HMST
#Correct.
I'm sorry if that wasn't clear.
Sure, because they were sizable loans.
Prepayments fees in the quarter remain high and we're running in excess of 20% annualized rate each of the last several quarters.
I don't think that we thought the prepayment speed was high enough to call it out in terms of what it's been running, but it remains fast.
I think that's true for everyone today.
Most of it was of the unusual prepayments was related to one fairly sizable commercial real estate loan that was restructured during the recession, and it was a sizable prepayment penalty because of a pretty favorable structure that we negotiated to get the loan through the recession.
And the property and the borrowers were covered to the extent that they could get a much better rate and they did it.
It was a sizable prepayment penalty, you got the economic values of even doing it was larger.
And <UNK>, I would just say that that was called out as a primary driver for the Commercial Consumer Bank in terms of servicing income, but overall, it really didn't stand out on a consolidated basis.
So we did give guidance in terms of our forward look on NIM between 330 to 335, which at the top end would be pretty stable to where we ended the quarter last quarter.
And I would expect for the next quarter or two to remain around that level and then trend down over the course of the year.
So there will be some offsetting factors in that.
But by trending down, it's within that range, 330 to 335.
Within that range, exactly.
It does.
It assumes (technical difficulty) into loans held for investment.
I would say one of the key factors is percent of refi volume in the quarter and the industry in total.
So in the second quarter, and I think <UNK> touched on this, our interest rate lock volume was 35% refi.
In the third quarter, that went up to 47%.
So of course, that increased our overall production quite a bit.
And we did not anticipate it with giving guidance.
Thanks, <UNK>.
Good morning
Well, that's part of our goals, right.
Ultimately, yes.
Business customers tend to have higher levels and a higher composition of non-interest-bearing deposits to interest-bearing deposits.
It is a significant goal to grow the balance of our C&I business and related deposits.
We are getting better at it, but of course, these are still small portfolios relative to the whole.
And so we expect that will have a positive impact on our relative deposit cost.
It already is having some benefit and how quickly we can do that is subject to some uncertainty at this point.
I think our track record, though, of growth both in the business accounts and notably consumer accounts, through our de novo branching, that track record's very strong.
I don't know if you caught the statistic in our prepared remarks that our new branch, or de novo branch, deposits grew almost 40% in the quarter.
To me, that's a spectacular number.
And a material part of that growth is in non-interest-bearing accounts.
Many of them are.
The oldest, if they can call it older, the first de novo branch that we opened post IPO has total deposits in excess of $35 million already.
So once you get above, say, $15 million to $20 million, you're above breakeven.
More in 4Q and less in 1Q.
I don't have a solid estimate for you right now, because we're actually negotiating with Fannie Mae as to what we can deliver in the quarter.
They have to manage their origination cap pretty closely.
And for that reason, I'm not sure yet what that reasonable range (technical difficulty) of sales, which for our financial results both are important, because that gain on sale, we don't recognize until sale, and that category of loans, because we carry them at lower cost or market as opposed to our single-family mortgage loans held for sale, which we carry at fair value, so we recognize a lot of that revenue at origination.
In this case, we recognize most of it on the Fannie Mae commercial real estate loans, ultimately on the loans, upon ultimate sale to the securitization of Fannie.
Thank you, <UNK>.
Hello, <UNK>.
Good morning.
We did, <UNK>.
It hasn't changed.
We still ---+
4% to 6%, somewhere in that range.
Obviously this last quarter, we were a little lower, approximately 2%, but we still are modeling and believe that we're going to be able to deliver 4% to 6% a quarter loans held-for-investment growth, on average.
Our markets are so strong, as you know, <UNK>, you're in the Bay area.
We just ---+ I think we hit a new record for cranes in the city of Seattle, at 53 cranes.
And the city of Seattle is not that big, as you know.
We can see most of those outside our windows.
So commercial construction here continues to be very strong and not just in multi-family.
The office market is strong.
Office vacancies are about 8% in the city of Seattle today.
The multi-family market continues to be very, very strong, despite a lot of deliveries over the last several years.
So we will be involved, continue to be involved mostly in multi-family construction on the commercial side in the greater Seattle and Puget Sound area, as well as the greater Portland area.
We haven't done much commercial construction, in fact, I'm not sure we've done a project in California, but we're likely to next year.
And in single-family residential construction this year, we will originate, we believe, somewhere in excess of $600 million.
It's a very strong year, up almost 100% from the prior year.
And those loans are still turning over very, very quickly and not being fully drawn out, as well.
So that business we expect to grow next year, as well.
If we originate in excess of $600 million this year, that number is (technical difficulty) for next year.
And those loans are across a larger regional market, not just Puget Sound and greater Portland.
We also have a very strong business in the greater Boise area, as well as Salt Lake City, which remains one of the busiest homebuilding areas in the United States, and then Southern California and we have a few projects in the Hawaiian Islands again.
It's a solid business that has some regional diversity, as well.
We did not specifically talk to construction in terms of the commitments, but we could follow up with you on that.
We are.
The appetite for new homes, apartments, office, is so strong here in these areas.
Fortunately, we're able to really choose the people we work with and the areas we work, in to the extent that we feel super comfortable with the credit, with the projected absorption of this construction, and it's been a great business for us.
It's interest rate driven.
If you look at the 10-year Treasury rate during the quarter, you'll see there was a couple of pretty significant rallies, where the rate fell pretty substantially, and it remains at a historically low rate.
So despite it being up a little from the lows during the prior quarter, our refinancing volume continues to be above normal for us.
And normal for us is about 25% to 30% of our production.
There's always someone refinancing in every interest rate environment.
Our environment today is characterized by lower rates and a great deal more equity.
If you think about our earlier comments regarding home price appreciation in our markets, many people have created a substantial amount of equity that they're now using for traditional purposes, like debt refinancing, home improvement, automobile purchases, investments.
And so we're seeing a little more activity in cash-out refis and not just rate and term refis.
Well, it's hard to predict, <UNK>.
Earlier this year, we had a pretty substantial rate rally in January and February, if you remember.
And in some of those months, our refinance percentage got as high as 60% to 70%.
So the percentage could be much higher.
It is seasonally dependent, though, right.
The second and third quarters, much higher purchase volume.
If we had this same type of refinance volume in the first or fourth quarter, that would make the composition of the refis as a percentage much higher.
So it's somewhat dependent upon when it occurs.
It's also dependent upon what we call burnout.
When you had low rates for a certain period of time and you've refinance a great deal of the people who would economically benefit with a refi, you'll start to see burnout at ever lower levels of refinancing, despite low rates.
We're never quite sure when we're going to hit that.
Because despite you being able to look at, let's say, our servicing portfolio and say there's a certain percentage of people who would have an economic benefit, they never all refinance, for a variety of reasons.
It may have to do with qualification, them paying attention, a whole bunch of reasons.
And so the absolute level of refinancing is awfully hard to predict at any time.
Sure.
Specifically with respect to the securities portfolio, <UNK> discussed earlier our short-term utilization of the capital that we raised, or downstream to the bank from our second quarter bond offering.
That utilization will be moved ultimately from the securities portfolio to the loan portfolio, as we utilize that capital for the intended purposes of growing our long-term balance sheet.
So we have a slightly higher percentage of assets in securities today than on a normalized basis.
In terms of consulting expenses, we utilize consultants for a lot of different things here.
Some of the largest costs today are in helping us implement our new loan origination system in the single-family area, but we have consultants working on a variety of projects here related to mostly infrastructure.
They may be systems projects or operations-related projects that we're investing in to grow and improve the infrastructure and risk management as we grow the Company.
And these expenses, you'd love to cut them back and avoid them, but given the requirements of growth, they're a necessity right now.
You bet.
Thanks, <UNK>.
Again, we appreciate your patience and your great questions today.
Obviously, we are pleased with the results this quarter and looking forward to talking to you next quarter.
Thank you.
