HAFC - Earnings call transcript Q3 2020 | Hanmi Financial Corporation

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Operator

Ladies and gentlemen, welcome to Hanmi Financial Corporation’s Third Quarter 2020 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. at Relations. Director Managing Glassen, ADDO Investor Lasse Please sir. go ahead,

Lasse Glassen

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

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

I along accompany call. Relations now Bonnie be in turn the call results to Lee. XX-Q. release our risk news may slide of our Both in investor documents hanmi.com. Bonnie? outlining our particular, presentation third For the our discussion expectations, and our to please recent we release, will Investor listing SEC most the cause to afternoon, financial refer direct today’s affecting This our to certain filings, certain a XX-K. a In presentation factors Form supplemental differ issued business the of of XX-K earnings quarter that at Forms to results XXXX, you the from of a Financial website over for our can factors including section and found with Hanmi contained our our

Bonnie Lee

Thank pleased third us am you everyone. Good encountered the for Hanmi’s discuss extremely XXXX results. you, I quarter light of have afternoon, of joining Lasse. XXXX, much we Thank In throughout today to challenges third delivered included currently growth, and is Highlights the strong Hanmi the solid bank management. in how positioned careful strong performance quarter. team loan earnings the expense with the noninterest production and

our addition, has steps our pandemic In that earlier proactive impacted the and took been the loan successful. support protect to in very year have portfolio the we by customers COVID-XX been

the the the backdrop, With a and and for credit key takeaways quarter. of are that solidly pre-provision we the the look continue operational well year-over-year beyond. Net to our of ahead as of particular, Overall, some drive loss third Hanmi the third In following and and business, taking future lower pretax benefited on income from services growth. income both steps to impact as positioned to additional and provide fundamentals banking pandemic While are profitable closely safely I is industry linked-quarter believe fourth we we quarter. higher basis. monitor concurrently was and expense and on the the in a financial quarter the we products higher

New the quarter third loan increased production third solid a year. quarter during and XX% compared last the was with

interest-bearing were the average on down just result over prior was basis past X.XX% production decline cost deposits. interest yield a in the earnings year, year-over-year. from offset partially a assets, reduction the receivable of As in by of strong quarter a Net of driven growth loans X.X% the margin X by up points

relationship-based a emphasizes from benefit both deposit low-cost loan to strategy continue that generation. and We

in continues the As noninterest-bearing a led result, by mix growth our overall improve to DDA. deposit the

from XX.X% to prior deposits, total increased XX.X% of the up deposits demand for quarter. noninterest-bearing fact, In

and years safe, capitalized. During mortgage our and liquidity to drive the importantly, banking enjoys well digital And help profitable residential the lead ahead. initiatives quarters to Hanmi very executives quarter, we and growth hired ample seasoned remains in

to well ratios be capital challenging and continue address we strong, regulatory believe to I Our are times. these positioned

Looking $X.XX per in the the share. per at more we to diluted income quarter per compares year. This previous share last of reported of favorably $X.XX net or net detail million, our of results, net quarter $XX.X $X.XX income share income third in third and in quarter

in loss In used our economic of from Hanmi with quarter, the portfolio. $XXX,XXX with income compared fact, unemployment provision years. provision performance credit the second a losses, uncertainties there single the the the quarter pandemic quarter for level. significant net inherent reflects these are of the during situation, six to $XX.X prior the improvement this reduction projections. was in of benefited which of quarter expense provision very The quarter the determining earnings remains will the the to said, activity best third and anticipated level in in for fluid on This Compared we loan allowance continue and monitor impact closely some million. lower assumptions to includes That

of Phase approximately program, interest payments remaining total modification modified the million initial XX% program, of deferrals. loans loan the encouraged modification at portfolio. In very of $XXX and or X Our stood modification by payment the phase declined are the or XX% of been In the modifications of XX% positive has the portfolio. program billion Approximately we seeing. we while successful, will the are trends to XX% are XX% $X.X provide

For additional In in the conducted a require to borrowers an enhancements Hanmi. we of we credit requesting to some reduce of their conditions. form cases, in-depth risk second the collateral financial review modification,

loan. some working with goal of as downgraded X special of remain a As time. program, mention now a the or weather review to avoiding future them crisis in committed of Overall, detailed this borrowers our the of part included loading classified we this were with and are charge-offs challenging helping and modified each loans Phase the

The of affected at the charge to asset loans end adversely $XX.X Special XX. quarter-over-quarter pandemic. quarter Let’s $XX.X $XX.X the were at June the million third of turn mention with by million now quality. the includes compared million loans

quarter were included loans of classified XXXX, XX, increased million million $XX.X of million adversely the at in In XXX with compared quarter off quarter. We to the of of affected points non-performing a compared the were pleased $XX.X XXX $XXX.X a by closing loans. at million loans after million points loans the million loan basis end September of second see or the shortly land $XX.X modestly at of Classified XXXX, pandemic. end $X.X construction $XX.X or addition, Nonperforming the second loans with loans full. to basis loans paid quarter, classified nonaccrual that

customers to like and our Anthony, to turning at call additional Before growth to to we provide on and comment diversify services with of products soundly drive revenue over our would Hanmi. and I source steps further briefly profitability are the taking and safely

hiring He track the as Head Consumer at success America. Lee the Bank, has President During Lending. of strong Mutual the of mortgage origination Bank Larsen over of Business Executive capabilities Washington Larsen’s mandate a XX is at quarter, mortgage and and Royal residential we Vice record the Hamni. banking to announced last enhance in of years

seamless the our CIT experience In brings of Lee Digital addition, Bank. Fred a Banking. recently Director President accelerate of products platform Fred for we to Head more digital also Digital experience. customer significant Vice banking Managing announced appointment Fred provide and was digitization Hanmi, At previously will and banking Senior convenient as a and of of a

Larson Officer, Chief relationships Anthony? effort leadership, Given and over growth Fred and Banking Anthony us gathering the capitalize their turn we deepen opportunities allowing to to our on new customers, Hanmi. production discuss more quarter and deposit confident will are extensive loan activities. to would enhance efficiently call strategic exciting with scale and that, for Kim, experience to results I With our third like the to and existing

Anthony Kim

excluding loans Paycheck the last Program. under originated Hanmi Thank million solid million the Protection Bonnie. totaling generated $XXX.X $XXX.X production you, volume government’s loan quarter in quarter,

CRE categories, million Third We expanded million exception quarter $XX.X $XX.X and consisted volume third SBA loans. of million across CRE the production $XX.X major quarter C&I all loan loans. primarily XX.X% More of of growth specifically, production of loans, loans with experienced of quarter-over-quarter.

commercial third million Hamni, production was quarter $XX.X leases. For our of equipment

mortgage million We our with of $XX.X loans. also residential jump-started portfolio initiative

X.XX%, had weighted second compared the the the leases lower-yielding average for of and of the of PPP loans yield quarter’s quarter. originated excludes impact generated linked quarter yield which loans Newly to weighted during average a X.XX% the

as basis solid the SBA $X.X XX payoff that receivable loan at Despite resumed or in yield production loans production reopened average shut level third prior points loan loan $XX.X rate of in of million quarter, of of quarter higher weighted the million in on SBA the in after the the last levels period in prior we loans being for and COVID-XX. quarter The than the level in the from generating million. third we market payoffs relatively X.XX% experienced secondary billion. of down Of temporarily weighted $XXX.X quarter, of sales the the was or interest quarter, remaining a $X.XX the in quarter Hanmi twice expected, an end paid third the off disruption sales SBA of higher the the unchanged payoffs elevated selling new the than from more experienced gain at in loan sale note, due As quarter, resulted average quarter. loan third to quarter. the on

receivables from ago. did X.X% expand loan year However, a

we underwriting, of terms criteria. disciplined credit committed conservative to In remain

third weighted coverage weighted estate average ratio of quarters, consistent debt real portfolio, end the with and of asset as data respectively. were quarter XX.X% X.Xx commercial the quality the For from and prior loan-to-value average

activities we’ll Looking more limiting by criteria, origination expect to ahead, prudently economic of continue which to disruption the caused pandemic, stringent in high-risk underwriting new we loans light industries. maintain includes certain within originate

observe term. continue update hospitality would by provide customers a that and to likely segment closely this tighter impact of like been I impacted point, over to most assess will We pandemic. on near the has underwriting we the economic on monitor segment our an as portfolio, To our the

XX% portfolio. XX, total loans or of $XXX As million of Hanmi’s September hospitality totaled

of million ratio Importantly, $XXX were reserve secure underwritten portfolio, of our or debt loans a able Xx and we million this modifications loan-to-value the a of XX% coverage in $XXX payment amount. weighted segment of Of is from June average to weighted at – average At ratio had XX, million $XXX XX% with we XX, of additional hospitality September down modified million $XXX as a XX%. collateral conservatively hospitality XX. of as on September total

occupancy, fare available service average key including revenue lower higher said, rate forecasted the hospitality to and industry segment improvements extended hotels are daily That and limited several end trends ago year luxury are per levels. Although generally room hotels. than well stay, months, scale are better below over showing metrics, past full-service

overall upper percentage of in hotels occupancy in bank’s a the Hanmi’s of are segments hotel the hotel total and portfolio low for in Based in hospitality range. price closures XXXX has demand comprised in average. to lower the economy increase accommodated to U.S. the month September experienced resulting hos mainly price segments. and the as similarly occupancy national a is metrics Additionally, revenues, line on April provided disproportionate with portfolio of U.S. upscale XXXX, steady

remains within hospitality risk they we While manageable. the segment, are believe

Going crisis, improve forward, the very will customers to schedules. helping of payment their with normal return liquidity a goal work weather to we loan with continue our and them closely hospitality position

Moving the preceding on billion X.X% end deposits a billion quarter of of third decline. quarter-over-quarter gathering end at at $X.XX deposit to activities. $X.XX Total were quarter, representing with the compared

very deposit However, the as we Hanmi’s higher an noninterest-bearing franchise. of strength deposit demand remain Overall, with improving deposits nicely mix see quarter-over-quarter. expanded declined, cost of we did deposit while time pleased

quarter at of to Financial Ron? production call Ron Santarosa, the third quarter in ratio turn XX.X% loan-to-deposit to result compared I’d the was gathering and with now Officer. prior. activities, third like loan a As end XX.X% over Chief of deposit the our our

Ron Santarosa

afternoon and Thank good all. you, Anthony,

net for pre-provision with was million, noninterest $XX.X million, PPP interest income pretax up noninterest the quarter-over-quarter, million and security costs. begin we gains effect when loan deferred quarter of second origination $X.X the income income pre-provision and $XX.X income the million, with pretax expenses quarter for adjust Let’s third XX.X% of $XX.X of of

from pre-provision expense. income pretax quarter benefited lower Third net interest higher noninterest and noninterest income income, higher

in million full up interest portfolio. from X.X% and posted lower-yielding quarter. reflecting securities million, net quarter at prior declined Interest income. X.X% income or $XX.X dividend part the our $X.X the of effect Looking We

interest paid $X.X interest-bearing on or deposits. expense importantly, lower More fell million, driven XX.X% by rates

points quarter. basis average Turning interest was quarter down third X X the X.XX%. points on to to The quarter. X.XX%, margin second for only second the from quarter the basis net for the decreased It yield loans from

However, the dropped basis to average on interest-bearing deposits XX XX points basis paid points. rate

benefited from also and average X.X%, accounts mix Our net deposit XX%. margin higher savings interest in in non-interest-bearing costing continued costing lower deposits shift average time money increasing the average increasing with deposits market X.X%

just and production loan new on was the for above the quarter rates third average for noted, Anthony the quarter. average As X.XX% posted yield

the have average this we’ve will fourth in In we addition, of have Together, several so Also X.XX%. rate remain quarter, reduced rates $XXX.X pandemic time interest have this since of which the net month. mature the to our deposits deposit the again million that done and should onset interest allow in times of Xs. our margin low an

income to gains. of X.X%. however, see non-interest the the third we the million. security the the appropriate, this the of $X.X individuals quarter million $XX.X expenses third million gains down the were $XX.X PPP a Notably, sold the number through $X.X and we due million million for averaged our and Next, to separation. $XX.X from significantly, guaranteed $X.X premiums was and trim for market Near primarily More costs. secondary second for benefits we quarter X.XX% quarter that of trade did origination decline million, small effect, returned absence than portion did third the Non-interest SBA attrition loans quarter, quarter. of higher loan because for quarter, of deferred salaries of end last of Notwithstanding where

balance superior customer activities, always, our striving effective for a and service. risk As and resources continue will compliance among experience to and we management efficiency, scrutinize and

billion our As closely the the availability billion unsecured we of had we secured $X.X liquidity facilities. XX, of and $X in unused to requirements. with evaluate securities of unused FHLB liquidity $X.X uncertain September remaining and well We operate and resulting environment macroeconomic the to XXXX, borrowing remain billion evolving as potential unpledged we cash and confident monitor of and continue that ample have will from pandemic, as

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

Bonnie Lee

you, Thank Ron.

shareholders. drive our positioned continued our ahead you I well profitable, with and look the we from value growth our we of forward loyal report employees customers, As XXXX sustainable maximize progress remain to and fourth beyond, ultimately, and to when for fourth supporting look the quarter to results communities, and our emerging sharing quarter pandemic the prioritizing and safety committed we January. to in our health

Lasse Glassen

to up prepared open call for our questions. remarks. concludes that Operator, We’d now like the

Operator

comes [Operator question. Matthew from Instructions] first question with Clark proceed Jaffray. Piper Please Our with your

Matthew Clark

for corner, Is Good resi the afternoon. some The single-family portfolio turn that has to been maybe and some time this quarter. grow start this balances may and the with stabilize off quite originators in environment? those though, running expectation now new

Bonnie Lee

plan, our That’s correct. yes. That’s

Matthew Clark

portfolio on you estate the portfolio real to then And on reserves basis retail Okay. declined about commercial Can XXX. your XX points isolate the your reserves hospitality CRE and separately?

Ron Santarosa

as we head. a but The coverage X.X%, my of real do C&I the recollection, remember a which larger our the have It’s elements, And I element well off don’t another estate portfolio, that top ratio as excludes of part to that my number not piece, it. there’s but about element secured of of that.

Matthew Clark

Okay.

then going release, And I thought the might NII PPP I this something, the I quarter. of was have Okay. but seen to contribution through

If you that? happen to have

Ron Santarosa

me a give Matt. Just minute,

Matthew Clark

Yes.

Ron Santarosa

million. So interest quarter, fee for and third income cost $X.X amortization the include

Matthew Clark

think sold like and expectation on premiums forward your you some bit in going And of gain this Or here than just terms Okay. seasonal little expected. What’s slowdown have higher on sustain and level? we then a volume it we’ll premiums? XQ? looked sale, production good SBA Can the are do in

Bonnie Lee

production think FDA, level of the Q in that I will production, hopefully, pipelines that the sustain have in and for the fourth probably terms first on that, the in we Q. the Based

as levels – it the X.X% that As hopefully, well. at are as X.X% in it’s least stay far up, to between concerned, premium at holding and will And it’s XX%. level

Matthew Clark

Okay, thank you.

Operator

you. Thank

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

Kelly Motta

has in second guess that was of special migration I has and how what’s that for Thank about I time? And this these deferrals? to amount first second was categories round question my round mostly migrated just classifieds. wondering the much questions. at with the into do deferral mention you of within

Bonnie Lee

COVID-impacted a release $XX.X composed of in loans. million our X covers that’s special is So terms loans, about category, about and mention

$XX.X and category, substandard about by includes the that loans. about impacted it’s million For COVID X

Kelly Motta

COVID are since ones impacted, as second deferral now? those highlighted currently So round they the are paying Or in currently right those buckets?

Bonnie Lee

in a The are the interest ones – a in is the and bucket. the of some special of there And management interest-only then are in – terms in some – – are some substandard there of them most in deferral interest category, are payment category, category. paying

Kelly Motta

And then fair like a added amount, securities of it you. thank securities Great, you book, – quarter. the on looks this

of into if still? Or going level to to of So forward wondering kind at? kind of securities continue that hold is put a you’re just this some if good to liquidity going your

Ron Santarosa

are balance securities XX% So roughly our of sheet.

about, from up remember if the year-end before at correctly, think struck. I pandemic XX% I

that, pretty a our book. suspect, all actually much is Kelly, cash I is again, the of substantially most book book flow So of high

So receive the remittances work each month. that we do back we to put

can see around grow book put bigger don’t I boundary than be XX%. slightly, than it less at I to this it, So XX%, a the had growing would won’t it if and I think point, but

the so XX.X% midpoint. is And XX%,

on where for on. are kind in we’ll the funding each month, around our level, and So bounce so of and market that depending what outlooks is

a So would about that lower, that’s little XX.X%, I we would where bit about think say a little maybe higher, maybe I bit but be.

Kelly Motta

And in. final if I a sneak one can

discussions at how capital to viewing your that capital. you what start all And the you revisit in do continue return? the and is, to valuation you’re of At Given terms point where entering build is buyback?

Ron Santarosa

pandemic, given our in capital Board, or past, that’s whether the the particularly dividend whether discusses that’s the actions onset of I quarterly as and repurchase. year I’ve the Well, mentioned think

So pandemic. think we third all the but what the quarter, we’re we’re encouraged I in in of saw still

So first what informed further we’ll quarter fourth or might quarter on a what decision by that outlook. deliberate longer, and make do

Kelly Motta

Thank you so much.

Operator

your comes Janney. Our with Instructions] Coffey with Please Tim next proceed [Operator question from question.

Tim Coffey

had modifications of where Thank When expire? hotels for a in to questions couple quarter. hotel Great. very these that much. the you I those the do modification, are – modifications on set the

Anthony Kim

the Those and of round expires – of second majority December. November towards October, modification modification end

three three given have the three first second limited We month, and well. to months on – months as months month

of end starting maturing it’s So October.

Tim Coffey

Okay. The the the apply has modification? already of payments? to to you you’ve end for plan used collected, interest-only Or cash that that do back to collateral that been up

Anthony Kim

it holding as we’re No, payment interest whether or… as reserve. agreed, will pay a Customers it’s

Bonnie Lee

So Tim, have modification, of in just to on our ample are their the to although payment to payment customers some some customers going forward. are so customers, add of we the commit on they wanted reserves, sitting liquidity,

getting a some was behind the there So the of spirit reserve. payment – interest

Tim Coffey

Okay. on next follows Yes. that And question, of kind Bonnie. my

the that owner they’re the is occupancy of at needs the bit are these a where rates little that actively on portfolio time, of your needs seeing deferral, a where to speaking, it look bit As time just just – are you properties or situation loans just second well little below generally a average? are

Bonnie Lee

It’s a combination.

individual hospitality as the at borrowers. Some the financial look – we of conditions

ability. show of Some do debt them service

taking pandemic, customers still more commitment. However, some for we’re reserve modification. of show to in given require their approach still payment conservative the are the we asking of where that That’s the the

are is in the recover the the obviously the bit some of convention average or industry. some And properties better But airline if properties then the the customers, or you a slower where to much are, than airports convention are recovery closer little type on main depending the than industries it, them others. of of

Tim Coffey

borrowers at any And just the forgiveness question just your Okay. process? That’s loans. the you. then my was, started super last of helpful. PPP Has looking Thank

Bonnie Lee

began actually with came the – at to We the out the Yes. came for process. least the out loans guideline. they with up just SBA XX,XXX,

we have So started process. the

Tim Coffey

Thank Okay. Great. you. my questions. Those are

Operator

We Kelly Please with with Motta have your from a follow-up proceed KBW. question question.

Kelly Motta

for the follow-up. much so Thanks

should a portfolio. was question I if of This leases second substantially. there’s it’s be and the demand change is environment? in how we in quarter wondering quick in or this the any loan thinking pivot about fell just if that about a leases growth just there Just kind

Bonnie Lee

so not has market it’s demand. the the of So a – lesser or much that changed there’s

providing demand I industry very that said think the in Having new in the industry. leasing there’s service consistent accommodations we cautious terms of that a are leases or being though, to retail.

production, in the not cover as I may I lower. historical But that you improve, the production. the it runoff, forward, why improvements see think lower. it if the if level year, the slightly our but certainly, same But think So last and compared as production of some that’s it’s be not we’ll economy may going activities the

So that’s what the expectation is.

Kelly Motta

Bonnie. much, so Thanks

Operator

like further And in at to to this I queue. time, questions the for call back closing turn over would there are no management comments.

Lasse Glassen

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

Operator

you, and conclude this today’s does gentlemen, Thank teleconference. ladies

disconnect You you lines may at thank your participation. for this your and time,

Hanmi Financial (HAFC) 27 Oct 202020 Q3 Earnings call transcript