HAFC - Earnings call transcript Q1 2019 | Hanmi Financial Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, welcome to the Hanmi Financial Corporation First Quarter 2019 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 introduce Mr. President Finance Vice Senior Pimentel, and Officer. Corporate Richard go ahead. Please

Richard Pimentel

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

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

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

Chong Guk Kum

XXXX Good afternoon, quarter results. Hanmi's first everyone. joining Thank discuss you, Thank today for to us you Richard.

onetime the briefly very annual achieving new in cost slowest $X.X volume net Net diluted our grow highlights the the to first and we loan I the share expense will key generated said, expenses, quarter first increased significantly end prudently, have quarter. included than In million more of lease first the in normal up offset on to reduce target year-end. quarter way in bank lease improve reflected which efficiencies compared efforts of first year the the the by savings, income Through the well origination credits structure. interest our loan $X loans was origination X% of and strategy activity performance net new improve and period year. standards. approximately our costs million and new That takeaways is the quarter last the summarize nearly from from reduction we progression our the for what prior first runoff. production, continued adjudicating quarter, protect underwriting and and during are per margin to traditionally quarter Our quarter, the discipline pricing quarter. and the conservative loan in were selective the continued in And with

has interest As remained a consecutive stable X net quarters. margin for result,

XX.X% and appointed at strategy of our and year-over-year driven end loans grow promotion. selectively Driven this time solid XXX% is to noninterest-bearing deposits, deposits. total and upon primarily leases, with pleased a demand in deserving were month. ratio I'm quarter-over-quarter the my Board our the compared with deposits growth uniquely Bonnie CEO subsequent as next of quarter, the addition, and I retirement growth X.X% loan-to-deposit along to and year next the And this Directors qualified by Hanmi's stood ago. believe Lee with finally, decision, In up of Bonita very in by XX%

$X.XX that net our adjustment $X.X onetime fourth We million share. or or increased share. million a $XX.X $X.XX to per linked-quarter XX% tax net at detail basis, by compared quarter fourth a reported totaling On included per quarter more of which reduced diluted XXXX, per $X.XX of net results. in income by quarter Looking first income the share income income

leases share share On by a increased compared by approximately declined X or to loan income allowance end. Excluding our prior increased at points the in XX for these loans share or We million basis net quarter. per losses $X.XX provision approximately the quarter, $X.XX X%. recorded $X.X X% to items, points year-over-year basis loan slightly and per first a $XXX,XXX quarter. income or for to of Net loss net charge-offs the per increased and basis, quarter

million lesser a activity extent, interruption business secured subsequent relationship in and, of end increased real commercial business first $XX the However, the due loans primarily estate, assets quarter to their by quarter. to loan nonperforming the which an commercial a to to experienced

our part As is borrower have we That established allowance achieve fabric we of a $X and working a with credit the to Hanmi's for specific commitment result, disciplined conservative resolution closely to of said, relationship, million of underwriting culture. are as soon possible. this being the as a

the respectively. For loan quarter commercial coverage the originations on estate and loan-to-value new ratio XX.X% average were debt XXXX, of first real weighted and X.Xx,

and XX.X% commercial loan strategic predicated the in the like weighted interest loan-to-value new and weighted X.Xx, on average for entire estate on production, average provide and net through XXXX, profitability our the as goals are an of first being ratio now more debt expense portfolio, to enhancing the For quarter margin protecting reduction. selective which respectively. update end of coverage real were I'd

a Bonnie with and lower-cost year made C&I equipment overall were periods. previous focuses deposits X% by much bank production than equipment focused lending loan have higher expand portion been quarter and/or in specialty loans of leasing areas. As her results, include generate on our that will of XXXX are on as loans, expectations have moderating commercial progress the this growth C&I we such larger range to evidenced leases. in In in spreads, along that first remarks. growing which mainstream our businesses the areas of on they very we loan in the our division division, key these X%, our to quarter measurable for full

greater credits placed discipline. more with addition, in In pricing we emphasis much are adjudicating on selective

As a for XX yield result, is basis first the the points loan up quarter and to lease X.XX%. average

average the for increased the importantly, basis points. in average rate basis rate points first X newly the XX generated interest increased And loans for originated weighted Additionally loans interest the quarter quarter. weighted newly CRE during the

the result, first As during interest X and X.XX% quarters. has slightly a quarter margin was net increased last

by be we basis initiatives, to at made the improve to a growth costs efforts efficiency, and least XXXX. to progress $X addition and noninterest expenses rationalization of and net operational The In branch takes our selective of importance reduce network the franchise. per dependence $X.XX by branch is a share the expected consideration of on on approximately component to our deposits in strategic into reduce end profitability, million are time which to or this effort also

including completed X from first and addition of the is in last in X branches X the fourth X year Southern of were and California. Texas consolidation branches branch, of the new that X to This quarter, Illinois, During Texas. branches opening of X we included branch closure activities quarter which in all in branch in the

Hanmi now we have XX% branch complete, the successfully the process With network. of approximately rationalization consolidated

through in ultimately We reduce are efficiency. also systems costs investments operational and to in improvement making technology

Bonnie? fee, turn discuss taking credits. adjudicating the along Lee, to and Officer, President enterprise production with over improve and deposit-gathering quarter first Operating activity. results steps streamline consistency centralize and certain call in I'd We loan Chief enhanced to are to back-office our and to the like across With that, activities processing Bonnie lease to the

Bonita Lee

Santarosa I'll discuss C.G. loan to our Ron Thank you, production first turn and then deposit-gathering on and activities additional results. quarter financial for and details it over lease

During ago. the decreased XX% which lease and million, quarter, $XXX.X production loan the from year totaled

elevated payoffs in our unchanged the and As a the leases portfolio of essentially quarter. from quarter, loans result is of of prior level

as Our leases, as continues reflect the our as higher-yielding first C&I as lower-yielding quarter single-family exposure classes, asset our such while activity to production loans. loans well strategic towards reduce such shift we to residential asset equipment categories,

year portfolio, C&I the In fact, of line XX% at X quarter first of loans the XX% with first Similarly, XX.X% XX% over year. portfolio objective diversify CRE our last and comprised the our XX% compared versus longer-term our comprised lease compared of in quarter loan of equipment to production first leases was production In our quarter a end quarter ago. loans our first years with XX.X% to ago.

of estate $XX First real and of loans, loans. million $XX.X C&I commercial of SBA loans quarter $XX.X production consisted million million of

million nearly We also $XX of commercial originated equipment lease.

from generated had and of average for the X.XX%, yield new previous weighted Newly improvement the an weighted quarter's yield average production leases X.XX%. quarter on of a loans

basis lease loan of portfolio As and for from increase X.XX%, yields a above points improved an to result, XX prior quarter. the the average

of to continue noted XXXX, of lease and second the of and leases and to and the we growth expect C.G. strong, quarter remainder to pipeline X% ahead X% full as Looking in range our loans is loan year the by

deposits. on Moving to

demand a landscape quarter time in Growth of quarter the from a X.X% operate Total activities. noninterest-bearing the X.X% competitive year quarter. driven deposits deposits ago. during the linked-quarter by X.X% prior billion increase XX.X% a first to increased $X.XX continue highly in increase basis banking deposits of We in on and for from Asian-American of deposit-gathering was and in an

our the would As to XXX% year. first Officer. Financial Chief quarter our to a ratio activities, Ron? call result in was from Ron loan-to-deposit first deposit-gathering the and the XX%, I the production first Santarosa, down of loan over like for quarter quarter turn last now

Romolo Santarosa

Thank all. you, Bonnie, good and afternoon,

days our well an to interest loan million, from in the in and at our the fees, deposits, deposits, of X $X.X the in other mostly X.XX%, loans XX ended an quarter end top principally were quarter fewer securities sequential cost interest the Offsetting within our X offsetting as points $XX.X basis yields driven our quarter at end income year. expense, the a $XX.X on improve income of to by results, Continuing XX.X% and our at for banks. increase with of due of of in markets million $XX,XXX interest is this to the line borrowings for robust fell remains X.XX% no in led total There deposits as basis there during down Net at the million factors interest and fourth X.XX%. this borrowings increase was deposit Looking expense. couple did quarter, quarter, prepayment of deposits in fourth placed this. XX.X% from in a increases was which reflected the revenue increase up see Competition are the for point to We first period-over-period. net and trend increase expense leases for for replacing borrowings margin the and quarter.

margin, interest in XX prior stable and shift relatively for with First, fourth prepayment remaining basis was the borrowings balances FHLB first with to leases was deposits. quarters. yield the a Net the X.XX% special from and dividend, point increase combined the loans for adjusted average there the for quarter loan and penalties from both

of declines a of premiums for income. linked a quarter X.X% rebounded in the million line accounts Turning $X.X higher item. this of to Decreases on servicing quarter. and affecting compared the for a noninterest in municipal drove $XXX,XXX. income level to the X.X% resulting with gain quarter those million. the were reflecting of first $XX.X for averaged service the trading sale bonds, and had $XXX,XXX decline, charge of from $XXX,XXX with on sale X.X% fourth We deposit Offsetting income SBA decrease servicing prepayments

volume. to the we $XX.X primarily with $XXX,XXX of chiefly was decrease other to X.X% other Noninterest loan sheet equipment, million a $XXX,XXX decrease $XXX,XXX million sold decreases a $XXX,XXX in and approximately in which of from our our a to the expense during result, our X fourth a continued sales and SBA fell expenses guaranteed the from practices in branches change quarter. Partially the owned off-balance increase expenses, operating promotion. quarter due in $XX.X portion and real consolidation was expenses of a advertising occupancy associated onetime and and $XXX,XXX related swing offsetting allowance, in estate of these the As

last lower quarter, efficiency the X.X% quarter from return than less year. noninterest quarter, from sequentially to XX.X%. on quarter caused [XX.XX%] XX.X% are while same to ratio assets the first expense last X.XX%. comparison, savings these equity this expenses Despite quarter revenues on average the slightly X.XX% to past first increased increased X.XX% our average increase to For Return from total for

back increased value $XX.XX to equity our that, per at strong from With and will to tangible common by tangible I was Our [X.XX%]. it ratio turn C.G. year-end, share book $X.XX

Chong Guk Kum

and Ron. a quarter to you, results expenses. the reduce start Hanmi's solid margin Thank of we summer to protect new to made a first and results positive interest decisions year last represent net reflect

to branches additional quarter, our During closed we the improve cost X structure.

the momentum In of to show signs upward addition, started continues balance of that has margin our for in net to the bodes some well also and interest show stabilization fact year.

on Hanmi. aware, call their the to take this support. for and The want are customers our to and support Thank our is to you the that will you, the the is I Hanmi Hanmi is my loyalty thank Today, Ron and Lee leadership, employees earnings last keeping me infrastructure of my behind As as Bonnie opportunity I CEO and one shareholders, I team of want analyst be toes. thank this God bless. very leave XXXX. Under community and strong, for also top-notch. their bright. is in than the different management I joined and future Santarosa's

Richard Pimentel

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

Operator

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

Gary Tenner

I a from starting questions. you what the couple afternoon of second in us the guess the branch just be particular can exercise Hey, quarterly savings I good consolidation, quarter? on remind have will first that

Romolo Santarosa

be roughly should approximately going making It annual to save, But were million $X $X million so quarter. we be per million. Gary, also a recall, $X about investments. It's

that had second the into in are also effect merit quarter. some We increases coming

notion. So $X about more there million And for ideas contribute be mentioned, per as just million will idea the offsetting year, that. will net branches the we $X a is other some than while

not show second million said So the in the different, slightly $X entire will quarter.

Gary Tenner

the flat strength growth And I'm I loans remainder the the that to type with of around the of make wondering about just year. Great. prepayments coming X% of what the understand pipeline. then comment X% Okay. assumptions the does quarter, pace this the off loan of for

Chong Guk Kum

in It a in she the pace the X of years, of prepays Well, penalties years. what the remaining I'll experienced range little the the first not the of of last growth albeit expects the have end. -- with prepays the falls over that the somewhat on let kind that say, levels couple we maybe the would But I high. that we've prepayments Bonnie about quarters. higher the had quarter was talk or three prepayment But last for we bit are, over of experienced line the within unusually

Bonita Lee

Yes. that I recognized as the the so what two lease, hard customers had during said] therefore actually sold quarter, mean have to Property prepays had predict. business. are relationships first and they're [we But we income.

the the the at second starting quarter And the going quarter so year, higher pipeline XX%, looking quarter, into is that the in we rest first second XX% of about experienced. than the

into that refinance of transactions. the the was activities. the for of remainder as going quarter saw be there purchase as more think in First first will purchases quarter, lesser well that we year, terms activities hopefully - I And

Chong Guk Kum

things notwithstanding quarter. said Also that that, leasing very significant in in typically well the we as lending equipment the quarter specialty the momentum put is the quarter target closing that bodes in us But have think, to as second a what division the as motion commercial maybe that X% slow beyond, is X% first the for they them of some that first to division, hit before, in are quarter as generated this them the in for I they far as and to done year. well have

Gary Tenner

actually I Well, question, if I have more Okay. one could. do

a margin. lot about talked You the

that the I margin looking give change the opportunity they fed versus to the you here the guess, to for expand be the some assume does rest let's rate? of on if year, pause, With extra, from

Chong Guk Kum

our the us, that I increases to side rates. get interest we Yes, operating down that, used by mean positive that slowing customer it base higher the the rates for definite not fed, a the albeit with particularly on us, should our pace have rates. us of could gives just in I to last market, opportunity and to year in the increase is say quarter enough every increase fast the decision lending to rate fed's

rate on able the year. for third the And costs. encouraging and this the been and of first rate year to keeping with increases pace somewhat so rise are the That are quarter in that side the is increases fourth that last -- say funding what's implement seeing what really, we've I say, the would to in quarter interest-bearing asset we're the

that recall, as -- one generates commercial And the the significant end of of to basis the production will borrowing than -- fully XX be better the Bonnie so the bank division. we leasing out, furthermore, area our able portfolio. the rest generally points the quarter the And higher That compared higher that expect that of as go I the to higher our and the the contributed yield as for pass in -- earlier, the may further you team bank. was rest to -- year customers. And along the area mentioned that about a equipment pricing first proportionately a percentage area of as

if from momentum a think more. maybe pretty a bit expanding we've side, that good margin up of got So little perhaps we're able to the leasing the I chance keep equipment

Gary Tenner

Thank Great. you

Operator

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

Matthew Clark

First you've activity don't appetite I had any quarter know and repurchase, share going if question forward. on this some

Romolo Santarosa

share repurchase the have There do quarter. share during repurchases were first or a effect. plan no share repurchase authorization a in We

to or it as traditional against We behave to I characterize that where at strategic and time benefit there's from as will that would look opportunity probably there's company a plan. execute time some when

Matthew Clark

a from about bottom and of a expenses equipment level? overall any in kind we on relief? we Should closures, of do line, little grow more found expect Okay. rate have thinking the we're And the it and the then run this occupancy like sounds expense. increases the just just relief Or noninterest and branch with going maybe to merit

Romolo Santarosa

occupancy just out, you processing. not pointed I of making be the timing line. the investments Because and I supplies, as go we're I'm costs. data don't going to sure certain relief incurring lines are fees some there as in the other of probably like professional or -- again, to again, certain

just quite yet I that don't know would So how work.

today that's I rate So have quarter. point think million, a the second the run XX-some-odd I that think say good sitting we I here, would at starting fairly for

Matthew Clark

of happens And on the of more some Great. just business just then criticized/classified? the maybe can give in increase loan, underlying and non-accruals, type what trend color specifically you in Okay. general more the then the

Chong Guk Kum

And a as CRE C&I labor factory collateral we is interruption. -- this has this was with a causing collateral. business them accelerate to or a experienced They assess took that should relationship have they whether transition is new an issue already occupied works. that The in to or Yes. ongoing an business on is model, their business component that the a as a we caused which

that an they are working we now. so And as right cooperatively speak. They're that's with us issue very evaluating

And -- the we protect or to so potentially talk, away sit quarters our we'll put and downside cooperation, a all couple but as the to that assets the on and as pay some be some and borrower positive there's to back there of that we know is we resolution. ultimate here this, to money seemed within next the have. But loans of

Matthew Clark

broader this quarter? assets criticized/classified just trend And in the

Chong Guk Kum

It's stable we've years. of no the this couple to over -- had last downward. There's

this get So one-off situation. we kind of

the the criticized you will. at higher when will, or look of substandards, no -- no So there's systemic a or weakness level or portfolio, of if downgrade kind you you if downgrades, -- there's portfolio-wide overall

we at would it's grade in there point said so no criticized in And a categories. say this other or this I a increases the is time, issue. -- And as one-off other are any once significant again,

Operator

your proceed the KBW. from comes of Please Chris with question McGratty line next Our question. with

Chris McGratty

of go aside mean million, kind the relationship, question million loan? credit this the collateral, the I confident the large moment. content And a just or of a us in Thanks. guess, with question. you set your million. this to on you the I The how $XX purchaser's is then was perhaps Maybe on than $XX credit the also, hope, $X bank, doesn't in C.G., think help guess, to bank is this if outcome I loss to you of kind are handful for relative the way going whether self-originated largest how Matt's back

Chong Guk Kum

exceeds million credit C&I largest all Well, total the this in. $XX at that $XX have one million a but is of relationship credits, we

do through excuse equipment. near I'd And base that C&I validate indicate say so the upper that not but the are which we exposure. have we that bank. have, a the range lease today a not have loss right collateral as relationships a -- of have our certificate -- in the Information of largest upon is update end in we this collateral to that as in appear But C&I like we now to have have concerned, is accounts on the valuation the have we far we certainly audits anywhere and value receivables, detailed and possession process and to we going borrowing I inventory, and, mentioned, we me, that

So appraisals I more current not are disruption a getting the concern. had, earlier, mentioned this have we much the on with but have relatively -- we obviously with we going and being of I that as focused possibility a think all of them, on

we're taking hard really the collateral. actual of look at value the current a So

million. well roughly side, to the real of On we the comprises $XX fairly secured. million the $X Real estate be estate out seem

really early million and on standpoint the line or million it's based that premature be we to the what accounts/inventory-funded is the you than the in whether equipment It's The more But is loans anything say We comprised believe not. today. all up we guess too adequate million. delve we that our believe $X we this situation point, even value $X as have current other all from for like understand at that guess more million of information any for estimate than But estimate of is the credit. is into is should which to that or give collateral, the of best us $XX sufficient go to us credit number down. and get may best as situation, $X

Chris McGratty

self-originated, Just was participation? clear. color. is or great want this to this Great. be And a That's

Chong Guk Kum

self-originated. Oh,

Chris McGratty

little back differently. margin, a going Ron, the Okay. bit to to ask Great. question maybe Maybe the

You be on structure guys portfolio thinking growth loan If the and given strategy successful growth NIM you the NIM have should thoughts protecting stabilizes, Maybe How get in NII about a the comment been from shift. we here. targets. right? NII, given growth, strategy then investment kind the on you achieve in the new of

Romolo Santarosa

to be NII just clear, And income? so or interest net meaning noninterest income

Chris McGratty

Oh, I'm sorry. Net interest income.

Romolo Santarosa

Okay.

I could net anticipate positive interest quarter-over-quarter. would income So have that growth a

earning If the you with a see you our respect see in -- but growth were average loans, did assets flattish to bit securities.

So loans you're going to versus see a of loans assets of sheet, little bit the of comprised securities. a balance earning securities, recomposition to

the of C.G. and you're into a leasing Within Bonnie loan to we mentioned from on assets, going as kind shift resis book, as previously. and mentioned, the matter that see commented practical had as

there'll perhaps shift. of be the a today. into seem the ago, funding recomposition X than little funding the to proportion years we some deposits So are But years settling were again, see where Time mix more base. the the recomposition, side, on ago, X you bit they be we the so of

emanating the NIM But I see X nature just of partly that's -- some as there be stabilizing because but I'm -- as bias. upward I personalities. of some So won't just not sheet could the growth, C.G., growth our or optimistic typical balance

And so can think bit. grow little it I a

Chris McGratty

help tax us you rate on could then forward? And going the

Romolo Santarosa

Sure.

the closer XX% year will probably settle to for rather we XX%. out think than I

Chris McGratty

you. Thank

Operator

of question Raymond with next from question. comes Don the proceed James. Worthington with Our line Please your

Don Worthington

going. some you SBA the on just Maybe where sales thoughts Good and see afternoon, you. everyone. production Thank

Or guess some. This on it depends any expect that on what's Would be going continue? premiums the I to sold you in quarter, helpful. market, but would and commentary you

Bonita Lee

a experienced in we of -- premium, pretty this it's we actually bit that versus think We stabilized. higher Sure. -- premium prior terms quarter And been much it's quarter. I little

production, of than our see the we In to expect quarter second production in better first terms quarter. a the

Don Worthington

just... what terms Good. or it in And fees deposit compensating or service Okay. Was decrease quarter, the linked balances drove earnings that? then of in credits

Bonita Lee

money business. are Some that Texas, of branch of had service Texas the related the in components actually closures of particular them a accounts from branches in some to

So what somewhat that's decrease. the drove

Don Worthington

great. Okay, Thank you.

Operator

We queue this in questions Please time. further have no the continue. at

Richard Pimentel

Financial's for with Conference look Results you speaking quarter. forward We to Hanmi XXXX Thank listening Quarter next First you to Call.

Hanmi Financial (HAFC) 23 Apr 192019 Q1 Earnings call transcript