Hanmi Financial (HAFC) 25 Apr 232023 Q1 Earnings call transcript

Ladies and gentlemen, welcome to the Hanmi Financial Corporation’s First Quarter 2023 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 you, Doug and thank you all for joining us today to discuss Hanmi’s first quarter 2023 financial results. its today’s and call. issued presentation supplemental Hanmi accompany to afternoon, earnings quarterly release slide This Both section website. of are the documents available company’s on the IR

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

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

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

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

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

that per selective testament originations consistent banking in model in believe strong the $X.XX banking interest joining management. share, a results results you in volatile environment. to Thank in million delivered disciplined am continued to all and the of maintaining year-over-year today rising to growth first team’s on our us X% XXXX, you, pleased delivered of a financial our new diluted these levels uncertainty our Thank liquidity rates, discuss exercising quarter strength Larry. for execution. afternoon, We or expense we $XX of and I while of high are Hanmi Good first results. quarter highly face everyone. economic net income even the of and relationship report loan

the a relationships led business serve. disciplined to added new the the growth our of communities execution during deposits. customers We reflects net we in quarter, our strength of in new initiatives This which and sequential

anticipated, during the moderated loan As production quarter.

still standards. grow amortization loan new However, we were disciplined our pay-downs, our with production, underwriting a to we able portfolio payoffs, maintain as outpacing

overall excellent. our metrics Importantly, quality remain asset

to focus continue underwriting vigilant high-quality administration We on disciplined practices. loans, and credit

include basis. quarter nearly the to Other balances following. at up billion highlights $X end, quarter annualized an on for the grew Loan X%

with interest from loan was to Deposits an million average XXXX $X.X First an X.XX%. attractive rate on quarter weighted $XXX basis production of X% billion. increased year-end annualized

the have consistent of a deposit relationships. built and focus franchise X expanding decades customers our proud robust are existing on over with that new pursuing We we

portfolio high remained quarter deposits bearing non-interest end. the of result, a deposit As at XX% at

We continue quarter-over-quarter. disciplined expense management, to exercise decline leading non-interest to expense in a X%

our already overall return-on-average basis quality X.XX% of levels total also XX.XX%. risk-based capital improved as asset total at strong equity nonperforming We XX a of capital low of And ratio points. and upon remained equity assets generated and a assets Our metrics assets excellent tangible return-on-average a at we X.XX%. common are XX.X% with to

initiatives. strategic our to Turning

market. partners have established mortgage million over we our in relationships at years. to was even a this lending of mortgage production Our couple solid the residential success strong past $XX.X challenging attribute the with We corresponding

outflows. gained corporate some customers our career we outflows offset deposit corporate the quarter those we in that from career While mid-March, experienced during customers new

remain focused we During do times. quarter, and customers our best, we manage on through challenging what serving helping to the them

to customers to the economic and their direct banking meet with into factors our we XXXX, identify impact of needs. up communication solutions to on continuing For much of XXXX understand businesses their shifting better evolving and stepped

March, in customer unfolding outreach were efforts. we events industry doubled our As

While an our example the very customers truly me moved deep customers This relationships response we financial some condition, the bank was for especially what is that over have us. asked of our a of as to years. built was in intent strong I our they assure was could do

for we And our opportunities new to continue grow to look franchise. expand and

This the For to this example, enable vibrant the submarket. a are fourth branch new to we open targeting San us the quarter Bay demand Francisco in client growing serve of in of region East in will regional year. move

to in opportunities the footprint key course, across will further optimize markets continue we Of to United explore States. our

I which relationship team to banking and highly our the grateful maintain our tirelessly work of In Hanmi build Bank the summary, hallmark am brand. customers, is with who trusted to of skilled the bankers

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

Thank you, Bonnie. our with begin production. details additional on I’ll loan

First $XXX quarter current XX% the and noted, reflects higher from environment rates the as production Bonnie quarter was economic uncertainty. million, down fourth and, interest of

the production, the our $XX number have quite that on a approved that on first loan quality are will which up was and the opportunities loans we we million, as sacrifice residential as first expected, in addition, this at note of In order mortgage not while strong we passed more achieve to selective quarter million $XX quarter I’ll down credit being XXXX. still in quarter, of growth. from was

our rather to and market be continue Our on portion A our for non-QM refinances. was lenders than focus of correspondent large market, home in production remains this active. the purchases

quarter with where balances. lower to more funded seasonally million being C&I Historically, funding has the cautious. quarter, fundings C&I we customers do in in also this first but are we that $XX believe the also the quarter, first slowdown loan in was down the

down first for $XX rate SBA quarter. our lower the of quarter for again. loan year-end. production X(a) a quarter our the utilization than XX.X% was of on by XX% the long-term balances on lines $X.XX these in lines decreased billion, from fourth were Outstanding credit quarters, commercial XX%, for up between resulting commitments the million in quarter, from slightly target Total first once

willing to we about We very the are loans selective being make. new that are

doing development is job, continue business serve of well officers this to we and market. to a key positioned great team Our are

of in first environment. cautious quarter loan the as to uncertain Corporate are economic declined this respect production With many our in our Korea customers modestly being Initiative,

for Corporate representing we quarter this remains had $XXX over from XX all up quarter portfolio new basis time above XX% quarter. XXX loan were loan at at balances The this nearly our basis average $XXX year. was the end, was million level from planned rate the the $XXX up rate up million fourth on payoffs. X.XX%, for million as prior average quarter. from stage Our first X.XX%, quarter, just of Payoffs Korea production the well and fourth up The for points $XXX payoffs points loan slightly on our the portfolio loan from were total million for quarter last

Our and the payoffs, total quarter slightly pay-downs. $XXX our as production in portfolio grew amortization first million in loan our total exceeded new

Now turning deposits. to

million we by deposits the X% $XX an grew mentioned, up Bonnie our on As basis. in annualized quarter,

We turmoil deposits. sector. are estimate created outflows the by experienced We that all banking volatility the of deposit pleased with this of result of we in given total our X% the about

however, were quarter levels. Importantly, from fourth still deposits up

rate moved deposits. in saving to deposits during time some in do environment, our competition into higher checking, quarter interest deposits continue accounts shift the the and a of see market Given we money the and

our However, market service relationships. believe our quarter strong represented and customer XX% of DDAs total at deposits end, non-interest-bearing local validates which we

with in deposit mix programs basis. time interest shift were to In on a were that are program we known very $XX pleased end insurance quarter, deposits, known that deposit as ICS. we Hanmi. affected grateful Reciprocal deposits, saw of a Overall, and as chose suite in first bank million launched also at renewed and also the our customers reciprocal Cedars, we stay recently and addition to

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

Thank you, Anthony.

which primarily begin million and Let’s income, the down the cost decline $X.X to of due interest-bearing in here increase the for quarter. was from with the quarter interest our was net deposits. fourth The million $XX.X

of well believe time XXX-basis-point rose during our modest expense their XX while interest X.XX%, basis first basis the cost now rate interest in measured as as better renewed rate interest to interest-bearing the Fed reflects against The the environment deposits. increase points raise for depositor deposits deposit as XXX current quarter, XXXX. We did the points

deposit basis for the production X.XX%. Loan first at interest-bearing to XX yields cycle-to-date quarter, new by points loan X.XX%, XX%. rose Our aided was approximately beta

XX to offset our Turning XXXX our points basis to our the cost cost change slowing. interest-bearing deposits points results, January about XX XX fourth increase than points discuss our net to basis cost basis points to When quarter rate from quarter were basis average. noted The declined in decline, the effect cost were basis that I quarter third XX XX met our for of higher interest-bearing met points X.XX%. the of that quarter we increase about of higher while we discuss third interest in interest-bearing the of When the I higher the average. prior margin, deposits than noted fourth is the XX our XXXX deposits The for results, about quarter the is average. the it, first contributed quarter too, loan deposits yields than to basis October Today, of interest-bearing this points. that by

XX% the XX%. I end portfolio. were deposit portfolio, the of demand the time deposits while the portfolio, and first demand were of will deposits At also XX% XX%. deposits cycle, the our at of same time in were were shift note non-interest-bearing quarter, at the the mix start of non-interest-bearing deposits the At

environment rate to peak, the heavy current the that though most altogether, has lift may cycle rising this into occurred. So of yet appears even it

the average notable loans premiums X.XX% from first declined, for the essentially while rising interest Moving The the the prior Encouraging, valuation to up in of reflecting insurance. of see the for we first increase quarter of during on, SBA $X.X an life income the swap was customer did non-interest quarter quarter. loan million fees absence and a the fourth bank-owned on $X.X adjustment million the increase rate volume quarter, is sold quarter. trade for

Non-interest million from expense down fourth was $XX.X quarter. the million, $X

of and average professional revenues, recovery expenses to efficiency assets as Here, assets and Non-interest the the of remained servicing or function fees, as a repossessed property ORE personal a valuation percentage recovery saw lower we expenses. quarter favorable adjustment of fourth ranges. a a in of ratio,

The believe annualized negative quarter loan average Net year-end. to $X.X allowance losses points X items. we positive Credit and provision remained to remain for the $XX a remains million being for basis $XX.X million specific expense quarter. first finance up included asset for Classified non-accrual million. addition resolved off-balance healthcare $X.X this Delinquencies increased for with a a X.X% loans, our low, first quarter were early was a larger million and of from quarter loans allowance and loss credit charge-offs million the contribution with basis point portfolio. $X.X $XXX,XXX industry reflect loans of Overall, loans our the of loss XX sheet a strong. and low, quality a provision end equipment or uptick from saw of loan

Turning funding, capital. and liquidity to

deposit franchise with deposit As Anthony been ratio is represent Bonnie essentially business no with XX% unchanged deposits core at our have has little relationships customers there our deposits these to Personal and broker loans FHLB and borrowings. base of funds. strong or FDIC and equally wholesale noted, change on remained reliance of and insurance. liabilities solid enjoying XX%, The quarter-over-quarter our in customer

our securities are provide combined securities our represent of portfolio after-tax balances a available deposits. and at position. The portfolio, reduce unrealized sale market cash for which our of carried values, when our liquidity does of Our current and XX% loss all with capital on cushion

at However, the capital less as increased value the first well million per those saw share decline X.X% as we XX.XX% bank the equity ratios continue bank. to contribution bank ratio losses and for capital and Tangible quarterly in March unrealized for for and minimum the from earnings X for a to dividends. the category. grow $XX.XX book was minimum of requirements, Tier The $XX.X the XX.XX% Hanmi XXXX. XX, exceed to the from quarter, well-capitalized exceed regulatory continues common company

Bonnie. I that, will to back turn With it

the serve expanding first To strong the balance conclude, excellent we proud results team liquidity of of you, continue client during a ample and and have are ratios ready Ron. capital needs sheet, am to quarter. our delivered I base. to our Thank the

the we and strong expect bring, times. We remain and also seeing said, production. our is value That will relationships demonstrating that customer these both tremendous comes that a deposits are team value sensitivity the environment, are during with seeing sensitive our customers to being and that we the the impact rate interest communication loan uncertain

we said, remain have we administration our practices. in vigilant As credit

We growth are responsible committed strong disciplined while credit our to levels and maintaining quality. of

by developing the serving attractive which shareholders operate we by We here team you. are focused Hanmi. our on to delivering Thank communities our returns and in at

the the open now up will Operator, We questions. the open to your call questions. line please for

with Our of Instructions] [Operator Please Gary comes D.A. line from the you. question. Tenner Davidson. first proceed question your with Thank

everybody. afternoon, deposit commentary, some the wanted to Good about Thanks. of ask first I Ron.

your You non-interest-bearing be that that in curious environment kind about DDA. the done. from heavy comments just the I said the And deposit still of lifting of current I a appears in XX% mix I’m perspective, in at confidence most – mean to

If go down certainly which year-over-year. of if pandemic, go you I back at you back But mean it was – kind is to XX%. entering down the

know in has I gives heavy of side guess, done at numbers? the deposit you changes I you structural confidence, bank. there what that that So in is been the lifting things saying or But reflected the been on

So what of was rate Gary. observing is I the change,

etcetera, relatively the with that some is constant. respect composition, remain to implicit in So of that assumptions

on in very a of large to rate And you and started first saw through the upswing the first from increases here quarter, fashion, so the then were change quarter. finally, rate it we quarter descent in of to second diminish. And a when XXXX, going similar then

the composition start stays out as of quarters. we’re getting of kind think, to of diminish rate the same, that should again, rate The over environment, close premise we’re rate the end relatively being in the then few cycle. change next move I you the the you to see that

mix as – you Okay. to Is But thought done. then – then weren’t so think shift so mix, was that suggesting saying right? forward that you you that completely then the weren’t the we

No.

time. mix that those a that have meaning DDA effectively that tilt had moved or in run operating shift, savings to accounts relative their individuals decline in towards a balances depositors or seeing those We’re DDA heavier their to

occurred. most So has of that – that

It not are happened. It’s So but a has that. there occurred. most people done, it’s most it’s it doesn’t that if has of who mean to bevy of do yet of as have

alluded then of that the you add Okay. quarter? I it. course balance in to or so, I did time in brokered million over appreciate balances deposits clarification. Or was perhaps you But about quarter, this answered shifting? this to the terms think customer increase the And CD of question or the the $XXX primarily

Yes.

growth, movements. – out the tracking CD and little total So those XX% Total interest-bearing we’ve been from deposit of migration was $XXX a DDA approximately over other million accounts.

that $XX million I so X-year points. to think we have only And was basis broker left with Gary, respect of deposits, or about money once XX

So that portfolio. adding we’re to not

this what more Okay. bit Great. a as question, growth quite one Production you any next quarters If at is might could the the level year, of relates the there I near-term? pipeline production loan – as of it lower. for to ask outlook level quarter. of couple growth obviously, of kind over modest Is pace is this least, visibility and growth you or expect think in the

first we up. pipeline. So into the loan itself Having beginning the loan second Loan the quarter the would of increasing of mean growth, going the loan first least moderate. versus I the quarter pipeline expect year, the quarter at said is We overall though, see first trend. comparing just that – half pipeline

have very selective chose to mentioned, we I that do chose pricing so and to deals the as we will have do, we the However, still on are to see. we that

Thank you.

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

Thank Great. you.

there. on drivers margin of Just the kind

quarter. being deposits to up XX that cost rate, relative think April in I interest-bearing Ron, that to in was want clarify. of spot mentioned the you or far? just Was the average so points the average I the a basis

It’s April-to-date. April-to-date.

average you do March? the to in Okay. Great. And margin then happen have

slides footnote. – I I it’s in have the at think in our to look

can I it then. find Okay.

so read have I too. you can’t don’t would if my say. glasses it, with me, Yes, I

deposit April-to-date? kind any And you down seasonal to that of maybe But outflows then update any outflows of is or in path. – there same am going I flows, assume terms – through Any additional unrelated inflows seeing I are that’s taxes? taxes. with

of inflow So, normal them, outflow. we or the seen weather of Much than, are much other haven’t fluctuation.

new what trying for reserve? in this sense to it $XX think give But the million the I there you in a happened that can that And basis was for your Okay. the added quarter, specific us non-performer deck. find

one-off Sure. go It’s to a it’s – hospital believe the under a into of case. beginning actually reorganization. We that’s loan

So, reserve information of the that’s based on current big at the – for provided of availability $X.X in, loan. the this that progress we time, this and we million

or Okay. And but then just recession. willingness that? likely nicely, we update going on capital, it’s the building do back buyback are here on also into Any to

before, the I will served of for we upheaval different of so we experienced Matthew, it think first here I for us have little bit mentioned a with through the part reason a in It well we be as that far, capital. us XXXX. very served think upheaval Again, XXXX. well And patient in

Got it. Thank you.

Please line with with KBW. next comes your Our question. from of Kelly Motta question the proceed

Good afternoon. Hi.

think well. from I appreciate really you different all I your back side so provided on very most the origination had point circle your this side. said And on conversely, disclosures, really deck I like watching? were are where looks about at seeing know, credit – will closely classes. asset I it in holding maybe guys selective the still you the cycle? incredibly Bonnie, good being the Where you portfolio up office your guys you you risk-adjusted in – is returns are to color of far And things. seeing

not in think I given I just environment, one mean the across board. think I it’s sector, this Yes. the

credit well the then cautious. that the pricing a have be we get evaluate as you of at and we very can credit for. to And the at I each as merits time, think we look

think it’s I So, across it’s or not specific in industry one the a but sector, board. particular

Understood. Okay.

benefited that that that that, the And in have do the the an given environment? excluding is out release rate any how more And challenging where expenses? revenue good is go-forward a you areas adjustment was? this expense expenses. rate the manage outlook servicing Ron, front, that you run on called for asset On just can large

So, or of don’t either I X.X, which especially rate environment, two, the think – reversed discount the interest valuation the X.X just in itself and because of the $XXX,XXX. was the I remember so $XXX,XXX adjustment or rate. shift it of

the depending little that markets is non-existent we expenses, a and a can or are to of get portfolio, property. come OREO it be we variability could respect particular again interest forever with in personal With how that repossessed on value when day. bit back So, there rate that

– So, hard that kind is always very that at fortunate of expense a happens. I look so, we the predict, something because few get or before one if to

So, there quarter. that, when at the second go I into adjustments about back run $XX And we merit look here sit rate will in have is and the million. that effect

probably maybe to a of and with inflationary then So, looking the pressures. at idea ideas at increase other reflect that least that X% mix kind throwing about of move

guys. Thanks color. the appreciate I Awesome.

Thanks.

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

Good afternoon everybody.

Hi.

Bonnie. the I some other deposit portfolios, in There those purposes? a institutions was or outflow to There Korea Hi their clients And do out comment deposits. am into deposits moved was investment and move deposits those Corporate about wondering, made deposits. for where are

us temporarily, give client. their of and hope particular we are moving the get event just to client the notified they March XXth let’s but very that said deposits, one back. that date, so Well, onset they The

obviously the larger institutions. diversify cautious. of deposits other wanted but to institutions, it They customers, mainly being on would I think kind their So, just mostly that depends to

– type the investment into or other but shelter purposes, a much temporary deposit of their movement. so for more of not So,

from of how know the the Do in quarter? Korea what outflow the – you balances Corporate Okay. deposit clients ready

than customers. from little a of couple $XX a about It’s million Yes. less maybe

Korea you their looking Okay. banking at you. legacy in customer your helpful. base, stress about? totality a since since That’s the then, customers, Corporate plus mid-March have And behavior of seen change very came some of just material Thank the Bonnie,

a and I communication, customer banks that expressed. event speak, Hanmi a bank was to customer little the we of we as XXth, the why customers. concerns And had the is customers those that later. I say So, our in have there And weeks as have that’s I the two bit first customers. March of terms that competition And and were clearly to within the about as efforts a think of reaching challenges, understand doubled really of week out of loan think having the well deposit different very of that subsided base date

Those time. my Thank Great. are questions. your very Okay. for you much Alright.

from Stewart proceed comes of Please question Jones Jason next line with with Our Trading. your the question.

Number estate one, Hey for moving to are? think cap real taking the And portfolio? guys. transition rates ask now on two, where just where you are how topics. the I you feel rates is question. wanted Thanks right market about commercial given the non-QM two

are most customers, estate, environment in So, because think in fixed down. just the terms I the the I the think rate like given demands And the they rate well of with entertain increase of commercial as would to notion. the real as interest CRE

even overall, particularly the So in mortgage. answer the purchase transactions in Anthony CRE And I on side, this, production refinances. as have will as well

see mean market, I of not, continued market, we transactions. purchase in it Non-QM slowdown to Yes. believe or despite purchase

So, and non-QM for been very market us. good has stable

taking for it. Appreciate question. Thanks Okay. the

Our follow-up from line Matthew with next Clark. Please a is question question. proceed the your of question

higher, appetite that. questions. yields but much duration the to moving Thanks any portfolio X follow-up. probably with years, are the as for your have wanted like, check as just you you on not the in to restructure One, do securities and over Two would

Yes.

afoot plans. no we portfolio. restructure probably desire we So, Matthew, I no effort will themselves, that be when will to present real advantage, there opportunities or take real – is mean but

Okay. average the that real And how Do estate have much $XXX of low $XXX,XXX. of owner-occupied the you at office to loans relatively mix just million then is versus exposure, of non-owner? look back a commercial balances

the of are office Most would non-owner occupied. I properties Yes. most – say

owner-occupied? Are or investor non or

Are non-owner occupied.

Investor.

Thank it. Got you. Okay.

you. Thank

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

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

conclude and Ladies does teleconference. gentlemen, today’s this

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