HAFC - Earnings call transcript Q2 2021 | Hanmi Financial Corporation

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Operator

Ladies and gentlemen, welcome to Hanmi Financial Corporation's Second Quarter 2021 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 a presentation, the conference will be open for questions. I would now like to introduce Lasse Glassen, Managing Director at ADDO Investor Relations. ahead. go Please

Lasse Glassen

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

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

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

Bonnie Lee

Hanmi's you, sharp quarter the Thank Hanmi for growth significant another you quality discuss and delivered increase XXXX second everyone. credit expansion. a today to highlighted improving earnings in loan deposits, in afternoon, Good production, results. lease by performance Lasse. in Thank and second quarter joining us strong

or significant Our momentum our activity poised in coupled business operating results XX% reported a from strong income year continue net with in first markets million, XXX% for $X.XX the over Net of and year. a the of economies we Today, ago. diluted half from driving second increased pickup has in income share. second quarter as $XX.X the solid to per Hanmi quarter the reopen

Our quality. reflect of well and second earnings expense recovery a as the loss controlled from quarter credit as expenses improving revenues strong asset

quite excluding origination. remained single and loan robust the with in record, PPP production loan a second Our when quarter quarter

Excluding PPP first represent similar recent grew loans, also deposits. growth Deposits were now the XX% total our that past up quarter. the X.X% X.X% quarter from came and to from non-interest-bearing loans our DDAs from of nearly quarters, prior

to see, loans million, to would of first June end on an from just the we trends the And At continue CARES XX% as declined portfolio. encouraging update I quarter modified Next, the XXth, the quarter provide loans. we X.X% emerge under at to Act pandemic. the $XX.X second from our like modified representing

the contact solutions. close to pandemic who beneficial mutually work these in with by stay continue We borrowers, on to remain affected

million the quality, credit the asset further I to of and we successfully bank. loans demonstrating without to of loss management other resolved especially asset $XX.X pleased on report, any tax filling measures that to practices, am Moving our

ago, pandemic helped, with mention we of Even the upgrades, borrower encouraging more pandemic. see of are including moving special asset classified losses of by XXXX. a of stood I than Hanmi's more since commitment uncertainty pass. end loans at declined And now our from allowance these loan faced to loans A beginning tremendous to excluding has management X.XX% We have seen and we positive the the non-accrual believe, year hardship encouraging, the loans XX% prudence, to loan proactive and the and both trends continue, the for the while significantly challenges bank. Balancing PPP. to

also now and previously CARES allowance receivable separate down continue currently We losses to the interest loans or to $X.X possible Act, under have for a modified accrued million. for

record economy call we strong well to Kim, and and allowance, emerge our to capital are turn a pandemic confident a would of results asset quarter discuss management, production quality, result deposit to the As loan gathering track Chief from as asset successful Officer, Banking Anthony of position, that, our we Anthony? With conservative our positioned I'm second I the like the to activities. reopen. continues over to the manage

Anthony Kim

Thank you, Bonnie.

Growth Hanmi new the of During in residential of PPP second was strength production loans, an in quarter. CRE prior offset of by $XXX XX.X% million loans, record million strong loan production periods, quarter quarter, previous partially the the PPP loan from which volume, the benefited production by lower and second all-time Altogether, mortgages, the totaling second quarter, million. lease SBA quarter's volume excluding in last draw loans Hanmi. generated $XXX.X excellent was loans, driven for C&I production in volume, in impact from $XXX of up

$XXX.X prior more of were and loans. loans in SBA quarter consisted million leases, levels returned second detail, million $XX.X of of pandemic. million $XX.X the seeing $XX.X the commercial quarter to of $XX.X mortgages, production production residential we of C&I Rounding our to primarily loan of loans, was at equipment CRE production million Looking million which second

had the quarter, quarter, weighted commission by loans X.XX%. utilization on $XXX quarter, these under a $XX.X million reflecting to that million. compared or million the rate nearly Balances increased excluding second XX% also from to lines a prior the yield of XX.X%. by $XXX of I'm prior commitments loans of quarter and pleased to for credit note leases PPP expanded average lines again Newly generated

new corporate second Beginning Korea and of new included to warehouse of mortgage with platform mortgages, residential on of like $XX residential initiative, lending to Next, residential million approximately along which activity I quarter meaningfully additional million our both and momentum generate continuing would platform, with to provide mortgage some $XX are our lending. color our contribute results.

In have million of increased warehouse to addition, lines end new commitments of credit second $XXX on the as the of quarter.

in production of Looking goal XX% to ramp loans ahead, residential comprising loan with we XXXX. residential expect XX% origination up will a mortgage mortgage the continue during to year Hanmi's activity of

loan the results be at Korea Year-to-date, quarter States. which end We And pleased totaled $XX million. total continue in offices with banking a very or of Korea Korea focused to United comprised strong corporate XX% the half year. with presence on our initiative pipeline of with second is Korean the companies corporate loans entering loans the of our production corporate a

expect contribution to with corporate deposits. in along the program a XXXX, continue We to Korea generate the in meaningful growth production double-digit loan in

many in our has activity strong has picked business markets Hanmi. up economies overall loan reopening the a Finally, pipeline and of resulted markets for very this nicely, as key in key are in

off recent weighted in included As second The solidly payoffs such, of PPP line higher production grow the end in should yield loans. of or in Non-PPP payoffs interest of period than levels the were the loan rate year. loans X.XX% production $XXX.X the production loan excluding the in of half average billion XX new PPP remain at loan robust second of the weighted loan of the million quarters. up the with of X.X% the experienced $XXX million solid quarter, quarter. loans. $X.XX second that in quarter points same basis PPP paid and Loan excluding the in resulted adjusted coupled average payoffs loans quarter, and in the from sales, with was The in prior quarter, the

X.X be high-risk quarter loan-to-value average and very of origination that certain ratio CRE were to within end average unchanged weighted impacted disciplined. of to the quarter-over-quarter. were we The XX.X% weighted portfolio essentially debt intend were loan by times to respectively. second continues metrics underwriting most industries Moreover, coverage Both limit activities continue as of our pandemic. and Our

update pandemic, which done I've course was by on the has As to segment COVID-XX. the portfolio, the hospitality been, our impacted provide of I loan like an would throughout

by portfolio. of represents quarter of about XX, X% and loans from loan XX% hospitality As declined June our the prior

Our of approximately hospitality remains weighted of and at balance at origination. XX.X% average average At times ratio hospitality underwritten. metropolitan-based XX% these loan-to-value from half conservatively with just X properties. a debt loans million end, coverage criticized quarter loan $X.X The with of loans a was ratio stemming are the weighted average portfolio of

loans these last criticized only loans the months with XX.X%. only XX for average X% appraisals weighted and over loans current all However, million. the loan-to-value the represent obtained portfolio, hospitality two Nonaccrual of was current properties $X we its hospitality of in have

and segment hospitality continue believe are to to risks the that manageable. exposure our associated We the

at end of another the Similar the to were to quarter an quarter. Turning benefit quarter Total from X.X% at deposits ago. to a had end billion the from of we with compared increase deposits. prior quarter-over-quarter strong recent Hanmi X.X% year came new being of larger the in from shift of of a by existing combination accounts, deposits continue $X.XX $X.XX billion quarters, increase a deposit and mix representing preceding increase the improving deposits. quarter of introducing key inflow included significant Korea a non-interest-bearing The corporate during as from and from much DDA driven accounts. growth relationships is growth demand drivers which the

a represent noted ago. XX% nearly Financial total Bonnie Ron? that year the up over I'll now In XX% With Officer. call Santarosa, fact to as of earlier, turn from DDAs Chief our Ron deposits

Ron Santarosa

afternoon interest Thank all. I begin you, to like net and income. with Anthony, good would

interest income points net our prior and of As second the we XX $XX.X quarter X.X% increased quarter well. our million interest as from increased reported, net margin of basis X.XX%

our see the benefit into the of approximately deposits. interest-bearing a of volume of the $X.X setting quarter-over-quarter, essentially interest, representing of benefit effects lower non-accrual and cost liquid we interest and interest-earning net assets million PPP and deeper aside would Looking results higher increased loans that income and

fall lower adjusting seven margin. the we we Adjusted would interest yields. higher as deposits Anthony as mentioned, to albeit Federal at in the of about at assets than fashion, interest-earning Xs. interest-bearing we X.X% reported, cost second the Altogether, to liquid of and see loans. same that keep our we will a year, deposits after net the was the net and in securities more And in in basis to margin the benefit this Turning interest PPP offset the modestly interest-bearing decline of continue continue lower-yielding point loan quarter we Bank. from anticipate mix Reserve quarter-over-quarter low in half second it Again as anticipate levels the and the shift dampen increase for a the for growth from see loans did

million that quarter $XXXXXX. in consistent remained for of Second our Second driving traditional Draw held million, compared million PPP from higher and quarter-over-quarter. held our PPP quarter our of million. fees for with the for we for XX.XX% trade to first million. the expenses of capitalized $XX.X $X.X the gains premiums loans second the third in quarter also to sales a sale included income the early we quarter end Moving quarter essentially Service second rising gain second on with quarter were SBA non-interest At Non-interest $X.X were sale after loans. SBA of quarter, charges of adjusting for $XX.X to first saw $XX.X other the of costs approximately Draw Loans loans million XX.XX% income flat $X.X the for first sold traditional the

perspective together up from as pre-provision of improved certain We saw from quarter. for of all well adjusting this solidly items. ratio for first of as the quarter. and XX.XX% efficiency million the PPP income $XX.X Draw to pre-provision loans Our the XX.XX% a effects other from pre-tax pre-tax prior Second a Pulling

$X.X accrued for provision receivable reduction provision million results of loans, recovery loss a allowance second current previously also positive for million our sheet off-balance million for of expense. loan a was $X.X in $X.X modified by or quarter Our negative for offset This partially losses, included $X.X comprised credit a a million interest items.

continue from X.XX%. to various million losses our coverage loans heightened Looking and from also reflects excluding to to $XX.X the our decreased for economic emerge credit pandemic. as Overall, to million adequately the forecasts the losses we allowance ratio from believe well $XX.X uncertainty near-term sheet, for of we credit levels X.XX% allowance declined balance as as the PPP

loss update will closely allowances environment We economic monitor continue the evaluate accordingly. evolving our to and and

on second X.XX% average XX.XX% and the and respectively. for equity return average return on Our quarter were assets

I'll share X.XX% common and In X.X% second addition of of increased at common book our per turn tangible all equity our our Bonnie. end the that tangible $XX.XX to back value as remains capital do With ratio it to regulatory strong the ratios. quarter at

Bonnie Lee

enjoyed strong I most with of performance of without asset the improving our am has very growth. the Hanmi XXXX. would production, first Hanmi importantly, Ron. expanding our efforts quality, a record-setting the tremendous the not very you, second earnings team Thank up loan pleased kept whom, I'm proud quarter half that be robust throughout entire of possible. success very and

half results look Hanmi strong second continued activity in our we we have the that second forward has report our with reopen well-positioned increase ahead the in of economies results drive the fall. the the a the of I to continued when in our in half progress As as sharing markets look you to to third the built year, business significant quarter with year. combined momentum we key

Lasse Glassen

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

Operator

question-and-answer Instructions] session. you. we you. Thank and Ladies our now begin [Operator Thank gentlemen, will

with question. proceed Piper Please Matthew Our Sandler. Clark first comes your question with from

Matthew Clark

on margin basis basis? think upcoming that on outlook, Ron I Is basis said points core margin on the a Maybe a reported you first in seven quarter. the core down or

Ron Santarosa

a would be adjusted basis. That core

So, the the if at for ideas received you that is the see about benefits margin the points. capture first net look the down second non-accruing interest the seven PPP basis same loan quarter reduce quarter in and loans we you'll that

basis So, first an X.XX%. down it adjusted was from X% that. on We're

Matthew Clark

you quarter. about upcoming the My Okay. I apologies. thought were talking

PPP you the balance loan the And average Okay. quarter? have then in

Ron Santarosa

give For Just the a quarter? me minute.

Matthew Clark

that's I'm -- but it's about million guessing $XXX if right.

Ron Santarosa

quarter For here XXX go XXX. averages the looking the for we

Matthew Clark

Okay.

rate to costs of Okay. the on at the the quarter? And side of happen end gears you shifting the deposit on do spot to have then -- deposit things

Ron Santarosa

about cost within of for to average three two So from the previous quarter. I believe basis we're deposits. points the

But you to the change has probably rate and very, we'll the lower. So of first that continue benefit if see measure time like repricing to become of small quarter-over-quarter the very deposits third. second now

Matthew Clark

rate expense Got are run the your then you. here? what from And Okay. thoughts on

Ron Santarosa

the happy Second adjust million about $XX you from first Again both quarter that I think, cost very to first quarter PPP, Draw of quarter same for see when and second capitalization idea. the

it at or other level about activities. to other $XX sounds running with that potentially But So, here I see for bumps the each there inflation little to same for continue and million some offsetting right me. just

Matthew Clark

you did what any the guys back stock And Okay. the And buy buyback about your in are thoughts quarter? going forward?

Ron Santarosa

where in the had quarter second we the today. market no we is repurchases and understand So share

or on our a our with have whether it's we so discussions And very dividend. active capital actions Board of repurchase share Directors

that here be taken again third So in the will up quarter.

Matthew Clark

Okay. Thank you.

Operator

you. Thank

question Tim with next question. Our from comes proceed Coffey your with Janney. Please

Tim Coffey

can can pretty the in a Thank wondering, wonder the you. you for this from. where you of idea strong just half the give growth more is, Right. I'm and Bonnie, for I The mortgage product. of strong me we're little if you're was the if residential projecting Anthony tell kind on me getting second quarter. kind pipeline successes

Anthony Kim

quarters previous couple lenders We setting corresponding a up lenders. spent warehouse and of Yes. the

corresponding from production lending. the and So came retail increased both

for the retail for will lending quarters ramp corresponding and up. the during both past two as So the next

Tim Coffey

Okay.

to the Ron into NII dig Okay. kind to while it of that the not about best to too but on Is seems going manage is focus deep just right? margin. this forward goal growing you like And the then can trying

Ron Santarosa

Yes.

Tim Coffey

All right. my Thank Okay. were Those you questions.

Ron Santarosa

Thank you.

Operator

question comes next D.A. with your Davidson. Please Gary with Our Tenner question. proceed from

GaryTenner

production estate terms you're to commercial production? sub-segments mostly that have most wanted Thanks, but in answered my kind real of in about the ask what of in quarter of just questions been the seeing

Anthony Kim

properties, and It tenants. from properties by office came well as industrial mostly as occupied credit multi-family

Gary Tenner

getting in primarily markets? Or growth other your any California? of you Is out that are

Anthony Kim

and area. well as Right from Texas now York as some New area only California,

Gary Tenner

prior with plan to PPP to you then or additional forgiveness sell PPP sales, do to repayment? the regard And

Ron Santarosa

Our of been the date PPP. Draw Second to have sales

sold. that most of So of will but the look PPP, With elsewhere everything draw PPP been the there's draw we decide route. as that first to respect been first originated program we've of But to has the the forgiveness the finality we've take expedite we've what's there anything through using for at down, process. if to part forgiveness a windows

Gary Tenner

Okay.

quarter the that's in -- loan PPP all you small sales third So currently amount the is early mentioned of

Ron Santarosa

-- those All Draw. all second are Second

Gary Tenner

Right.

All right. you. Okay. Thank

Operator

is Instructions] question. your Our next KBW. Kelly with proceed Please [Operator Motta question from with

Kelly Motta

I with Hi, the But maybe has a off commentate Ron, asked was the little already good afternoon, been from Thank was what there seem compliance everyone. the CRA I I any I cost can of from exam? apologize, on tell accidentally for it wondering like additional to expense if that. with doesn't around this bit. there's if any But call And going commentary, any associated you. costs that. be color fell

Bonnie Lee

Sure.

other any will than don't expected. what's incur cost So we that significant additional we believe normally

Kelly Motta

you. That’s answered. and asked Okay. Thank my questions were other All all.

So the thanks questions. much so for having

Bonnie Lee

you. Thank

Operator

you. Thank

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

Jason Stewart

Hey, I afternoon. your And ask the the mortgage you that good mortgage? wanted thoughts were opportunity you residential Thanks. what perhaps how about to on FHFA? that and residential see question. the for Thanks in set the taking changes at market changes

Anthony Kim

products been the side. not Well, focusing actually non-QM the FHFA on we've on

us But side, So that's levels because to I've rate not payoff much. going the of of environment. elevated on affect payoff seen then

Jason Stewart

Okay. But do the wider, the most the in we GSEs sense for the sense think most the move of little by terms bit box for products might a make make what going and Hanmi forward? credit you that fact

Anthony Kim

fix Well about for ranges products, sense with low under said, us the X%, that a rate as to which non-QM XX-year with is environment, X.XX% a product makes I X.XX%.

concentrate the that on product. selling continue we'll to So

Jason Stewart

Okay. Appreciate. Thanks.

Operator

would to call management at closing more any over no There the like you. I comments. for Thank this time. questions back are to hand

Lasse Glassen

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

Operator

conclude you, today's This Thank does ladies conference. gentlemen. and

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

Hanmi Financial (HAFC) 28 Jul 212021 Q2 Earnings call transcript