HAFC - Earnings call transcript Q3 2021 | Hanmi Financial Corporation

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Operator

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

Lasse Glassen

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

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

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

Bonnie Lee

everyone. quarter afternoon to third Good us excellent Thank Thank XXXX you, you Hanmi. results. discuss for today Lasse. our another joining quarter was for It

Our and solid third record in quality, reflect results strong continued a credit deposits, production, and in improving loan for uptick quarter earnings. the growth lease

Our consistently to fourth Hanmi Momentum we the and of remains both deep customers. improving enterprise relationships strength quarter our across the the ahead platform, to franchise, highlights growth production new the and our as and overall Hanmi robust loan build throughout profitable generate to develop continues performance year ability XXXX. and the very well-positioned with to look into existing

helped $X.XX reported execution $XX.X in a net share income quarter million We single was quarter XX% third for quarter. a of nearly and drive growth year prior Our substantial ago. earnings. increased from XX% Net strong over new the and income or operational per record diluted the

promotional expenses. as by were a as due strengthening million increase earnings Overall, a and the a higher advertising with third driven increase asset controlled Our loan commissions and in loss expense of to $X.X strong recovery quarter well non-interest to revenues and higher remained production due significant well expense a modest quality. credit

on and production let's move Now, gathering. to loan deposit

was the breaking loan quarter the in in excluding the single million quarter cylinders During established firing production quarter, prior with loan to $XXX loan production our PPP platform the our quarter, third originations. on record growing all when

our annualized increase In XX% a an balance grew total, We as key pandemic. business loan emerge from to during in the our in benefit the also continued from activity quarter markets the rate economies ex-PPP. at

from nearly of year total from quarter deposits, and annualized comprise prior the ago. were a XX% up quarter XX% Growth now DDAs, to last which prior solid X% recent nearly similar led and by deposits periods. up was addition, In non-interest-bearing from XX.X%

the by quality. asset modified an trends update be to portfolio seeing. performance the of and loans I our and other of next measures continue on we encouraged Turning positive to are

end under quarter pandemic September the management modified XXth, declined the Overall, activities we XX% weather to throughout quarter challenging second of crisis. from our our pleased times encountered loans to during at Act third the and I'm team's just the credit extremely the ability CARES with the As $XX million. effectively

and risk, Given become end are modified The comment of quarter loan seeing and asset from future our payments have XX% measures frank will other second them loans through in in to credit ability since the approach portfolio, positive on payoffs. by trends no timely quality assessment of to demonstrate XXXX. part and comprehensive Non-performing a the credit further that we of we the Hanmi's minor resolution quarters. nearly seek and management, XX% declined our of our longer positive loans

of points XXth, just non-performing were XX As loans. basis total of September loans

We allowance loan our caution, are Balancing upgrades as as loans. payments. remains and encouraging loan also well for trends to payoffs see and of positive strong at these X.X% with a continuing losses

very in discuss third that, to ability effectively turn With to Anthony? Kim, confident manage would the to remain quality. credit As to like call the loan and production over results Chief activities. I we gathering I Officer, Banking our look quarter Anthony ahead, our deposit

Anthony Kim

prior Starting with and times higher color third to quarter the and quarter additional Bonnie. on surged off volumes year. lease $XXX million, X.X% loan quarter up third from than almost you, production. Thank Hanmi's last the two

major record the PPP along Hanmi, commercial loan we previous the from impact production nearly periods, of coming an loan all growth in in quarter. notable last was SBA and loan excluding the estate record categories Altogether, the with record production. period, real quarter previous loan established growth equipment with generated third breaking During production for across sequential quarter leases, all-time

volume is was to centers the that With noted, various managers from very classes in particularly platform diversified chain across joined asset the relationship with the anchor our for and quarter, solid retail with production Hanmi contributions recognizable in loan tenants. well CRE team. category quarter strong, recently loans neighborhood-based performing As national Bonnie respect

and the quarter. compared under Commitments million. industrial quarter the of multifamily lines had or approximately by commercial also $XX.X the million prior classes. $XXX.X quarter of increased credit from XX% solid production to We C&I in Also prior with the X% decreased note, volume approximately in

on million balances increased generating leases a of compared quarter quarter. XX%. lines utilization increase yield quarter $XX.X third rate these the last points prior weighted for of and average loans a the an X.XX%, by generated of quarter, had Altogether, from newly to basis However, XX

initiative are Next, our provide like both which to an Korea to to corporate platform, meaningfully on I would update results. the residential of our contribute mortgage new continuing and

the in recall, on a has may our been and of Korean you is in solid contributed more loan solid initiative the geographically well the production. in growth initiative quarter pipeline, for contribution helping This XX% to Korea Korea banking along a As loan companies, a diversify C&I meaningful With than growth to our loan the production on corporate way corporate category. of deposits. double-digit with focused in production XXXX driver its generate QX is program

with the continue also pleased residential platform. be to new of results mortgage We our

Third approximately the quarter $XX warehouse with $XX mortgages, of lending activity included residential million million lending. of along

pipeline. to in Overall, strong and we loan to heading XX% continue the residential into fourth will year. mortgage quarter, activity line of quarter, leases loan the pipeline fourth Looking to of full quarter remained loans comprise for origination our very anticipate the ahead third Hanmi's the with between XX%

finish to remain loan As strong. such, year to robust expect and we production the

end on continues value and CRE hospitality. our to metrics industries notably coverage third the impacted With that, loan most debt underwriting and ratio XXXX. certain said, within loan throughout the by hospitality pandemic, our weighted I has weighted continue of to as category most an like average which pandemic. be high-risk we update essentially Moreover, been quarter times, both have impacted limit respectively. by Our I to loan of were very portfolio, would portfolio origination provide activities Both as the been X.X The to of average disciplined. XX.X% unchanged

of than the of declined represents quarter, the our end As At for loan present, XX% XX% end hospitality the X% and than hospitality prior XXXX. portfolio. more third since more approximately of quarter of by loans

remains as hospitality De-risking are going such, in conservative a there portfolio in classes, reducing totaling metro and including to asset property we riskier loan remains broader forward. hospitality XXX,XXX a committed Importantly, exposure a collateralized just by one to only and priority, loan location loan Texas. our underwriting nonaccrual loan

quarter. driven a combination corporate that from the all quarter increase deposit we demand growth months, at end X.X% to increase third Hanmi deposits the benefit and of improving quarter, relationships, new an by existing nearly from had growth of Turning XX solid past along an of a of of acquired year billion we Total accounts of from XX.X% in from drivers shift Korea with continue Similar recent ago. with deposits. to were during The quarter-over-quarter during key the including $X.XX representing DDA quarters, the mix another to deposits accounts. large came non-interest-bearing the deposits.

deposits, fact, a In call that, DDAs our third Ron Officer, of now ago. for year over Bonnie Chief the financial our up Santarosa, nearly XX% quarter turn noted on as XX.X% now results. Financial from I'd represent With details to earlier, more like Ron? to total

Ron Santarosa

all. Anthony you, good Thank and afternoon

basis will asset X.XX% X.XX% quarter, as second Let's the and for second net of quarter, to highlight our see interest in X% of third the nonaccrual down the for second PPP Adjusting compared well loans for it we effect for quarter. down million quarter, down margin of begin third quarter. quarter mix was $X.X interest six on for the in because for interest Net was points. loans our from Interest second PPP allow the us net with from income $X.X portfolios. the with could our earning changes quarter, funding a the margin received margin interest third for effects X.XX% the as million the

effectively second reported our billion, when and at XXXX, importantly, ended the our change end this traditional have from little we quarter year end since at amounts reported transient year own portfolio loans. with XXXX. at $X.XX loan replaced quarter at We end the of More portfolio the loan looking loans we

increased the million loans, however, which quarter-over-quarter. and PPP we million year year and end $XX.X $XXX.X were at X.X% since just XXXX end loans would end at the of see third quarter, X.X% Excluding

loan comparable was see PPP billion. the end quarter again, effects balance trailing quarter addition, excluding balance the In of billion, of the the $X.XX we for $X.XX loans, could average

$XX.X our average funding the notes. points also Last, maturities wholesale XX% cost $XX.X non-interest-bearing reductions principally wholesale of to X.X% quarter-over-quarter, $X.XX X.XX% borrowings reduced Interest-bearing by and in at again declined solid of million million, We basis the our to our for of saw portfolios. sequentially and of of Looking amount our to our balances deposits scheduled because growth the portfolio accounts, deposit fell $XX.X points interest-bearing demand XX million; basis on while quarter. grew repurchased in deposits million $XX.X billion. we up seven

the end in growth previously, the deposit contributed $XXX.X at $XXX.X the as to lower million balances the demand was has for at quarter of Finally, other yielding noted our which average the we've lower growth than third million banks, XX.X% and our quarter.

earning a with we about interest that at albeit to amount net average will anticipate a higher our margin of As assets. result, continue be X%,

on $XX.X Moving non-interest to income million. of

We gain XX.XX% trade up with sales the to continue to of rising million quarter. the SBA strong loan see a sales $X.X previous XX% million to from from second $XX.X And million, quarter. $X.X volume premiums, on increased in

bulk remaining our expenses this practices, recall, advertising particular business may in compensation campaigns well We our the while meaningful marketing our second in marketing occurred of from our gains, revise did this on the $XXX,XXX improved revenue loans production and quarter on increased business and a and volumes. on schedules you sheet. second deposit higher balance expenses and higher As fee new as loan loans first leading increased of sales quarter are as upward There the more change PPP Non-interest respectively. of account source. no to included quarter, only third draw second $XXX,XXX draw

did an Our from as quarterly We for Pausing here X.X% growth adjusted pre-provision pretax our the to in improve from efficiency the ratio, look of million, growth however, perspective. pretax to $XX.X quarter. quarter third saw XX.XX% adjusted at previous outpaced expenses. up revenue income pre-provision results the

million interest $X.X the quarter positive We of a third allowance for a recovery, established receivable a $XXX,XXX the a million. provision losses in repair $XXX,XXX loss posted allowance sheet expense for modified again current recovery posted to allowance. recovery Turning negative to the million Analyzing and the $X.X on loss allowance and a credit provision on for components negative we $X.X losses, previously this for credit for provision to SBA a on accrued expense. previously off-balance on loans, items, losses

for million on noting quarter was and $XX.X credit allowance economic on that of continued loan at the off-balance loss result the adequately accrued of third reflects losses net Overall, recoveries loans losses as the we items $X.X as sheet uncertainty ended forecasts pandemic. near-term interest As of The our a we losses our losses modified for was while well the $XXX,XXX, for various allowance million. $XXX,XXX. believe the for effects experienced receivable allowance credit X.XX% for allowance quarter or the lingering for

to methodology accounts under capital for loss evaluate update We this X.X repurchased stock accordingly. authorized stock repurchase share. $XX.XX a quarter, closely the of our during approximately monitor evolving of third program continue shares our or and with previously million and common an we'll our environment, we our aggregate Finishing XXX,XXX

Our the return share on was third average book XX.XX% per and equity for was quarter $XX.XX. value our

remain of back With a of ratio tangible Bonnie. capital with Our common I'll Tier strong it to X.XX% X turn ratio equity ratios equity a common and XX.XX%. that,

Bonnie Lee

asset am very Once possible. another improving quality, in tireless with Thank I again, making you, was the another for earnings performance. entire expanding it Hanmi its production, quarter thank family efforts success excellent and I Ron. and record-setting our loan happy our Hanmi, Overall, for

quarter As operational with has you the our the year. January. in the continued our combined we poised business when finish look for robust we look resurgence progress next sharing strong us fourth and quarter, report to a I ahead key execution Hanmi's markets pipeline fourth continued to forward in strong to our with activity results

Lasse Glassen

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

Operator

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

Jason question with JonesTrading. first proceed your Please Stewart question. Our comes with from

Jason Stewart

could and growth the what strength you you point? for in Maybe their start you that the you the CRE thank in and questions. your confidence to originations this on Hey share economy tells view C&I. I think about taking wanted with customers' in at

Bonnie Lee

the in the CRE transactions, as the pent-up in coming it's purchases. as Sure. we C&I definitely Yes. well with purchase activities I communicate increase mean the customers, the are as demand from as we our well there as whether business see

Jason Stewart

you to as we How a purchase volume at of us with idea then outside. resi little drives bit should seasonality? just origination origination could And turning quarter-to-quarter the we from the think platform. Maybe Okay. business that volume correlated about what of look the give it

Anthony Kim

don't actually, there's I Well, -- seasonality there in factor a think is there.

fierce, the to increase -- correspondent branch business. getting of trying leveraging only to but competition's looking we're the the our our customer our the to not channel, network more leverage side existing As and we're retail

Jason Stewart

Okay.

you. Thank Okay.

Operator

Thank you.

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

Kelly Motta

the list Hi, question. for thank quarter. you for Really good

especially little you if since on seeing wondering talk Just bit deposit great you're growth. side, could such a the

non-interest-bearing had a You've past nice the influx of over several quarters now.

and we Thanks. should deposits about of for thinking Just growth? wondering be how the stickiness future those funding plans

Anthony Kim

large But same Well, attrition expect quarters. the for we see we we increase At the the saying three increase. our acquired have over been the last and to we months. some from first, the then XX -- that from continue would largest accounts thing last over for

to far I expect XX% as XX% would So, of as stickiness we sticky. deposits think these will be goes,

Kelly Motta

Thank you much. so Great.

Bonnie Lee

Yes.

in had and other our we to corporate from really color. that the And additional new good and a acquiring then had Korea and add even great DDA success well. target institution. large strategy business DDAs really as for this PPP of year success year did customers the loans the beginning we a to last Just really We initiative

really that we the are new accounts existing and acquired inflow well of this we for as our has accounts as accounts sizable average contributed. continuing quarters So, past funds to the few see the from for

going I they'll So, deposits, of we think these sticky feel, fairly be the majority forward. deposits

Lasse Glassen

question. next Operator,

Operator

Thank you.

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

Timothy Coffey

Great. Thanks. Afternoon everybody.

kind conference of that you're in side low forward that think you've a so loans in success made this way and on the to growth the is call, comments origination about right double-digit rate loan far range? Given having the the and

Bonnie Lee

that XXXX, two -- later in next at -- there's environment to happen -- part we for may think I But being, It of probably least our such to think or targeting for the the are growth XXXX. time keep low that still one I single mid-single-digit quarters. because is

Timothy Coffey

And quarter? loans last were were trends, that Okay. sale lower how about your sale much that they held end think should the considering on gain for than we period then

Ron Santarosa

not moving when going of here very too let's be seen, that isolate in strong, volume, quarter-to-quarter, a the though, as Still government, down from try for from for So, XX%. volume, draw -- of new we where that we quite guarantee the settle of we move you, the compare sure Tim. the out. anticipate again, into our forward, They've to quarter. will to little the XX% dissimilar been second PPP first good so change, fiscal three trade But third production say, quarter SBA it, rates to quarters XXXX. premiums healthy will bit year you federal the for had remains be What not to

say trade I'm would bit. of So, I relative maybe necessarily -- I'm absent premium. a volume, fading there's would not a sure increase chance they continuing, the to

Timothy Coffey

Okay. got Great run in marketing that to quarter and good the Is expense? you spend line, I've kind was doing since equivalent rate in And XXXX. of what advertising Ron, that's very were the you the the about helpful. on promotion for a

Ron Santarosa

the at spend look to the I'd low or you see back year. off is picks you'll to if maybe down and it's like end at third seasonality kind So, quarter returning, the But in again. should -- two. towards for few going it, seeing too quarterly perhaps and seasonality here up what It's pre-pandemic, kind a where we're of periods our a the a that then of a not although drift stay dissimilar say quarter of level it to

return. that just quite going through as believe manifest it's how quarter-to-quarter. I to will go pattern not sure So, I'm we

Timothy Coffey

mortgage just and SFR, warehouse you're a Anthony, question Is then, And that there the targeted at? on lines mix Okay, originations that's looking helpful. a Thank business. between you. the

Anthony Kim

mix. targeted There's no actual

line balance million million, outstanding target average about is million. commitment the and is warehouse Our to $XXX on $XX $XX

Timothy Coffey

great. Okay,

Bonnie Lee

So -- yes.

business to were will we saying XX% of in As of expect we that XX%. side mortgage our production contribution the be terms

mortgage combination an as a retail well well that to buying as of as a some will acquire, so as if it's combination. So, opportunity there's the of the warehouse portfolio, be

that overall business targeting our just about we're So, XX% to XX% of overall production.

Timothy Coffey

it. I much. very back. Bonnie. Thanks you I'll Okay, step Thank got

Bonnie Lee

Sure.

Operator

Thank you.

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

Gary Tenner

afternoon. good Hi

with questions corporate But that and could if All related deposits share the to holding initiative. you're loans my you the were of I wonder answered. us currently Korea

of sense of Just kind give current scale of the initiative. a us that

Anthony Kim

Currently XX% approximately corporate deposits and X.X% of loans the on space of loans, in are the are Korea. in Korea have we corporate

Gary Tenner

Thank more have any there to you. And this sub-debt? you sub-debt then, Ron, you or at redeem do do to along new with plans the of hold the point, X.X% the expect remainder

Ron Santarosa

a market very we the So, at of of hard be what notes. a the would option the the have given we March XXXX, to exiting between might X.XX% more going which present. or redemption attractiveness date Redemptions take end at are of look that repurchases

So, opportunities can took at had that we in the I in was quarter, one looking occur redemption present will to that. at advantage we're those opportunity that don't end if the themselves so March. of any predict how but the quarter, of clearly of we third fourth know the

Gary Tenner

And rate? Okay, on third into business the run of that great. account to that fee full did so it's fully impact revision quarter, quarter kind the then the finally, schedules, loaded

Ron Santarosa

look that quarter fairly at you it's rate. Yes, the representative completely, affecting run so as could third a

in pretty what of might occur quarter. bit the idea be that left hard be depositor decimal But activity. fourth the would that, depending to the little a it'll the digit predict the is to After point more little which be will [indiscernible] on a good. I think first activity, variations of to bit

Gary Tenner

Thank great. Okay, you.

Operator

you. Thank

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

Kelly Motta

actually though, that use a want for about kind about My just sub-debt capital? thinking Did that how follow-up. buybacks the covered. thanks of Hi, so was ask, about you're redemption, well, to was as deploying the question of as

Ron Santarosa

we present in repurchases opportunities effect market both. of any So, during kind very advantage our as each they or took the do in good out or We'll what the to some so our calls, quarter, capital market that. fourth Clearly, we've at be repurchases, dividends pointed all quarter previous period themselves opportunities quarter, again, see of practices whether third there in thereafter. and of were we look

Kelly Motta

so had one on a Thanks given credit how reserve Obviously, you to quarter, high nice this especially been much a Ron. release quality relative has but trending. still credit. peers, it's last Maybe

us -- with or quarter room Just of -- they a kind have wondering, things side -- we on you a -- bring or stay there and big be crystal assuming it of provision? I kind should a as know but still take ball, are, just we down that none is as did negative to the this of qualitative further

Ron Santarosa

pointed notice credit X.XX%, of just roughly and hospitality. allowance. with you associated million about have, at aside ended for quarter on it of we So, set inside is strong look and the sheet of associated the and loss that million allowance with idea, about have focusing that, estate $XX of off-balance the is out, about losses it's we other that which very you'll we $XX commercial principal When real allowances mechanics the that, as $XX third traditional and million the of we

hospitality opportunities follow it drip needs lower. continue So, the then to watch will the to demonstrate and be that continues watch reserves improvements, there -- to should as allowance

Kelly Motta

Appreciate it. all it. Ron. really helpful. the That’s Got color for Thanks

Operator

you. Thank

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

Lasse Glassen

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

Operator

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

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

Hanmi Financial (HAFC) 27 Oct 212021 Q3 Earnings call transcript