Hanmi Financial (HAFC) 25 Jul 232023 Q2 Earnings call transcript

Ladies and gentlemen, welcome to the Hanmi Financial Corporation's Second 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 second for quarter and to us Doug, Hanmi's discuss XXXX you, you joining all today Thank financial results. issued accompany Hanmi slide afternoon, its and release This quarterly presentation to today's call. earnings supplemental at available in section company's Both documents hanmi.com. the are of IR the website

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

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

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

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

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

the second today thank for XXXX. us for discuss afternoon, to our and everyone, Thank of results Good you you, Larry. quarter joining

report with uncertainty rising for even quarter continued and team's events with improvement challenges, aftermath of results second the and our successful Korea second delivered attribute We interest disciplined March. banking pleased in healthy the the Hanmi steady and these these XXXX rates, banking and know, banking deposit a was well to execution results Corporate economic credit our am all to challenging I highlighted you initiative, in our continued solid model of expense consistent expansion the that of industry the of management ongoing quality. time by quarter our for the industry growth, strategy. As relationship

of per the share quarter compared $XX.X million $X.XX or the income quarter. or Net XXXX diluted $XX.X million for was share second diluted year $X.XX with per ago for

long spoken you to We our growth position initiatives sustained to deliver have the Hanmi strategic term. about and returns to over

expanding companies top for loan and relationship and customers. investing assets our portfolio mortgage You team business grow can the may profitably grow talent our deposit and mindset portfolios accelerating recall more attracting serve from our our U.S., Corporate initiative in diversify more Korea that with and include to these the many platform lower our adding are residential growing years, risk loan by win Korean growth that to by to

Our our this success in and notably Korea our second benefited mortgage strategic strength residential Corporate was our most initiative initiative. lending business where results, in from in we evident executing quarter

These remained quarter and high new our basis over XX% building ones. our an maintaining and deposits at at deposits $X.X deposits X% increased quarter relationships annualized customer billion results Second in of noninterest-bearing existing end. on total success to reflect

customers in March. to Our event our did job close an the confidence during with in and outstanding team contact both stay key deposits maintain their

needs amount some solution. and of and part disruption the We has initiatives, of demonstrated are deposit be marketing our identify a also resulted new and again, well relationships market to this continue execute customers sales that of a opportunities to to of quarter. with the substantial best which to in partner team times Time the on our evolving

loan and their production in loan and for remains to quarter demand. by Overall, financing production XXXX mortgage the under lending. quarter million we $XXX million, CRE, higher our on strength equipment offset line levels last saw pressure As due lower second with partially as down we in residential of the industry, C&I was rates $XXX expected borrower and from banking impact loans,

As the a quarter, pipeline. encouraged we strong are to have we loan third enter

the for are we of customers resilient they Our a growth a to also continue needs. as funding. will are and financing their Hanmi They adjusting cost plan, new trusted to reality have and higher expect view partner their

to Now turning quality. credit

Effectively to managing Our banking even a assets overall period. challenging always as nonperforming important basis XX excellent at quality metrics total low and more risk assets asset during are remained is points.

steps our credit We our continue have in and to administration have credit strengthen and strong taken were approach the we underwriting quarter. to in metrics practices the management credit highly a to comprehensive second disciplined and evident

a selective ahead, relationship on highly borrowers We'll take disciplined will focus we also high-quality continue lending. to have loans approach making to deposit and with attractively to who priced Hanmi. a Looking

more in Korea-based low-cost both as business. serves companies to in we lending initiative, strong in quarter invest Corporate Our continue the in from relationships initiative which fortunate that this into continue was with expanding new the continue contributor initiative have deposits Korea existing a dedicated Korean in throughout Korean this launched customers. new to tapping offices. companies our XXXX position U.S. Korea the opportunity, companies Corporate and believe second and to Korea We our results to U.S. teams invest and to U.S. our and is will attract opening and Corporate we Hanmi even now operations a U.S.

diversify segment $XXX production strong correspondent we from at first our of modestly Despite mortgage market focus the and program high this success higher residential quarter on our with non-QM rates, launched have was of our developed we this share standards. quarter, underwriting Since the who loan strategy reflecting the the lenders loan again the million, up mortgage close relationships our XXXX, to in portfolio.

here diversification important to an our this continue of our to We as category loan look relationships part expand strategy. remains

including new our to execute -- we and also our optimize opportunities serve stated in footprint be continue growth our we opportunistic growing As on strategy, stated expanding markets. to pursuing

and a markets is serve there can our so, deposit base. on business are market Hanmi community; where doing where or in geographic niche we loan and a of the movement expand Specifically, focused

to relocate we to mentioned also to our in of East New Dublin now Lee, New a our we quarter, Jersey City our in Last Edison, San the plan in branch the Francisco have to Bay branch and Fort plans relocate Jersey.

During quarter, expenses the second we manage to well. our continued

the our We no quarters. managed with that change able keep well the benefits, relatively even notable and were and employees, are pleased rising with salaries between growth, to investment contained we in expenses continued

a return XX.XX%. second generated the a return In on average quarter, equity assets on of X.XX% and we of average

a upon XX.X% ratio at already X.XX%. improved also total levels and common equity capital tangible our We strong risk-based of with capital

of opportunities, we positioned Looking liquidity a a strategy that and of remainder the and balance solid sheet with ahead, a quality, to healthy new strong a are working. base customers, well credit an team is navigate year of loyal position, growing pipeline outstanding very the

over to I that, it Anthony deposit activity. to turn will Officer, Chief our Kim, specifics loan more With share Banking our about and

today. Thank thank begin for loan on joining our detail more us you, and with I'll Bonnie, you production.

quarter. loan quarter Second production XX% first down million, from was $XXX the

production couple attribute Given been a and first moderate expected of production year. the loan the to the We quarter second case has the of in loan environment, interest current factors. to half decline we in that this the year, had rate

sector, only of seeing impact. major have where our are and appropriate standards had rapidly transactions the this in the are purchases interest demand rate and high-quality a sector, we high provide rising that First, level refinances, underwriting for softer pursuing we rates In this especially CRE meet environment. in yield

that did $XX million the approved large loans three second not quarter. quarter, we the about by totaling during Additionally, second end of fund

quarter. Had in consistent with However, funded these the loan third loans have production these loans. the would the quarter loans in quarter, will new second first fund been been

have $XXX which five performer space. is quarters. success focusing non-QM consistent lenders their was the residential who continue quarter lending built with correspondent to attribute active our to in this the a own residential Our We markets with last million, mortgage relationships be at close mortgage by on in our production strong the we

has now in XX% rates. total comprise refinance purchase off up of significantly portfolio, ago. our Practically, year nearly market lending with of the X% current our is interest a as loans all from These higher activity loan dropped

an and position diversification serve to to loan best residential to said, has be our of mortgage the part Bonnie and in be market. want As been this we important strategy, will continue

lending. funding in We into C&I we believe the million is encouraged quarter. first in first years, which than reflects of Turning it the funded quarter to $XX we the an environment. C&I loans, third has that quarter. the said, from the been C&I second That increase XXXX XX% are to was in our going early half stronger overall past pipeline of cautious relative lower

X%, declined XX% second second Total Outstanding from resulting were commitments rate $X.XX slightly credit in utilization the first a quarter, first down billion the on the in our slightly from quarter. quarter. balances lines commercial in XX% in the quarter, up of of

Corporate XX.X% were Loan of Korea total balances initiative our the for loans.

Corporate production While in the third declined pipeline second the is for as enter Korea C&I healthy we particularly the loan quarter, quarter, loans. modestly

from loan in the down Second quarter million, was $XX nearly quarter. million $XX SBA first production

and and the fund believe year. quarter $XX team our the we half pipeline $XX we new the Our selective loans marketplace, we can visibility, continue million remains each of in in be about loans. between back active on to million SBA of Based

into a ability small vibrant and market. for market we Hanmi, optimistic our long-term about is The opportunity business tap remain to this

and portfolio of in average year is driving our CRE XX.X% production represent portfolio loans loan our ago. loan yield. with of our the new Our compared now XX.X% a improvements diversification

The to production grew loan second loans the loan payoffs. was And yields paid basis XX off. basis that quarter. from fund points all new up yields last average X are average to lower X.XX% first we on X.XX%, points higher quarter at rate the continue rate on in being portfolio the than than new payoff Average quarter, increased as loans

strengthened through with Now customers in by brought In we the and relationship-building grew targeting relationships efforts. deposits. quarter, and an turning deposits as focused we new customers X.X% our annualized second to basis on existing

our XX% deposit than our comprise Corporate XX% up from year from a year As ago. total you activity was Korea ago. quarter from nearly deposits in higher Bonnie, a last the heard strong base, now X% up and XX% especially the These quarter, of deposit

important, and our from total in As demand drove a increase a this deposits DDA. ago XX% XX% comprised initiative year of

customer have success and for bright and unique future loan for of business this us. opportunities growing proud continued team's our are Korea Corporate ongoing customers. in acquisition with and we very important We We existing the deposit believe a segment

shift the composition respect deposits and deposits. money the as in quarter market, total see we deposits, shift our to portfolio the accounts demand second some noninterest-bearing With time in to savings continue of a into

have we pace quarters. of the slow seen from the prior the However, shift

represented of our success which end, model. deposits our deposits XX% demand total validation is the relationship nearly at of important quarter Noninterest-bearing banking of an

details more That our to on financial Ron for turn over our closes it my Financial remarks. Chief I'll now second Santarosa, quarter Officer, results.

Thank you, Anthony.

Let's interest-bearing because down sequentially expense. begin $XX.X net million for quarter, interest where second of income the from we deposit or the higher X.X% posted with million primarily quarter, $X.X first

in Here, a expense we deposits $X.X XX by increase in saw increase a interest paid. largely average rates million point basis on driven

this XX fewer income from the our was million effect to due yields. increase of income, interest mostly expense $XXX,XXX expense deposit was borrowings. and Further the increase a Offsetting $X.X $XXX,XXX deposits reduction offsetting in increase from in at point Fed interest in effect a loan interest a interest a basis higher in

Net points to quarter the basis interest for margin declined XX also second X.XX%.

of basis decline contribution by higher increase yields further deposits the points. contributed offset Here, at borrowings deposits on the effect basis FHLB Fed of in points our of X decline benefit by lower interest-bearing and margin that X XX while cost yields offset to points. basis this loan The the the another the

That the entered quarter. about change interest-bearing in happen quarter where XX in last decline margin quarter noted first that the second half did saw increase we as expected, as the of net decline was the on interest deposits As first the we average for quarter. our basis interest-bearing margin experienced quarter. moderated we the deposits we prior our we met slowing paid the from fourth in pace rate of points the When was from quarter, the rates increase second

the to of to month the interest-bearing continue basis of third higher for we as the second quarter deposits as deceleration than points see is about the We average. enter cost quarter XX date July

portfolio deposit reflective our find in composition a environment. a rate higher more shift mix the to addition, continues also of In

in came shift existing the whether in in savings the from money growth accounts decline second away flipped quarterly an second accounts The nearly and or halt quarter money from market to new deposits, a stopped from to a as increase the for and quarterly quarter. time

funds we The demand deposits healthy the tomorrow Noninterest-bearing our rate points. will learn of Fed and whether meet a deposit another increases were will basis XX% portfolio. soon Fed XX

again, And renew rate will be have rising are higher even further longer? noted cuts expect increases? questions when to changes the will yet rate We rates answers -- together, the be Will occur? us, for debate So of for has cycle the slowing. will will there may this linger. first the But rate though the all rate peaked,

Now first the securities. guaranteed $X.X $XX.X points a to a losses X.X% million XX% first sequentially to turning of expenses Noninterest The of or $X.X loan portion offset $XXX,XXX sequentially second sale from million to basis on XX legal included loans. the for noninterest quarter million from declined $XX.X up were to income, from also gains volume million. because sales Noninterest the by which of trade quarter, the X.XX%. income the quarter, second X.X% declined quarter of realized largely of settlement, benefit from the SBA declined sales lower of for premium while the

$X.X FDIC $XXX,XXX Here, due while recoveries of percentage of an $XXX,XXX overshadow ratio These costs, a to our X.XX% first and OREO the expense represent recoveries XX% quarter average servicing expenses of and items efficiency a which of insurance XX.XX%. stability was in increase SBA base. our valuation from second $XXX,XXX expenses. million our Noninterest allowance assets the was from of quarter as operating while largely increase the labor declined included were the asset

for of for The provision recovery allowance a We $XXX,XXX. loans losses at for Net losses or of to off-balance a stood $XX Credit average points. were XX for quarter loan quarter, X.XX% provision had million June at quality $XXX,XXX a credit of comprised sheet credit loans. remains second XX charge-offs loss and second expense items the the excellent. negative of small of annualized positive for basis

and Looking to funding, liquidity capital.

reliance $XXX remains portfolio declined $XX funds. $XXX on little deposits million. solid with strong while million or relationships a deposit to broker deposits FHLB and million, at wholesale Our broker customer unchanged borrowings remained

to declined of end loans the ratio of to The second the quarter. deposits XX% at

when Our of and XX% carry balances, all available at sale cash of our for needs securities deposits. our pledging reduced values, with portfolio, market for which are and combined represent current

securities position first in loss their our is the changes our included value after-tax portfolio The realized $X.X on reduced in and market capital quarter capital million. our by since

an further earnings average was repurchased these less capital by reductions stock During share of second shares also we $X.X the quarter, contribution price XXX,XXX of $XX.XX, dividends of Offsetting capital the common our quarter paid. reducing at million. second to

result, $XX.XX a X.X% value per tangible As book increased share to at June XXXX. XX,

bank continue it for bank the minimum requirements, to exceed the equity ratios the and XX.XX%, to category. Hanmi regulatory for and capital the X was was ratio well-capitalized company minimum and common for bank, Tier the exceed continues The XX.XX%.

to that, Bonnie. back With turn it I'll

help relationships for your and grow. closing, them also thank strong with our would continued to that superior would thank customer building In by outstanding investors Hanmi solutions and analysts I I for support. our customers like like and to banking team dedication our delivering to their help

on second on continuing the advice, managing our and to customers will our products Thank strategy XXXX, we focused deliver prudently and return our to business growth into half need shareholders. remain executing you. of and services to our provide Heading

[Operator question of from Matthew with JonesTrading. Instructions] first comes line Our Erdner the

How viewing share loan the buybacks are current level? you versus new at originations

quarterly we've as in calls, or So to we plans, see be both future. to what they and in might Board they With take and I respect the two our said capital dividends, whether actions, share previous our the we guess, as repurchase parts. unfolded it, review in meets

quarter from the dislocation events. case opportunistic, here markets equity to repurchase very the in in happened the March share particular the second given just for So severe be this

So the will again. Board meet

proceed we will and from there. conversation, a have will We

slow the to Anthony be what respect pay, Bonnie again, environment. to themselves, current right now a and pointed the to as out, have rate and pretty that's loans environment borrowers With selective given high do in we that in rate continue we'll

quarter had pretty quarter? a it this That's following that of non-QM up the you profile was with it guys if then Could rate loan, helpful. the average and loans. size, the loan you for be resi talk good whether originations, And about on

mostly average percent, about we over loan-to-value I XX%. about California. produced loans, believe. the was produced X.XX, rate in is We non-QM XX% Average then production is of XX-something Yes. like And

question with from Fedorjaka Matt next of KBW. Our comes line the

have in have could noninterest-bearing bit guys seen running little at pace June quarter specific give you deposit more any maybe a off of you base end and deposits and the possibly you I if high into a and don't trends even July the guys recent noninterest-bearing movement? around on Obviously, that they're of the that color mentioned I slowing. know you is know guys

trends, recent And CD slow. from hold accounts deposits from obviously, for current the but the shift down quarters, the some maybe or to expect been has either Looking actually interest-bearing at past to noninterest-bearing XX%. there and has two slightly the go been DDA we pace the

So stay maybe of total to noninterest-bearing to will deposits. it deposits done, when this is XX% at XX% all about

Got that just it. it. similarm margin. with super following of kind up on And the Got maybe helpful. That's

similar another dip back Looking expecting forward, expecting of with moving guys the the year? kind in are you maybe of or two in here? Or what guys the a are forward of margin half quarter margin you

be we continue something doubt the the tomorrow. as to in will So inflection that the occur. call third quarter point tried the to when likely decline to point deceleration difficult see it's we've will out, going I do to

have of a point. when stops, sense when we So inflection get the might we Fed better then to

you right. here? saw this $XX up coming the is Obviously, for might guys good One a you a forward? rate on moving guys you Is future last what increase bit Very run Or this million expenses. talked higher cool. here here. about quarters All question than little expect that

release to isolate run expense. especially we property a But repossessed and what rate. a try personal expenses. is net They earnings the in from benefit our think to I OREO alternate can good do a net to it's pretty

that, when might some dot what idea. can't $XX million you that around those could kind be numbers you stability and you of in of tell outside kind So type of I one of start quarter, x see to look any

Instructions] next Our Sandler. the [Operator question of with from line Piper comes Butler Adam

on Matthew Adam is Clark. This for

Just forward of range deposits. in during down And balance the the significant imagine borrowings in going the mostly to due a down? quarter. increase saw that's I going amount remaining that -- envision Do going you or -- borrowings I came this

And So were the represent term $XXX are million of term financings. XX they three-year -- financing. borrowings have they June we at that

while, been recent about a they've So on year for a most the maybe tranche ago.

So overnight the anything differential to pretty be to would were say that just still ensure industry, might just just on up March, uncertainty ideas should positioned banking represents depending just were back what was it. And where much when occur, there to you they with respect to needed. adverse bulked address I well the go we

materialize. not Of course, did that

went in those So quickly top second away borrowings of pretty the quarter. the

thus you costs? costs interest-bearing basis appreciate think or color were that I And that total Okay. up deposit say quarter-to-date. Great. Thanks. deposit points think And I cost deposit I the on XX Is I far. heard pressures decreasing

just I only -- It's focus on interest-bearing.

So interest-bearing deposits...

of as [X.X] today?

Correct.

update Okay. loan. there then the of I credit? reserve specific Great. C&I just with one on an Is healthcare that you question -- could more the on regards saw to credit. the status provide And increase

Sure.

business including So in and the actually a of what the sale in shared the line as with well. also quarter, reorganization borrower last we possible is

still going just it's the reorganization through So process.

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

continued and for remainder in call move as sharing forward the to Hanmi progress we of our through Thank participating look interest your appreciate our in today. We XXXX. you

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

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