Hanmi Financial (HAFC) 24 Jan 232022 Q4 Earnings call transcript

Ladies and gentlemen, welcome to the Hanmi Financial Corporation's Fourth Quarter and Full Year 2022 Conference Call.

As a reminder, today's call is being recorded for replay purposes. [Operator Instructions]

I would now like to turn the call over to Larry Clark, Investor Relations for the company. Please go ahead.

thank fourth for XXXX quarter and to us results. Doug, Hanmi's discuss and you, you joining all today Thank full year slide This and call. its issued presentation supplemental afternoon, today's to earnings accompany Hanmi quarterly release documents website. company's Both of available IR on section are the the

on Kim, with Financial Anthony Officer. an begin call Banking here Bonnie of today Chief activities. overview and we Officer performance our Anthony Ron to details with discuss will will Lee, will provide Bonnie I'm Officer; open and before and up financial President deposit then Executive comments Ron will Hanmi; and call Bonnie your Chief and Chief Santarosa, today's questions. provide loan closing the

the I remind like to begin, comments you we may would securities statements federal laws. today's Before under that include forward-looking

expectations, results position. and affect financial current are trends industry statements may financial operating on based the Forward-looking future events and company's plans, that

the our which our forward-looking our including investor and filings, Our risk and those to uncertainties. actual in by materially in affecting differ can contemplated and results forward-looking of our that those from Form may statements materially be certain risks Forms contained involve discussion results on we our from to direct factors found SEC our you XX-Q. In the business our XX-K. factors earnings of XX-K release, could in statements, differ particular, Discussion reports actual cause our presentation

call Lee. would over With please Bonnie to ahead. the to that, I now turn like go Bonnie,

execution earnings Hanmi. Thank our third quarter was Thank of a XXXX you joining discuss and for Good to XXXX you, for record Larry. afternoon, solid us everyone. results. today year

enabling defined with the momentum. year a to business by We continue to finish and strengthen executing us our strong well our strategies, diversify

coupled conditions deliver customer with ongoing This macroeconomic results. ability proven underscores service, to strategic strong and navigate dynamic to our dedication model, our

improved expenses we record margin, improving our income diligently an net operating quality. our For asset and and loan and the year, managing net interest while production generated all

Net in increase for $X.X income loan record of the result as to $X.XX record share. for Net net point million, or average highlights. of a diluted the review driven per basis in $XXX.X XX.X% year a by XX.X% new year me billion. Let increased XXXX, was by by grew production margin earnings our interest assets a XX X.XX%. interest a income and higher the Loans

X.X% a the our grew by bearing point managed mix and which deposits a deposits less full of Our strong XX.X% and our for XXXX. growth, XXX by year, They diligently. efficiency at for loan expenses from of year a ratio improvement increased recorded the fund non-interest than we XXXX, deposits. remained of total helped We basis non-interest X% XX.XX%,

XXXX underwriting disciplined significantly focus Importantly, asset and on as improved practices. quality high continued vigilant in our quality administration credit we loans,

of XX%, result, million the Criticized down total were net X.XX% a declined over loans $XX charge-offs to or and nonperforming XX% course were of year. negligible As assets deposits. the

positioning us XXXX improved return on recognition continued We remained our safe and very was increased a sound well performance shareholder strong our in in for twice and capital at strong, Last, dividend past of year-over-year equity this our year XX% our average ratios shareholder manner. growth XX.XX%.

our Our portfolio, core delivered loan with strengthened our our of progress further We our our customers, diversified existing franchise. team strategic deposit growth on initiatives. meaningful expanded relationships base, each customer bolstered

approach, banking work, results. these is us to and our customer exceptional service enabled Our the of focus and with in to hard tandem hallmark commitment our community achieve

the a we excellent in discussed loan years, have progress last priority XXXX. has made and we two portfolio over our in key diversifying As past, the been

loan XX% production, XX%. year XX% was our of and to total For represented example, $XXX our million production our of ramp-up the residential mortgage record exceeding a well approximately targets loan for

by driven focus our $XXX Corporate million generated and with to SBA also on originating traction market another securing solid both grew new Korea year expanding strong where and continue Our the of gain talent year, loans we keen production initiative, a group loans for meaningfully. deposits reach of and

reminder, US with portfolio high businesses diversify and of Korea-based of the divisions As a serves to initiative needs South on quality this focused our loans.

balances were XX% and Here, now our up million or over loan just the representing $XXX $XXX grew for total million deposits. XX% balances deposit of or year, and X%

from success production achieved in commercial C&I to estate addition In the and real XX% year loan up categories, production the X% saw of from last diversification year. and came our new for these outside well loan California, Texas loan We strong nearly loan as attracting working. in The Eastern healthy strategies in our diversification new are our continued in customers in our are results reflecting as markets. region, market conditions growth both the clear;

is as have help approach, we both horizon of a customer business to asset see with environment. our in macroeconomic existing strong to their want businesses. proactive challenges in customers remains relationships. Communication navigate uncertain our they very the part about them in our and may the maintaining understand and together with gaining critical communicating been Our quality new work this on We

Kim, that, gathering to Banking production more turn With in the quarter to discuss Chief detail. over fourth call loan our I'll Anthony Officer, deposit and

quarter I'll details Bonnie. the current on higher $XXX and, of we interest economic uncertainty. our loan you, were volumes with and production down from million, fourth modestly quarter begin environment believe, the additional Thank where rates third reflecting

we residential loans industrial, We quarter, SBA in sequential quarter, good a and and environment. during and finance result million fourth mortgage volume third very record of down commercial the our while equipment achieved was production challenging mortgage originated its $XXX a in the in production higher from

our large correspondent this be for of continues non-QM production to Our focus in our portion active. home than in refinances. the purchases rather is the A residential mortgage lenders remain market and division on market,

quarter market as many their in the on purchase homebuyers healthy fourth and in remained eager close rates. their relatively to were The lock homes

higher expect refinance to both do an markets. are originations purchase rates However, the in moderate on as mortgage having impact we XXXX interest and

quarter increased of C&I the to a funding $X Outstanding X.X% balances quarter utilization lines billion by third quarters, year-over-year. quarter. fourth was on these prior between the XX% XX%, X% $XXX $XX rate and Total up from up credit with end, of commercial consistent million at lines resulting increased commitments quarter. during quarter million or the in on

at Equipment was loan the strong $XX production in finance again the $XX for SBA up $XX million perform continues our quarter, from million quarter. was third with for X(a) in fourth million the expectations. production to fourth line and And quarter

over continue us Our market. investment the year this personnel enabled key to production in loan half and has to last service

for Corporate Korea higher We as new was did of the With the fourth level given quarter mentioned, we production. loan delivered million growth our production uncertainty respect decline a is economic impacting which Bonnie our of to by see $XXX year, for strong Initiative, that driven customers. the in

good optimistic year us. we of line remain this be to However, about XXXX expect and for important business another

Corporate our representing portfolio expected portfolio. the total above we loan at XX% well as loan Our million had this for Korea $XXX of level balances year-end, is business were

new future all yields. on on production $XXX payoffs in loan the on down fourth origination quarter rate payoffs. the X.XX%, for have third was basis average the from quarter. XXX the The $XXX Payoffs new our loan The loan quarter million from yields which payoffs, row quarter the a benefit our million loan quarter, basis points average were yields X.XX%, should up from for up where the second This exceeded for is was rate XXX average quarter. third points third

diversify and to type drive industry, growth efforts further In we working, believe our is loan and loan incremental which summary, portfolio profitability. geography by will our

in deposits rates. a to stable quarter. shift the given from money deposits; We me, interest markets our relatively during moved quarter, turning see deposits into prior fourth DDAs, excuse increase remained in less did Now some deposits and deposits the of the accounts understandably as down rapid the savings during than quarter, the time in X% composition

over expertise. year-end, DDAs which just these total believe represented XX% noninterest-bearing local we our at and our strong moves, market customer of Notwithstanding validates service deposits

gathering Corporate clients XX% total deposits just up We efforts with and in as our the balances the Korea those At over continued Corporate quarter. year with X% also deposits. success $XXX year-end, and new had our represented from modestly our were of existing Korea million, deposit prior grew deposit fourth our

to call Officer, more our the results. hand Chief Santarosa, I'll now on details Ron quarter And financial over our fourth for Financial

fourth net essentially primarily offset a the the for loans, loan saw Anthony. Beginning reflected while $XX.X interest-bearing in we you, Thank at the sequential quarter. the deposits third the increase average from in with This average of interest growth increase million X.X% cost income increase quarter, increase the in yields.

on Average XX and up deposits loans reached quarter, X.X%. X.XX%, the to was the up X.X% fourth loans The $X.XX for points. XX interest-bearing billion yield basis of cost points basis rose

point net for Turning we margin, saw basis interest to by loan prior assets interest yields reduced which yields there deposits interest-bearing points, a points fourth of of while increase between basis from the differential benefited increase was XX in in the and the the cost and net one the XX was cost our negative quarter; debt. benefit the one the in interest-earning our other X.XX% basis point increase and basis margin up borrowings that quarter and by on

all interest During acceleration XXX the saw, Expectedly, basis interest period. and funds on interest increased in we loan and point federal rates of rate, have saw the our increase very points offered time XXXX basis also a in deposit fourth we short their of quarter, renewed depositors a deposits. rates XXX the for extraordinary and products in as

beta quarter quarter; for for XX%. approximately was our fourth XX%, to beta loan fourth Turning our was various the betas our approximately interest-bearing while deposit the

we amount in federal the particular as have as significantly any the the of that for for beta conditions market change the period As period quarterly vary previously rate differing noted, that in given can period. funds well

and support of of performance to rates rate to the noninterest-bearing said, very current as are our demand continue our net we net the given the margin cycle, we That revenues economy. from uncertainty such, through deposits. margin the of the remain As given especially rising the with stage interest in quarterly of interest interest cautious high the interest this pleased level trajectory and net

trade down and to sales. decline Last, on; SBA gain quarter in primarily for decrease a sold the other $XXX,XXX The $X.X quarter, volume asset. from income our fourth where noninterest XX% decreased due lease to to income $XXX,XXX and from for decline X.XX% bank-owned valuation as quarter. for disposition $X.X SBA $XXX,XXX we income decline a $XX.X was third million, expected, had in a gain for operating declined the we due a a million the to to prior X(a) was life of on the in adjustment the the million of quarter, other primarily loans recognized $XXX,XXX fourth a Moving modestly premiums, insurance operating quarter on The residual. our

to from the increased benefits employee with by fourth quarter $XXX,XXX increasing expenses, noninterest respect With categories reflecting the Salaries for $XXX,XXX, to fees adjustments to our up in third increase production some and and $XXX,XXX declining. quarter, and from loan were in expenses promotion. the a strong others performance, contributed professional changes compensation and primarily decrease in advertising levels $XXX,XXX financial incentive activity and

quarter, equipment million taxes and and property lower adjustments Occupancy $X was real the largely to to owned due in premises. on expenses leased

other $XXX,XXX by on addition, due assets. were our valuation servicing operating In adjustment expenses to higher a

a quarter fourth to result, the increased efficiency ratio for slightly As our XX.XX%.

The ratio loss positive our million $XXX,XXX quantitative loan the loss fourth Compared considerations We while allowances provision a $XX.X for quarter. and specific recorded representing qualitative with off-balance $XXX,XXX. of decreased the quarter, for third million, allowance down expense for million. for was negative X.X%. $XXX,XXX a third $X at of credit provision expense quarter, of the losses a of credit increased a allowance by year-end, Fourth the $X.X from coverage and quarter sheet $XX,XXX provision for reflected

equity delivered X.XX% we of assets or strong net $X.XX $XX.X and a a diluted XX.X%. income of quarter average on of return million return with summary, share, another on average In per

year, full XX.XX%. our average return XXXX was and was return average X.XX% the For equity our on assets on

the tangible bank up ratio X.X%, company Consequently, third a adjustment and per in positive quarter up book net the our our well of was retained because after-tax unrealized value interest longer-term earnings from the from capital to common arising of assets The quarter prior portfolio equity and minimum as rates. the to quarter the X.X% as ratios, regulatory decrease $XX.XX. a for exceeded share tangible securities to tangible from loss was our on

I With to turn it will that, back Bonnie.

before strategic do with keen years navigate Ron. entered XXXX you, demonstrated the a our our ability on to and we to balance I past in continue focus have the We Thank sheet. believe this a and execution of strong so with plan. year volatility, we'll that,

that XXXX anticipate macroeconomic loan from environment the we due in moderate levels current elevated Looking large ahead, production saw in to part backdrop. interest will the and we rate uncertain

caution approaching this discipline. and environment We are dynamic with

our core credit Hanmi deposit our to remain And on of the we and growing all remain underwriting with and customers our the continuing by in returns team, our corporate expand win base shareholders. committed attractive administration. and goal vigilant focused remain to We communities We existing our delivering relationships. to

their I that, past just our thank want this Hanmi XXth entire milestone for the celebrated to important We company. an year. exceptional anniversary, With team for our work

service serve communities look of advantage Our we deeper understanding customers' a we personalized with delivering continued are decades the our forward financial in shareholders. communities enabling teams is needs. to many more positive reflect of helping our them They them, our and with reach relationship-based our to a how to customers, continue competitive our results bring we This and commitment their to goals. for intend customers our generating

Operator, line please We'll open to Thank questions. the the you. now for the up call open questions.

your line the question. with Motta Instructions] [Operator KBW. proceed of question Kelly Our from Please with comes first

for Hi. Thanks Good evening. question. the

deposit I betas margins accelerating, a are with still think the We've is so keep were your few which far, start but and quarter, clearly this able of your great. pretty seen report flat side. I'll to you peers

Just into commentary wondering and could that some through in the if next vis-à-vis read margin quarters as on the for at maybe XX/XX well as couple deposit of how rates what you betas expecting you're spot should here. provide

our the Bonnie of mentioned. first competitive beta their all. thank determination of rates think that Anthony discipline in and Well, It's and a pay. the team and to you, the deposits, that acknowledge work growth, want our very managing marketplace I And had in the reflects but in only I we not just hard

So I for that average XX the the of points plainly January, deposits you that can with through the basis than month, our cost are that, tell about interest-bearing higher we quarterly experience.

into increases. I to more a against know. that We're how rate don't going beta, up perhaps translates truly So be two

what I needs are we the depositor first is. the demonstrated but can that and needs again take our we our know few the performance navigate when our quarters what What say hurdles I'll we over heart meet is think I in we that quarter, you also we've can those through what are, best past to financial and again beta let

Thanks Ron.

they're you back noninterest-bearing, but Just around runoff this at deposits, had quarter, high still just some pre-pandemic, you XX% more stepping a XX%. level; were over on and

Just having anything on structural dictate higher like that noninterest-bearing? a high level, a would of level

mix kind just what as noninterest-bearing couple wondering and much -- the you sorts part you of Maybe your run through? done it's in past sticking run of And as here Corporate as around those you've starts initiatives, to Korea or of but deposits liquidity with view post on anticipate kind how the of what rate of of years. do COVID

Thanks.

try answer So that. me let to

Korea and whether been the or Corporate Initiative consistent strategy very going that velocity I So And has down. of target has accounts, still of been definitely, the within that outflow market of the think will interest-bearing into we've outflow US. did the couple we and we the DDA -- see successful, very deposit after category. been corporate of quarters, we that our speed go last -- And deposit slow corporations

So will stand. to that strategy continue

will Okay. back. step Thanks. I

the with Our with question. Clark next question line comes of Piper your proceed from Sandler. Matthew Please

Thanks. Hey. the first Maybe of Ron, had average Good just margin outlook running in you margin on afternoon. discussion; the the if December? month out

what I quarter. few the a if think we I within basis remember of correctly, did for we're points,

you mentioned held growth, the up pretty which shifting in it be quarter And surprise. feel Bonnie, you bit get types environment. also, Xs? then loan Got better of in drove low in you and a slow, production for a rates to with the to expect C&I might maybe is what quarter of Okay. to can speak booking this that trying Just strength it. not But pipeline this and this credits I know, then to the you fully well the

Sure.

been our In terms been has strong in key production of one diversification strategy. which of the C&I, the -- has

then industry, industries, of the So corporate extended lines that of we commercial type from the manufacturing XQ, it's terms fairly various of customers. including the in the contribution And to companies broad was the C&I. credit new in

in. What's And to the X(a) on premiums outlook. then comfort with originating a around recession? production SBA going Great. expectation your and SBA through Okay. your continue and come level maybe Premiums just

Sure.

in fairly are terms then million we that I quarter. production, of think think per million think expecting I has all, consistent. to about of $XX And production, I $XX first been

market, think the -- of terms In little X%, premium I X.XX%. this been it's a quarter -- quarter was shy past of

So I think holding much it's at that rate. pretty

marketing And hopefully, then markets XXXX. and people additional we some really we thanks that the production. stays So good that new that hired, the throughout have that able into to we of to momentum were a went

maybe then for just noninterest -- on run expense And on rate. Ron the Okay. the

there's parts growth there inflation quarter. the this run a to an in hurt MSR It moving on of thoughts rate terms expense But a little other bit. and just of sounded think couple overall was that wage all I we that things consider. like your adjustment need with and

Yes. clearly probably That's for wage inflation. quarter starting the the prepared with we marketplace. see the in will second that pressure We're

We will address that prudently.

and expenses at just categories is pressure would pointed levels I inflationary I think out, function just a So with noninterest certain look But other. in pressure activity we about. subject inflationary be we so, to fortunate as would offsetting seem up with, generally to down, of each going which a just general period,

Okay. And then last for one me.

your around recession thoughts turned just But maybe activity. to stock on your corner and horizon. trades the a here. Obviously, given appetite buyback the buyback rates where reconsider Just any updated your obviously helped. Capital a have --

we've served through been in volatile think well, of second which here had think I this us we've rate that the environment particularly I patient with has XXXX. capital, half

play lot pent-up a all think And yet anticipating, then actually you'll out interest a There's this in of continue think the to rate -- say, I'll new how that I side activity expectation we'll life. environment. we're of be see will economic I things in play patient. So out of to have

we'll So continue be to patient.

of Montgomery Coffey Janney Scott. Please proceed from with question. comes next Our question with the Tim line your

the question on life you first CDs if have about the My and that wondering what the average kind rate those the new were those I'm on is in of are. what average quarter. brought of were

are I life average XX for term don't quarter. of Usually, have average the months. of where CDs rate a

think to we would I slide look say I just would release deck, what CD in earnings the show the I maturities.

that forward. correctly, quarters see I so $X.X X that the mature about you'll was of average And X.XX%. remember if billion, will rate And

Yes. Okay. Great.

Sorry.

kind looking expectation your be is at And you'll ratio, next then is loan question the of my deposit off loan-to-deposit funding growth? Okay. your that of production

Certainly, Initiative gathering Korea that this outside of the that Yes. going it's environment to forward, deposits challenge. feel expansion and as regions, be expansion into whether will But can bring as well a our California additional deposits fund -- successful Corporate -- we a into we loans.

build are mindful, very those at loan we our are So we closely looking pipeline. we and when numbers

-- headwinds then And And the Okay. have in just to XXXX. just maybe margin -- competitors competitors so those number significant a to first not will? last going a heard expansion your immune same they've couple headwinds half talking of or even from XQ been strength them perhaps Do you're about the we days. and those you think of to at of face of

whatsoever. We're Not immune at all. not

saw point you magnificent again, So a expansion. X

that. quarter a be that back at are continue think differential in looking going probably about know to quarter, right point second now, to conversation the it's at But what tried third happen. previously we might cresting. signal earnings, the at apogee yet? our I We we debate I to So We'll

Please your Tenner line D.A. Our next comes of with question. from the Davidson. Gary question proceed with

was in But bounced 'XX? So largely of point year Ron, for this Where bit. lower at rate rate, answered do little asked project the my around and you a this the quarter. already. tax questions were full just It tax terms

Yes.

think XXXX, the of end the I of were say, the XX%. on for year end the we we year prior, up high ended And of I'll full the, XX%. low the at

XX% feel XX I like is or right, matters But spot about I for you plus minus, to use will. So think judgment me basis the comfortable if XX%. points, still

on Slide XX the more And on a just NII Okay. that one just referenced question sensitivity. that you moment then ago

like got of I the the X%. that the assume opposed end December XXXX footnote where #X, month period On because of as of the CDs deposits as the end for you've was over to X.XX%. it will average seems December that's cost Correct? be the period

Yes.

For the month, yes.

We work will on propositions.

wanted make I just to sure correctly. looking And it was at I

from with comes the Jason Stewart question of JonesTrading. next Our line

well. past stress Jason. is days seeing Good build to quality This all to was where But there? XX that talk for up on up Matthew around. good see quarter Erdner XX% about credit you It's is guys you're Can quarter-over-quarter. due loans holding XX

to There's seasonality a little of -- in too. bit smaller the loans,

anything it's finance, haven't though, the metrics, whether we data that's we haven't terms So I or problems. Having businesses, get said seen potential that, they this of think SBA -- environment, could impacted. typical in in small equipment

them So the how in what they quarter of have next the our potential of down and did to -- that fourth in the in the quarter, XX% quarters. as and top be contacted to they every any are gauge coming scrubbed may we of during customer doing fourth front we problems actually couple to and loans see SBA try

alarming So we seen haven't yet. -- as but of anything

And you think has space, guys when demand and uptick slowing see space? to to pretty That's How in quickly. we'll that is in been And commercial you an Awesome. the then real know. from estate for originations do your demand people we've there in then talked product? good

question. difficult a That's

big-box we near commercial of we mindful markets try are CRE within we the properties the So type then and certain markets in CRE, certain situation -- being of is slowdown to the seen is are loans and in also from of whether retailers. type selected the the that properties stay definitely, retail away cautious have office And estate -- inbound real loans. the in inquiries or definitely

as that the as as closely commercial very estate industries real we health in to market follow CRE see well care of So and well. terms some of

hesitant of of example Got would you. give could to be couple And where then what a you an you originate? markets --

terms different in it's said, offices, of think factors. I I As I think just

experiencing for rise properties as I health increase market. think labor the industry I higher in average labor cost varies. and think well, is particular care the And that the in it the

Motta Next from line question with the Kelly KBW. is a of follow-up question

just follow credit. up I wanted to on

You continue this reserves to point. release at

think levels heading reserve by at into at time. what is model. cycle, be get into credit Or the this could XXX as release the XXXX? you are where a think you're I just are do the still you basis But CECL I do think given room driven there's points we understand this we to reserves bottom?

et okay, on and the say, rates it's be, that you're But a if little definitively. the concern would I bit I low down, -- down cetera, difficult, So first to would like quarter, end. start probably where much. we're the if difficult it's it But to to bet margin you but respond anticipate again, it's out should just there, drift the economy the the at in if then are color play going can hard of to relative But going actually at more expectations you that level, low will. drift to not

we ideas of huge at $XXX million $XXX bottom at the million year. were the looking of like not You're the top where year, the at

that bottom not left. more there's much So

it. Got

good X.X was levels know if you line rate it I'm like your you X.X? already me. there that Or some like ball of out supposed this. XQ, kind that the reversal with X.X, to line, that the for I you Sorry, occupancy of equipment Last I that a like on called and projection you But is to trying on -- in look looks Ron, release. with back question that. to addressed crystal apologize is run to XQ in a basis? go-forward Do come more ask

rates. was pointed previous we for again run as went aggregates we things other notion. because out, match that kind should then Yes. I that of -- quarter the your would look they to some And have have against the

So total idea. fairly I think, of expense, bottom noninterest a is line, the good

go your model. in you're ask look to I'd and too at your if that, then from far back away coming modeling, you So

for There back questions Lee hand like in queue. call to the are Bonnie no to remarks. the I'd closing further

you our year. interest call look participating progress for appreciate sharing your today. Thank in forward and Hanmi our the you. you with Thank We continued to in throughout

participation. gentlemen, teleconference. you and Thank conclude this Ladies does for today's your

this You lines have your at may day. wonderful disconnect time, a and