toward reaching our financial goals. We expect the current pressure on our revenues, both on net interest income and non-interest income, stemming from this fast-moving and volatile rate environment, will be the most acute over the next quarter or two until our mitigation actions fully take hold and restore us on a path toward achieving our profitability targets. I will expand on this further in my remarks today, and I hope that these remarks, as well as our answers to any further questions you may have afterwards, will shed light upon the confidence we continue to have in where we have repositioned the bank over the last few years and the likelihood that we can achieve our financial goals going forward. During the third quarter, we grew our loan portfolio by $454 million or 7%. Year to date, our loan portfolio has grown by $1.7 billion or 31%. This growth was driven by our strong loan origination levels, accelerated by a historically low level of prepayments in our multifamily loan portfolio, the largest part of our portfolio. Looking forward, over the near term, we are expecting diminished demands for loans, mostly due to uncertainty regarding the economy and of course, the overall higher level of interest rates. Accordingly, we are anticipating only a modest rise in our overall loan portfolio for the fourth quarter. Due to low levels of core deposit growth this year, we have had to fund our significant loan growth with wholesale funding, both FHLB advances and brokered deposits. With significant increases in market rates already experienced this year, and with anticipated additional increases in the near term, our wholesale funding costs have risen dramatically and are expected to continue to rise. As it became increasingly evident in the last few months that short-term interest rates were likely to rise much more quickly than we or the markets were originally expecting, we began efforts to replace our wholesale funding with lower cost promotional deposit products, primarily certificates of deposit. As a result of our promotional deposit activity and excluding the impact of our July sale of branches and deposits in Eastern Washington, our total deposits increased by 10% during the quarter. We plan to continue growing our certificate and money market deposit balances going forward with a goal to substantially, if not completely, replace our current wholesale borrowings within the next two quarters. We are fortunate to have a valuable retail deposit franchise with customers who will invest in certificates of deposit and money market deposit accounts at rates well below wholesale borrowing rates. As a result, we are attracting and locking in longer term funding at favorable pricing. Our deposit betas remain below historical levels, with less than a 25% beta on our interest-bearing deposits realized to date. Through the end of 2023, we currently expect our interest-bearing deposit beta to be less than 40%. In addition to our ongoing organic deposit gathering and in an effort to accelerate our goal to replace our existing wholesale funding, earlier this month, we entered into an agreement to purchase three retail deposit branches in San Bernardino County in Southern California that will include approximately $490 million of deposits and $22 million in loans. 83% of the deposits today are consumers, and 39% of these deposits are non-interest bearing. The weighted average rate for all interest-bearing deposits is currently less than 10 basis points. We are excited about this opportunity to expand our footprint in Southern California, and members of my team and I have already met with the staff at these branches. The deposit premium to be paid on this purchase is 6%, and we currently anticipate the closing to occur in the first quarter of next year. This acquisition is expected to result in an approximately 25 basis point improvement in our net interest margin. While our yield on interest-earning assets has increased and is expected to continue to increase in the future, the impact of the accelerated increase in market interest rates on our wholesale funding sources is expected to cause a temporary decline in our net interest margin over the next two quarters as we work to replace existing borrowed funds with deposits. More specifically, if the Federal Reserve increases the targeted federal funds rate an additional 150 basis points over the next few months, as is currently expected in the market, we estimate that our net interest margin in the fourth quarter will experience a decline similar to the magnitude of the decline we saw this quarter, the third quarter. At the same time, assuming, one, short-term interest rates begin to stabilize in early 2023 in line with current market expectations, we continue to have success in our growing deposit base with promotional CDs and other products. Finally, we complete our Southern California branch acquisition as anticipated in the first quarter of 2023. Then we would expect our net interest margin to trough in the fourth quarter of this year and build sequentially throughout the quarters of 2023, and ultimately provide for a full year 2023 net interest margin that exceeds the level of our 2022 net interest margin. Of course, this is premised on all of the things I just described, but this is what we believe will happen at this juncture. The credit quality of our loan portfolio continued its strong performance during the third quarter. As John mentioned earlier, the improvement in credit offset any required additions to our ACL resulting from the growth in our loan portfolio. In last quarter's earnings call, I spoke at length about my confidence in how well HomeStreet's credit profile is positioned for the eventuality of a recession and/or credit cycle. Our portfolio is well-diversified, with our highest concentration in Western states multifamily, one of the lowest risk loan types historically. Our delinquencies, non-performing assets, and classified assets remain at historically low levels. Our portfolio is conservatively underwritten. With a very low expected loss potential, and we expect to perform very well relative to both the overall industry and our peers if and when we face the next credit cycle. I remain extremely confident of HomeStreet's credit quality. The consistent rise in base treasury yields over the past 12 months, combined with widening mortgage-backed security spreads, have driven the rates on conventional conforming 30-year fixed mortgages from around 3% just a year ago to over 7% today. The single-family mortgage industry is currently in the midst of the most difficult stage of the mortgage banking cycle, and I suspect it will remain there for the near to intermediate term. Today, industry loan mortgage volume is at multi-decade lows, so these conditions will not last forever given the continuing low levels of new and resale home inventory and excess demand. As those who follow HomeStreet are aware, we made the decision approximately four years ago to significantly downsize our single family mortgage banking business to one which fit our overall size and one which could withstand the low volume, high rate cycles with minimal losses. I'm happy to report our remaining single family mortgage banking business has performed very well since then, and even today, the origination activities produce minimal losses. However, we are not immune to the headwinds facing the entire industry today. During the third quarter, our single family mortgage banking loan volume and gain on sale revenues continued to decrease to levels that we now believe are unlikely to fall much further. While we are continuing to benefit from the origination of single family mortgages and HELOC portfolio loans, we are not anticipating any significant increases in mortgage banking revenues in the near term. We anticipate the normal seasonal volume changes next year starting at this low base. We have, and we will continue to take steps to manage personnel in this area to be commensurate with loan activity levels. In spite of inflationary pressures, we were able to decrease our non-interest expenses during the third quarter to below $50 million. This is the result of our continued focus on efficiency improvement and expense controls throughout the organization. As we grow, our ability to leverage our existing operating expense infrastructure should result in improving operating efficiency ratios over time. While these efficiency gains have been muted by lower gain on sale revenue as a result of the historically low levels of single-family mortgage and multifamily DUS loan production, as well as reduced secondary market for portfolio multifamily loans, over time, through growth and operating leverage, we currently anticipate beginning to achieve these efficiency goals in the second half of next year. We do expect our gain on sale revenues to recover to normalized levels sometime in the future, but we are not planning such a recovery to take place in the near term. Consistent with other banks, we have experienced a large negative swing in accumulated other comprehensive income, or AOCI. In fact, the AOCI balance, a component of shareholders' equity, has declined from a + $21 million at year-end 2021 to - $106 million at the end of the third quarter. The change year to date represents a sizable $6.79 per share reduction to our tangible book value per share. While this - AOCI balance does impact the level of our tangible capital today, it is not a permanent impairment in the value of our securities, and it has no impact on our regulatory capital levels. We have reduced the impact of current and future additions to - AOCI by restructuring our portfolio where possible to reduce our duration by 8% in the third quarter. We are now buying shorter duration securities when replacing our portfolio runoff or increasing our holdings. As I hope everyone knows at this point, the AOCI related write-downs of our securities portfolio will be added back to us over time as the bonds mature or repay. Well, on the other hand, should the interest rates decline, the securities valuations will improve and the AOCI write-downs would reverse and in turn restore our tangible capital. Given the earnings and cash flow of our bank, we don't anticipate needing to sell any of these securities to meet our cash needs, so we don't anticipate realizing these temporary write-downs. Our strategy and year-to-date growth has built the foundation for increased earnings power going forward. Unfortunately, as a result of the significant and historically fast rise in interest rates, we have not been able to achieve our near-term profitability and return goals. I've already discussed the detrimental effect that the rate environment has had and will continue to have in the near term on our net interest margin and associated net interest, net interest income, as well as on a portion of our non-interest income from lower gain on sale activity from our single family mortgages, Fannie Mae DUS, and occasional permanent multifamily loan sales. Combined, these factors will result in a suppressed level of earnings and profitability during the next couple of quarters. Importantly, we are already rapidly addressing the factors causing pressure on our net interest margin. Even as we have reduced our gain on sale expectations through 2023 to a level consistent with what we've experienced this year, we see a path to achieve our prior profitability targets as soon as the second half of 2023. We view this current environment as having caused a short-term delay to the financial goals I previously set forth in these calls. All that said, we continue to target returns on average assets in the 110 basis point range, and a return on average tangible common equity in a high teens range for the second half of 2023. For 2024 and beyond, the ROA and ROTCE targets move higher. I hesitate to be more specific given the many variables, both positive and negative, that could impact performance that far out. Suffice it to say that generally we feel that the unanticipated significant increases in short-term rates have pushed forward by about one year our planned accomplishment of what was our near-term financial performance goals. Of course, and this should be obvious by now, achieving these goals assumes a generally stable economic environment, current consensus views on rising interest rates and the yield curve, and an absence of changes in law or regulation or other events or factors which could negatively impact the success of our business strategy. Finally, in the midst of the near-term noise and chaos, and by that I don't mean to make light of the temporary suppression of our earnings and profitability, I would like to have you step back and consider the bigger picture of what has taken place at HomeStreet over the recent years. After our single-family mortgage business reorganization, which was completed in 2019, and our subsequent efficiency improvement initiative, we entered 2020 with a goal to improve the quality and consistency of our earnings and profitability. The year 2020, of course, brought the COVID-19 environment and all of its unusual factors. As we look back at where we were in 2020 and compare it with where we expect to be in the second half of 2023, the progress we have made in our strategic goals is remarkable, notwithstanding this current temporary rate-driven disruption. In 2020, we had a core ROA of 1.22% and a core return on tangible common equity of 13.4%. that included nearly $123 million of gain on sale revenue, which represented just over 34% of total revenues for the year. The significant gain on sale revenue was largely driven by the refinance boom in single-family mortgage banking due to the ten-year Treasury yield falling to well below 1% and tighter mortgage spreads due to the commencement of significant mortgage-backed securities purchases by the Federal Reserve in an attempt to spur the economy through the pandemic. As we look to the second half of 2023, should we attain our financial targets, we would expect to attain a return on assets of 110 basis points, a return on tangible common equity in the high teens with minimal gain on sale revenue that we expect would represent only a mid-single digit percentage of total revenues for the period. We have substantially reduced the contribution of single-family mortgage banking to our earnings, and we've replaced it with durable and growing portfolio net interest income. We have grown our loan portfolio with high-quality, lower credit risk loans. We've created meaningful operating leverage to support our expected future revenue growth, and we've used our capital wisely, providing for balance sheet growth while returning excess capital to shareholders. I understand investor anxiety and concerns for the future challenges that may come from persistent inflation, rising interest rates, and credit risk from a potential recession. I believe HomeStreet is well-positioned to address these risks if and as they occur. I also believe our veteran management team has the experience to navigate all of these risks successfully. With that, this concludes our prepared comments today. We appreciate your attention. John and I would be happy to answer any questions you have at this time. Thank you, sir. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question comes from the line of Jeff Rulis with D.A. Davidson. Your line is now open. Thank you. Good morning. Good morning. Good morning. John Michel, do you happen to have the margin in the September month average relative to the quarterly average? In terms of that, we produce the quarterly numbers, and so I guess we don't specifically provide the month-by-month changes in going through that stuff. You can see as we talked about last quarter, that there was a decline and the rate increases continue to outpace what had been projected at that time. We're trying to anticipate that, and Mark provided what the margins and the expected interest rate increases that were going forward into the fourth quarter. Jeff, instead of talking about the month of September, I think we gave you better information in my prepared remarks by saying that we believe our margin compression next quarter will be similar to our margin compression in the third quarter. Got it. Just modeling stuff. Yeah. It's just better information. Yeah. Fair enough. A question on that margin. Mark, you mentioned. I thought you said some pressure the next couple quarters, but I think you've alluded to troughing in the fourth quarter. Sequentially, Q4 - Q1, you've talked about some of the, you know, some stabilization of rates. Branch deal expected to close in the first quarter, some positive offsets. Could you maybe clarify your expectation for margin Q4 - Q1? Sure. Some recovery is probably my best description. With more significant recovery beginning in the third quarter. If we close and that biggest difference, Jeff, is closing the deposit deal. In my remarks, I think I said our current estimate is that the deposit deal could improve our margin by about 25 basis points, right? If you compare that to our third quarter change from the second quarter, right? That if we close that deposit deal in the first quarter, being conservative, let's say we close it late in the first quarter, the second quarter benefit could be about 25 basis points. Then recovery in other aspects of the margin sort of sequentially during the year next year. Okay. While we're kind of on the branch discussion, you know, any other, I guess, further appetite looking around for something of similar type transactions that you'd be interested in? Absolutely. I mean, the best thing we could do for the company, and this is really regardless of the environment right now, is to continue to improve our funding, right? This transaction, it's somewhat unusual, right? Because it's a forced sale. You know, typically people aren't selling, deposits with, you know, 40% non-interest-bearing deposits, right? They had to as a consequence of their transaction. As you can tell from our deposit premium, we bid aggressively to get these deposits. That pricing looked much better as the year went on. It was a complicated transaction that was negotiated, basically earlier in the year. Okay. Got it. A last one. Yeah, about $3 million or so net non-accrual increases. Any type or size, any sort of kind of characteristics of that increase in quarter? No. There's nothing remarkable about the composition of the change. All that really represents is a little volatility, right, if you look at prior quarter numbers. The other thing you can look at, Jeff, is just look at our delinquency levels. They're not increasing at all. There's no build up in the pipeline of delinquent loans. Okay. Again, there's nothing, I guess a trend or, there wasn't a specific type. You're basically saying some random fluctuation quarter? Okay. Yeah, I mean, look, there's always individual stories on individual loans, right? But we don't see any trends in loan type or region, anything of that sort. It's not a trend. I think it's just volatility. Our levels are so low that any small number just makes it go up a lot. Right. I mean, think how small $3 million means to- You're right. Well, yeah, we're gonna track it all. But I appreciate it, guys. I'll step back. Thanks. Thanks, Jeff. Thanks, Jeff. Thank you for your question, sir. Our next question comes from the line of Matthew Clark with Piper Sandler. Your line is now open. Good morning, guys. Good morning. Just one on the decline in loan servicing revenue. Would have thought that would have been up with rates up. Can you give us a sense for what drove that decline and what's your outlook for that line item? Yeah. Part of the decline is just the difficulty in hedging and some of the losses we've had in our hedging activities. The other is just going through the process of looking at, you know, the servicing revenues and the decay of our portfolio in terms of how it's affecting it. There's a lot of small moving parts. There wasn't any one major thing that hit it. It was just a little bit lower servicing income and going through the levels we had. If you look back on page 15 of the earnings release, it's much easier to understand when you look at the schedule in the top half of that page and you see that the servicing fees have fallen a little bit this quarter, but there's volatility in that line. Some of it is accounting because servicing fees are still accounted for on an as received basis as opposed to an accrual basis. It actually matters how many days are in a quarter and what the cutoffs are. If you look at the volatility in that line, it's more than you would expect given a portfolio that's more stable. Great. Okay. The spot rate on interest-bearing deposits that you had at the end of September? Yeah, I believe that was in our book here, but let me check and make sure. We completed that. You know what? Let me look at our math and I'll get back to you to make sure I have it right. Okay. All good. Then the 25 basis point benefit from the branch acquisitions, or branch acquisition. I assume that's just for using the deposits to replace borrowings, but can you give us a sense of- Yeah. What you're assuming to get to that 25 basis points? That, that's basically it. It's pretty simple calculation, right? Their cost versus our marginal borrowing cost. Right. 'Cause that's what it would do. Got it. Yeah. The noninterest expense guide- Okay. Go ahead, I'm sorry. In our deck, our investor deck on page 13, there's a page on interest-bearing liabilities, and the period-end cost of deposits is 71 basis points. Which includes all of them. Which is why I was trying to break out the non-interest bearing, because he asked for interest-bearing. Yeah. Well. That's old, but that is the overall view. Sorry. That's all right. 71's good. I didn't see that. Okay. Just on the expense guide being flat, but there's some mention of seasonal comp increase. Is Is that guide of flat expenses exclude the seasonal increase in comp in 1Q? Yeah. Basically, as we go from a historical perspective, we expect the first quarter to go up for the items we mentioned in the past, the 401(k) match, the FICA, excuse me, Social Security taxes, and also at the end of the quarter, our normal raises, which obviously with the inflation levels we have, are expecting that to be some pressure on the first quarter of next year. In total though, that increase could be what? In the $4-$5 million range for three-four? Did you say million? Yeah. Yeah. Somewhere in the $3 million-$5 million at most. Yeah. Yeah. For the first quarter. Yeah. As the year As the year continues, that declines, right? It kind of flattens out, you know, and so offsetting that stuff, so. Great. Thanks, John. Thanks, Matt. Thank you for your question. Our next question comes from the line of Tim Coffey with Janney. Your line is now open. Thank you. Morning, gentlemen. Good morning, Tim. Hey, Mark, do you have a targeted loan or deposit ratio for 4Q, or something that you're looking to get closer to, if not an absolute target? Sure. We don't really like being over 100%, you might imagine, but confluence of events and decisions has gotten us there. We really would prefer not to exceed 100%. We think it's going to take us several quarters and maybe as much as a year to get back below 100%. We'd love to be lower than where we are today, right? Our refunding efforts, if you will, replacing borrowings with deposits, are going well. We may end the year at about 100%, if we continue to be successful, and we priced our promotional CDs to be successful. You know, hopefully, we can hold that number closer to 100% throughout the remainder of the year. Yeah, we'd rather not be up here. It's too costly. Right. No. Speaking about the promotional CDs, you know, if I look at the rate sheet, you know, those rates seem to be really in line with the market right now. In 3Q, how many times did you have to change the rate sheet? And what's gonna be your approach to that in 4Q? This is something that has been kind of surprising to me. We never changed our promotional CD rates the entire quarter. You may remember on our call last quarter, we shared that we had three tenors, a seven-month, a 13-month, and an 18-month promotional CD at 2%, 2.25%, and 2.5%. We only changed those rates this week. We started at even lower rates. Everything that we raised in the quarter was at these lower rates. Only last week did we add 75 basis points to each of those tenors, not because we weren't raising money. We were still raising somewhere between $3 million and $5 million a day, but we wanted to raise it faster before the next Fed increases. We've increased those rates by 75 basis points at each tenor. We've increased our daily acquisition rate, well, initially, almost double, and we'll see how that works. We've been pretty pleased to be able to raise a lot of money at, meaningfully lower levels with borrowing costs. Okay. Do you anticipate being more active in changing the rates this quarter? No. No. Okay. I say that because we were still having reasonable success at rates 75 basis points lower than today. We simply want to accumulate it faster before others raise their rates. No. Now, I could be wrong, but if our experience is similar to last quarter, I don't expect to. Okay. We have these next couple of raises hopefully are the last or near the last in this cycle. Right. Okay. That makes sense. The terms on the FHLB borrowings that you had this quarter, I assume they're short, but how short are they? Overnight, mostly. I mean Okay. Very short. Yeah. But. Okay. All right. You know, based on your comments, you know, obviously the residential beyond sale business is, you know, in a prolonged slowdown at this point. Can we also just determine that or guess that the DUS sales are also gonna be, you know, slow as well? That's what we're internally forecasting. Now, my hope is that business recovers faster. This year will be our lowest production year in five years, six years, something like that. Very low. We're internally forecasting a modest recovery in that production, really modest. More of that recovery being in the second half of next year and beyond. We are not internally forecasting meaningful recovery until then, second half of next year. Even then, we expect it to be modest. Hopefully, we're wrong. Right. I mean, our internal Yeah. Yeah forecast are considerably higher. I think the downside risk is pretty limited given how low the levels are. Right. Right. Absolutely. Okay, well, thank you very much. Those are my questions. Thanks, Tim. I just wanted to follow up on a question earlier. At September thirtieth, the weighted average cost of deposits of our interest-bearing deposits was 93 basis points. Thank you for your question, sir. There are currently no questions registered at this time, so if you would like to ask a question, it is star one on your telephone keypad. There are no additional questions waiting at this time, so I'll pass the conference over to the management team for any closing remarks. Thank you all again for attending our call today and the great questions. We look forward to speaking with you next quarter. Have a great day. With that, we have concluded today's third quarter earnings release call for HomeStreet Bank. Thank you for your participation. You may now disconnect your line.