HAFC - Earnings call transcript Q2 2018 | Hanmi Financial Corporation

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Operator

Ladies and gentlemen, welcome to the Hanmi Financial Corporation's Second Quarter 2018 Conference Call.

As a reminder, today’s call is being recorded for replay purposes. At this time, all participants are in a listen-only mode.

Following the presentation, the conference will be opened for questions. I would now like to turn the conference over to Mr. President Finance Vice Senior Pimentel, and Officer. Corporate Richard go ahead. Please

Richard Pimentel

and deposit earnings discuss and Thank an Hanmi quarter, then conclusion for financial our the XXXX results and Kum, Chief affect may open activities will thank include operating Santarosa, Lee, joining with forward-looking based and Financial performance. In Officer; Matt loan Chief Financial’s future prepared and C. company's will comments financial the position. Lee Executive our on Ms. us Santarosa more quarter details may statements Operating questions. discuss all begin President on to Mr. provide Officer. the you you, we call, Mr. trends overview Bonnie for will G. At of and the of operating and me current industry that today. we and events, today’s second will Ron plans, the session Officer, remarks, are Chief With expectations, Kum

actual or Safe statements, the implied from and claim by those provisions this the Reform the in Litigation results XXXX. of Harbor Act expressed protection uncertainties. call contained forward-looking involve risks of which different Securities our could Our speakers The on be

I the In to of our cause at our results we our can For found XXXX, the at SEC of issued in please XX-Qs. refer Kum. news hanmi.com. second which Form affecting direct from filings, a release outlining factors This recent discussion some for to Mr. you will risk the our call financial afternoon, business. XX-K Financial including factors turn differ particular, may Hanmi to be our over and now XX-K website our that quarter to results our expectations, certain our most

C. G. Kum

growth, strong competitive stable for the lease by you to was quarter you, careful and expense In highly driven Hanmi’s asset a quarter us management. Thank today Good everyone. afternoon, loan our discuss environment, performance XXXX Thank second joining and results. Richard. quality in

both Here quarter Net year-over-year highlights quarter. basis. on sequential a for higher solidly are and some the income was

have been and X% exceptionally quarter new from and and, managing from costs. receivable expenses X% excluding leases loans grew a merger a Production X% leases expense on we prior Importantly, carefully and basis and of strong. XX% Loan result, diligent more declined after non-interest integration in year a linked quarter than nearly the nearly ago. as and nearly was

We X% annualized have in were remains our been asset year-over-year, able underwriting nearly quality normal Deposits to standards. basis driven applying excellent. and primarily by while an on X% this Overall achieve deposits. growth growth, conservative up time

the flattening our of acquisition organic growth, interest as pressure Inc., of in significantly Bancorp, has However, liquidity on presence growth. with fund provide during in attractive future we net along the announced Texas to curve as finally, help to well augment resulted And will SWNB markets expand competition quarter, which margin. Hanmi’s the our strong the yield excess throughout

quality quarter. metrics to net per the leases from unchanged income tax basis continued XXXX merger relating points share, and to prior were the income with of announcement year, now to costs second consistently expanding combined along We $XXX,XXX. X%, the legislation our of resulting per $X.XX of by have end. integration loans, XX to Non-performing remained at detail or are income to leases quarter X%, acquire taxes, points our million, share, recorded share. to On net $X.XX linked our the down quarter with per basis per allowance from of while have to net quarter quarter Compared note points our of generated of sustainable associated of now the per our XX quarter asset last we for a diluted more share $XX.X strong. income nearly loan assets. in of losses nearly With was by or late approximately with by second at in impacted core $XX.X year. loans decline eight we Congress net reported for Looking SWNB. and the basis It share $XXX,XXX loans by first growth or earnings million Overall, of XX or portfolio NPAs XXXX. a compared is net $X.XX in basis, the enacted increased total in second basis reform properties by results, or primarily charge-offs portfolio second $XX,XXX, was and quarter quarter due of OREOs, important increased lower $X.XX last the loans

growth an Even to on credit we loan basis generated continue as disciplined double quarter, the to for maintain conservative, annualized our digit underwriting. commitment we

the weighted on coverage X.X commercial ratios were quarter loan-to-value consistent For XXXX, originations second prior new quarters, estate respectively. with XX% and the debt and average loan times, real

like I��d during highlight our announced Bonnie, to acquisition quarter. of SWNB, over the it briefly turning to Before

retail and Hanmi SWNB approximately transaction with XXst, and transaction As excellent and of surplus loan-to-deposit in We deposits will March grow Asian believe deposit $XXX bolster in of significantly will XX%, million deploy our a attractive loans had banking across in total strong as high a we in communities in Texas into the that totaling over $XXX an $XXX has banking assets, credit branches of an SWNB strong portfolio plan Notably, six $XXX base. this million scale growth deposits million securities immediately bring market and loans Texas. million markets. to share attractive, franchise. Furthermore, approximately we SWNB assets with profile ratio in

XXXX transaction modest announced, book share with to to earnings tangible value. in accretive per be As dilution this will previously

on XXth. on merger have are transaction of the currently shareholder to underway and been for the and SWNB activities applications next steps, and terms meeting vote integration In regulatory August been filed schedule. has scheduled All

value M&A a for enhanced have opportunity build shareholder the Officer, close second quarter. successful the that, track With deposit like years. Overall, quarter in Lee, and activities. great lease and call transactions, on loan the We I’d important to and over is which and this Hanmi discuss to to acquisition an our Bonnie turn expect early to to gathering over fourth Chief production Bonnie? the record results of our President transaction the Operating milestone

Bonnie Lee

C. Thank you, G.

and totaled quarter, organic year-over-year. which up $XXX nearly loan quarter XX% the lease increased million, the production During from XX% and prior

result, our and a expanded As nearly ago. during leases by basis an year annualized second loans quarter from portfolio of on a and the XX% XX%

of XX% to to the percentage a the will a of with comprised quarter, portfolio ago. diversification continues total portfolio over year decline. of the portfolio as loans the loans improve. end continue compared Importantly, of CRE We our CRE At second our XX% anticipate

loans. production quarter estate $XX million of million loans, $XXX SBA primarily consisted Second of of and of real C&I loans million commercial $XX

than We also equipment leases. of $XX originated commercial more million

of Newly yield quarter quarter’s the production on on previous weighted leases loans loan new continues the a weighted as weighted generated new This generated quarter other to a X.XX%. average had organically first categories for lease for from than yield generate higher average average improvement portfolio of yield an X.XX%. the was X.XX%, yield the

terms production to had new and Manhattan in overall total. Illinois In our branches loan our solid contributions of production,

and beyond, remains our loan ahead, pipeline in quarter and the Looking healthy. third lease

have have on quarter to of American while noting ago. X% with the gathering deposits this XX%, for rate has continue $X.XX X% Fed’s of non-interest-bearing CDs our a Competition we expanded linked increased. banking past our operate increased have deposits deposits by of last range up year deposit from retail Total even to competitive pricing second a the demand activities. several in landscape as consistent of interest deposits, quarter the that as deposits during at total moves. billion a to on is total remained XX% competitors CD market increased It stable basis, a driven approximately the quarter Moving not highly Asian deposits the level as worth over have a year in in of a significantly percentage

Hanmi’s that I discuss deposit our call the franchise, particularly Ron core detail. like With turn demand deposit Ron? to Chief would that, to confident second are Financial the in we results non-interest bearing help operating mitigate Santarosa, category, more the to over Officer, deposit costs. However, quarter will the in rising strong

Ron Santarosa

Thank second $XX.X Those where $XX.X quarter X.X% and quarterly net quarter you, interest to for X.X% balance basis loans more a net first points quarter-over-quarter ago. quarter quarter year-over-year. and Starting in Bonnie interest Notwithstanding margin increased the and earning X.XX% revenues, leases, growth the basis from X.X% the XX.X% in the same increases our average to increase XX points a year reflect and specifically year declined ago. interest afternoon in all. XX the with good and million assets, million revenues, from grew our the from the net second in

markets time while curve the while quarter X.XX%, overnight changed second loan-to-deposit attracting the in for second resulted average loans basis the to from quarter the earlier, deposits assets last higher flattening growth As quarter, on the XX rate compared the to funded stiff well G. ratio interest-bearing C. at points quarter Bonnie at average leases competition quarter. The as of end second our of coupled X loan the with XXX% yield quarter with We and our first paid the as deposits X.XX%. for receivable points up in deposits first and rates the little. rates on was said in rate increased XXX% earning borrowings basis with with increasing

benefits. have the million, the charges of X.X% a quarter-over-quarter quarters deposits our decrease the respectively. over quarter. on decrease the X.X% Turning and on a on control employee the I’d activity has the $X.X while other to lower seasonal X% second to effect X% Service first declined point expenses and of been months. last to as Non-interest the over in were a first and Salaries premiums remain manage servicing income, charges, $XXX,XXX costs $XXX,XXX, the Those evidenced included quarter range for saw expenses The just last was of sales million quarter were of XX second quarter for the averaged results losses benefits within for XX.X% to non-interest those like X.X% successful higher first quarter. for quarter-over-quarter. integration slightly NSF quarter million. SWNB second and decline basis as quarter rate from declined by XX.X% were in the was under Despite income of and second for while and trade higher in for with and and decrease second a assets. loan SBA other our to aggregated the year XX.X% would from very quarter, efficiency expenses provision effort linked out the also SBA the tight improved sales Salaries of million due very expenses sales over that XX.X% payroll in The $XXX,XXX. M&A $X.X benefits lower $XX.X costs prior last and $XX.X million quarter. our Gains the on loan year-over-year taxes volumes premium declined declined first addition quarter. non-interest costs, second ratio $XX.X down slightly. tax the servicing drove quarter loans non-interest that on just for expenses merger of lower to and and the the XXXX with growth from a effective non-interest Without trade X%. compared

For the year-to-date, the effective tax rate XX.X%. was

turn assets share return tangible average per both and will our at the to increased common on tangible regulatory average common book respectively. C.G. remained Last, as XX.XX% at and return of back and end quarter second in capital to equity to strong value ratio second XX.XX%, quarter on the of increased our our all call ratios. the X.XX% that, With do the Our I $XX.XX equity

C. G. Kum

Ron. lease results and good quality driven stable were you, growth, continued by expense and loan first management. credit half Hanmi’s Thank solid strong

anticipate curve result a positive operating for Xa Hanmi’s this built re-energized loans and challenging we back as SBA has flat loans half third year environment a On While and competitive the team the pressure a of pipeline for beyond. deposits. a yield momentum the a strong strong environment the quarter SBA provides tailwind, of for note, of and

quarter. fourth $XX production $XX quarter to million $XX a are for to currently the targeting third $XX Xa target million of We of million and million the for

In the results our and cost opportunities other SWNB October. with to network sharing will branch conjunction when quarter profitable the closing of and you. re-evaluate Thank our we with acquisition, addition, our in be you more third in we to look in progress continued I XXXX. report trimming efficient forward

Richard Pimentel

the our open concludes We now call prepared that Matt, questions. to for remarks. like would

Operator

Our Instructions] from is first question Davidson. Gary Tenner from D.A. [Operator

Gary Tenner

comment, delta C. year. kind assume the So quarter I guess quarter that to the half I’ll the of it’s back and the safe last came this start would your there. expectations of majority for to or regarding with SBA and sold slated production I the of just in where was of, think outlook be That a our G., terms in, least this at you be production team over big that

C. G. Kum

to the generate, and Yeah. the projected third delta that quarter, XA we you I the the mean, on give we all million $XX loans Xa perspective do there, Wells bank of with the has sell in the SBA loans. but it that loans, are second a Fargo. production between to Wells US quarter out fixed for rate to Chase XX-year and lost specifically fact we Fargo offering

so we lost XX million. And

So in when the production relative you second big. the delta look the is to we not XX for third as the million at quarter that of context quarter, generated that projected

Gary Tenner

have I Do the they niche, up competitor right the costs industry that and obviously, are now? in then, be it retail going is ran competitors sense deposit of, the until just in are off the phenomenon retail And prices are CD you of a out Bonnie market ongoing, kind side from and issue. near right ongoing sort if mean, on special of your the your to the CD type or that discussed? front, an of kind increasing any and of of

C. G. Kum

But the much I an at It our Citizens as a today, of exclusively would bankrate.com, to looking out friends. used almost on. was X.X% got involves, I Bank be broader. going competition the promotion the say Rhode is example has competition CD Island Korean-American today, today,

say much the the think promotion the in as on more be impacted market, market, space, is the that, is to, mainstream which news shall good by within don't slowed Korean-American we there to mainstream. compared but so I has And our Southern largest than, California, what's slow the down going I as seem

guess saying, relates of I it longwinded to competition I CDs. So the has somewhat think the as down way slowed

Operator

from Clark question Our Matthew is from Jaffray. next Piper

Matthew Clark

expect are rates and pricing the REIT what you for that CD too? the a What give in here sense maturing there, us half? Can rates, in second the you are rates those the

Bonnie Lee

Sure.

were similar the second actually, maturing about let about cost We in we above XXX into me at that And XX% quarter expecting had the average X.XX the maturing are at what’s that terms at coming we weighted CDs For X.XX. do just that. matured third and quarter. retained million of

Matthew Clark

terms And what’s guess, promotion rate I rate and your right CD I current lead of promotion in now? guess, duration? the

Bonnie Lee

looks to CD X.X%, CD to offering customer, the we’re and for it customer. anywhere at we ranges X% relationship each that rates each rate evaluate the So, our from where it

C. G. Kum

promoted right But to the product money which me. account, have the primary excuse to and a the is that we’re than savings past. not we X.X. has a marketing tide market, negative now the our time of – account clients, in first in kind I for a is, premier savings we money rate Rather rate, this And to go promote account while, savings other rising impact chose that market after the believe,

impact reliance of on have, in of cost CDs, and not funds only the which but going quarter from the highest so FHLB, costs headcount And second borrowing reducing the will maybe the we’re of X.X%. market one our is that – to the the was that our

X.X% we out So swap we’re with account, it. can that hoping premier from borrowings I can lower cost savings FHLB say if the

Matthew Clark

and And numbers, G., kind your loan but that given talk to the our about Okay. mean desire I pricing second margin pressure, you here, the then expect any on least of deposit of at own based in portfolio can guess guess C. half. obviously the we I within outlook repricing I kind run the

C. G. Kum

my to turn enthusiastic. that but very looking CFO, have not to will he's I over

The currently rising will little or interest bit third than try income faster is And second rise the fact promoting quarter principally a quarter, increase focus in have growth. terms to we're a of the So, the because in of also rates. higher quarter-over-quarter at rate in it rate this let our of answer faster at – a way. we this X% me now the bank, within that loan kind had on loan

I the more, lot much I interest mentioned the the it rates And relates seem side account. conversely, how slowed liability savings And it price of we -- premier earlier, to our relates loans on there's leases. scientific, it's as is have not emphasis discipline on to perception side, say, the on but velocity as so, as the down. the movement, it's And more and been deposit that to would then

I bit experienced quarter. we that contraction so And correct, think I should quarter near but first as as perceptions more margin significant conservative pressure, if our the to view be will banks are a face going think second the that we little be to expressed the the us – from to it's continue don't like of anywhere

Operator

[Operator next from question KBW. Instructions] from Chris McGratty is And our

Chris McGratty

the expansion QX C. where a some G. wondering [indiscernible]. portfolio, new of your rates reprising lot flat rate of or big production is less for really year? But, Certainly, it half was loan we’re to movement the than the a see QX peers. there. the if factor any Ron, curve I curve in simple on were think just back an of of I’m that the all the versus in it and flat going as to improve Is the at much assets? not expectation that as, stays

C. G. Kum

X.XX%, think right. I if mentioned recall, I had Well, Bonnie the

Chris McGratty

And on quarter. the was up for from that average first X.XX about

C. G. Kum

management, downwards quarter, done of prime create estate, And – internal it have X.XX. we to of it an or upwards requirement real what relates relative we pricing authority price see as plus having a the and is X.XX% want would be the to Right. to which commercial to a minimum then

estate commercial product. So that’s our primary real

put a prime. there to leasing the spread in program to have like where a see we'd we side, similar On over X.XX

giving rapidly, on because our making to by moving fixed rates number. forward get want tied a prime a the we existing fairly rate Now, with, don't commitment prime these are up loan then is

has a prime quarter then prime seeing plus XXX quarter, time the for seeing And the plus pushing like of we're to again, management is what prime ability it plus existing today. discipline at that So existing we're to above leases, points. the challenging it in kind and the of close price but once environment rate basis a now we're and or below authority then it, similarly, a

Chris McGratty

think the of you the quarter get very, kind with magnitude estimate, tight trying what is the line magnitude you what of the sense expenses, a an mitigate, obviously top of want or about? trying expenses. to on just on this to Thanks. of I'm serve closing year of considering get this do portion for might a be to the of this the be Maybe will after very we to pressure thinking branches,

C. G. Kum

Chris, you're talking not about about other you're talking the correct? Southwest the ideas, transaction,

Chris McGratty

Yeah.

the legacy offset pressures of to like bank, year? do other some The how top you next line the in

C. G. Kum

Yes.

draconian, So range at $X.XX of we’re but nothing $X.XX about looking a year. in to the

then ones that the Southwest In we we far organization concerned, then is As look given year the look will move Bank that and evaluating at point, analysis up their taken structure basis system depending will lower on but think overhead generate we where further cost words, do, somewhere be after that them highly to be it high the of, could dependent need closer CDs ones the primary to the we the will will that as reevaluate, on a of cost that and but that will point be those down, generator, at as deposit other save the it as on the starting to National ability targeting first, particularly, about branch cost $X.XX we'll see at are a $X.XX a transaction, goes. we in other we're and this deposits. a range

Chris McGratty

the the Ron, should thinking the about how of tax be back half lastly, And on rate, we year.

Ron Santarosa

to XX% or sorry, XX%. XX.X% about I’m Still

Operator

floor questions, over if further any turn I’d comment. And the are like closing Instructions] [Operator to no for management there back to

Richard Pimentel

look Financial’s We Thank you XXXX for to Hanmi second results forward speaking you listening to quarter with conference quarter. call. next

Operator

This concludes today’s teleconference.

lines at you for Thank your disconnect participation. may your You this time.

Hanmi Financial (HAFC) 24 Jul 182018 Q2 Earnings call transcript