HAFC - Earnings call transcript Q1 2022 | Hanmi Financial Corporation

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Operator

Ladies and gentlemen, welcome to the Hanmi Financial Corporation's First Quarter 2022 Conference Call.

As a reminder, today's call is being recorded for replay purposes. [Operator Instructions] I would now like to turn the call over to Larry Clark, Investor Relations for the company. Please go ahead.

Larry Clark

Thank you, Alex and thank you all for joining us today to discuss Hanmi Financial's first quarter 2022 results. its today’s and call. issued presentation supplemental Hanmi accompany to afternoon, earnings quarterly release slide This Both section website. of are the documents available company’s in the IR I’m Officer; and Chief Santarosa, Chief President Financial Bonnie Anthony Ron here Officer. of Corporation; Banking Officer Hanmi and Chief Kim, Financial today with Executive Lee, we with closing begin and the details Kim on open financial overview; performance, will comments Ron discuss questions. Lee will an activities; provide Bonnie loan Bonnie will provide will then before today’s call your to Anthony and deposit call our

Before today's we statements federal begin, you I would like laws. comments under to remind securities that forward-looking may include the

based are company's statements industry operating trends expectations, may on Forward-looking events, future and performance. financial current plans, financial results the affect and that

our of involve and be SEC to statements XX-K Our our actual results found factors may the differ forward-looking reports our on differ our by statements, uncertainties. materially risks forward-looking materially actual Discussion can could and release, in contemplated to from cause certain that earnings these results to risk would including With from like XX-Q. which our filings, Forms I the call discussion the please and our affecting in direct of we that, business contained Bonnie investor our In Lee. Form factors presentation, now in ahead. XX-K. to over Bonnie, go turn our you particular, those

Bonnie Lee

expansion, to fueled and quarter margin net Thank to the first Focused you, year. us first had loan earnings today by excellent results. in XXXX management. disciplined Larry. board credit strong expense the healthy production, our Good the afternoon discuss Hanmi start everyone. very, Thank solid us you for quarter quality, execution interest to joining deliver helped a across very

customers, per share income our up for of client strengthen quarter $XX.X or ties from $X.XX a $XX.X net million community nicely the $X.XX in XXXX approach. XXXX. first fourth diluted develop relationships banking of first share, quarter, to diluted down from of the new continue million reported We hallmark or per We quarter Hanmi's and the existing but

on on our average Our with strategic equity first on on quarter XX.XX%. was focusing contribution our return the SBA return am pleased are business assets X.XX% career expanding I by progress production, our mortgage making our we loan to loan the initiatives. ramping These of initiative. our residential and average stockholders' up increasing production, our was include initiatives portfolio diversifying and loan very corporate

We quarter, reflects represented community to within XX% our we achieved our year-over-year. well ability million up impressive have to scale is loan residential In $XX steady and residential ties. we XX%. our making platform, non-qualified risk residential we portfolio platform, our profitably in acquired originated warehouse the In loans that in solid XX% our production, the progress adding of effectively expand mortgage established total diversifying this goal a which a first years. This class production our by loans loan by of for launched Through XXXX. progress can program and initiative This lower over mortgage with and leverage just are lines. mortgage loan year, grow this we asset with a

We SBA X(a) million we business to in continue loans $XX where quarter, our expand lending originated our targets. exceeding in the SBA

XX% initiative quarter relationships this throughout success fourth to the here year-over-year. is to of with is million Corporate the Korea bankers' from sequentially develop X.X% We continue this grew up their traction rooted strong our gain in the initiative expand in our in The We United domiciled companies Initiative. to Korean launched also meaningful $XXX communities. with and XXXX portfolio relationships and This States.

loan ethnic environment, client we're X.X% communities our are a growth Despite quarter. in Importantly, lending as strong footprint. in growth multiple to and also coast-to-coast U.S. relationships we our corporate strategies cultivating business net clients, continue the competitive corporate across our Overall, working. the of grow with strengthen first we Korean delivered

Additionally, year second production. exclude ago PPP first prior the from when loan we production total the year doubled draw quarter loan than more

strategic loan initiatives, Our with lease growth diverse the our our and build along quarter. during growth the across business lines, strong momentum

leasing strength lending in complementing solid Our were real contributors growing to businesses our and this and and portfolio. SBA performance, estate industrial commercial commercial

be initiatives, are good We on fund our are growth. relationships. our deposit progress deposits good making also to tend a as corporate liquidity These low-cost to of expand source gathering we continue particularly our and loan to sticky

and deposits when the represent quarter and for quarter, XX% metrics by the more now these growth we further X.XX% from fourth DDAs redeeming onetime in well and margin. In X% strong This loan expanding our net both of attractive grew the charge to in were the positioned and our subordinated than net pipeline exclude our improvement over impact contribute to of by total up quarter total costs. helped core deposits interest see sheet. driven both funding very we grow well given continued Our in that loans first solid to an year-over-year. are of we our the believe was These interest just the as X% notes. XX% balance our the increase We as income

Finally, our on our remains credit and performance thorough underwriting credit focus across excellent, cycles. loans high-quality reflecting

ability Kim, improved going our Further, and loan to gathering has including Anthony payoffs in we credit Our Banking to to comprehensive deposit approach to led detail. remain payments discuss call to effectively turn our forward. quarter the quality our Chief to first confident in production more that, credit Officer, over ability in trends manage quality. secure management, With asset and I'll

Anthony Kim

production. our Thank loan Bonnie. lease additional details you, I'll begin on with and

million, quarter PPP first quarter loans. fourth doubled volumes than and last production the more high First than $XXX our were quarter XX% record year, excluding production lower

in of quarter production production utilization production in This stable discipline lines industries. credit industrial, million production. XXXX. varied X.X% ratio of and real remain $XX Korea first the loan $XXX of prior was million our times $XXX on production for balances service Outstanding warehouse the as Initiatives estate or of and and portfolio first consisted first quarters, represented total in lines XX% this XX% quarter this year-over-year. Corporate underwriting increased as loan was debt retail more million We well or Commitments first X.X and to end than coverage end unchanged to average C&I however, in of XXXX. from evidenced million, of level at an loan-to-value by of average and at the $XXX category and quarter. on of the as office the $XX commercial from quarter commercial resulting were quarter between lines, of double our the loans fourth weighted quarter XX% of The increase weighted Our and XX%, committed these lease of rate respectively million properties. majority quarter, relatively of and includes to

looking was cautiously their New to healthy are operations Bonnie continue $XX and ongoing X(a) million portion mortgage invest investment production customers our finance noted, production the market. lease this SBA of Residential in of $XX the serving reflecting focus benefits our of of loan a our leases. solid, as of the seeing line recent mortgage through in pipeline we million, this quarter a regarding of first million total loan Despite many to and was and was segment we as consists equipment investment the on XX% run-up non-QM lease the $XX quarter non-QM remain which and as is production. residential the platform our optimistic in of are the business. mortgage our production, in loans, in represented rates, current

$XXX quarter XXXX. $X.X Given increased quarter loan from our points our fourth quarter of quarter to X.X% of from from payoffs Payoffs the and lease the fourth loan million portfolio quarter. payoffs. billion the average production compared to were previous basis for solid was also was $XXX million rate XX.X% first in in overall loan the up first The XX on an increase quarter, X.XX%, and the the

Korea our considerable Since our branches in Now on have significantly. we've we its program I'll This relationships our testament inception, the strong a Corporate have discuss programs a seven to across we in Initiative, communities Korea made in the began grown located footprint. bankers strategically progress where XXXX. has program Corporate this is our

quarter relatively In geography priority type to Bonnie the more and XXXX. the remains a end Korea XX% believe diversify mentioned, loan an category this Corporate anticipate has strategic total customer quarter, expanding fourth than economic and summary, XX% initiatives we environment, quarter. of loan to the portfolio our in this from million favorable by As continue continued portfolio in last is this represented a X.X% the of by base first further objective. and of industry, on growth deposits. will deliver and X% the of we At loans us, and since year With Initiative for first remainder we our grown $XXX up to total throughout

million Ron? to money and $XX non-interest-bearing at billion, DDA drive $X.X during were first decrease deposits our quarter, Total Chief Officer, deposits, now, again end from composition the base in over to quarter to more on increase quarter Financial decline deposits. quarter. an in total offset Santarosa, time of of deposits. million our of deposits due results. $XXX market improved call and deposits, year slightly on dividend deposit financial turn the word partially details continues pay $XX The to in over first decrease at And quarter Ron DDAs The XX% just was represented growth in fourth a efforts was our by Now, up XX% a I'll down the our the off. first which of from end overall XXXX. a savings XX% million our as the for

Ron Santarosa

Thank you, Anthony.

X% $X.X from in higher sequential million however, the related on subordinated on combined income. for drove increased margin net and our interest points in net Our XXXX loans, loans and higher redemption interest debt interest securities, The prior average net costs average $XX offset X.XX%. of income increase to increase our fourth yield quarter the XX issuance benefit higher quarter million to a The of quarter notes, unamortized with securities. increased the basis the yield X.X% to charge

The liquidity the loan with in on balance end our our margin, Our holding benefited increase from of average XXXX. that had excess we primarily interest assets. sheet was funded mix the been in net shift at balance however, earning the

a emanating subordinate the seven improvement, on improvement during in however, earning As was the charge those assets Offsetting the composition the interest of result, redemption. improved assets. yield point driving our basis the from basis XX the quarter point

not the charge that that that sheet balance service point know and debt our seven we redeemed absence balance sheet, save know have seven excess redemption. sensitive. is on we we know debt. liquidity basis basis points will of we know we Looking for also will asset have on And we the forward, our we a Further, a still from

anticipate our we As near-term. the in should net increase that such, interest margin

gradually will as ongoing the behavior debate interest away the Fed, timing adjust zero also pace we increases and by the and is move changes as a policy that margin. there of net anticipate rate rate eventually in While to from temper of rate we interest depositor

volume also declined to again, income first from of of SBA due The $XX.X was million the $X.X first decrease the prior million as to for quarter. $X.X quarter. the gains fourth down Moving the was XXXX, million $X.X on a XX.XX% the from on. sale And expected, as loans of quarter $XX.X modestly quarter. expected, for declined, from sold sales Non-interest trade quarter on in premiums primarily for decline The X.X% million in the the million prior loans. in to those

was XXXX Salaries declined posted the operating improved slightly from slightly and we incentive recorded expenses. The loan credit of expense $XX.X recoveries to expenses, million largely XX.XX% quarter now offset million for by Turning the end premiums. from $XXX,XXX XX.XX% expense for for of of March to million with of These about down and for the million quarter. credit $X.X XXXX again quarter. $XX.X lower We $X.X the insurance quarter. the compared expense allowance increased occupancy estimated $XX.X XXXX, for compensation from first reflecting quarter from efficiency in loans the than increase the prior were from first The employee first $XXX,XXX, quarter benefit loss allowance of XX, more $XXX,XXX. a to to expense net for of prior recovery more ratio of quarter. and losses X.XX% and And other declines XXXX production. the a generating by was normalized prior an million X.XX% as for credit at Non-interest losses

rate benefited improving economic due While growth, quantitative in first loss we average taxes X.XX% first asset quarter return qualitative up a and quality charges return first ratio factors the where on and We provision our in the X.XX%. to first factors metrics, the during the quarter, for for assets of valuation strong tax and reflecting average on and quarter common from fourth profitability tangible XX%, the With respect loss asset income $X.X our respectively. We allowance. recorded equity a normalized slightly our from quarter remain well-capitalized, declined deferred our of million tax loan representing quarter, XX.XX%, to was for more equity increased conditions very metrics. were

Bonnie. notes and outstanding March of as $XXX XXXX. X.XX% beyond. were However, $XX.X that increase we million entire from the in our second that, X.X% portfolio because in turn securities noted, in rates. subordinated Retiring our from the TCE notes rapid in cost With interest I'll declined our unrealized quarter and losses the balance redeemed finally, March on will to previous of our arising due it ratio X.XX% increase we after-tax the quarter funds sizable million of And the back the benefit, XX, on

Bonnie Lee

Thank you, Ron.

move our thank our employees DRU and in employees moment serve ESG we to what take about are located for on doing our in invest hard many I stockholders. encourage communities quarter. our long-term to needs. learn our Relations ways website during want XXXX Hanmi to at support to you our I their their the to to to outlook, more banking a I in report our Investor here generate addition employees work for our Before to Hanmi communities read fulfilling

businesses a affecting there geopolitical the and inflation, ahead, Ukraine industry country of are economy every macroeconomic the XX-year sector Looking the individuals are effects. high and nearly in across building war overall in rate several to from factors the

financial have diversified demand forecast the well a on are half loan may they second our we strong these on cannot and the capitalized believe U.S. year. we do some on a clients, the said, While will exact economy the business with of factors impact or in pressure we specifically, model. that exert profile That

solid. remains pipeline loan Our

is quality interest and excellent. our net margin healthy credit Our is

that continue in to Our growing our our intently over building dedicated In brings markets team will and of banking the customer a environment, has on our well needs Hanmi, served banking years. relationships XX wealth meeting at new base last cycles experience economic clients economic across business of any we be the and various focused lines.

Operator, up driving to in for open please open disciplined your the delivering the and questions. shareholders We attractive are committed growth the we'll With XXXX. line returns that, our to call for questions.

Operator

Instructions] of be with this Gary a At you. Thank conducting will question Davidson. Please first time, comes we D.A. Tenner line from [Operator your question-and-answer with the session. Our proceed question.

Gary Tenner

Thanks. Good afternoon.

Bonnie Lee

Good afternoon.

Gary Tenner

Hey.

commentary, production So, term, not a from in the for good. year, the think and I intermediate as good year your maybe start in think is the to quite later loan visibility good I but

growth, updates year So, about Bonnie, thinking of I I it, on and as missed commented how unless of full think terms year Any growth? apologize did. your you kind in if full the I you about you're pace

Bonnie Lee

high expect what -- had think, to medium which Yes, growth. -- still we quarter, to is the loan I net loan production sticking I we prior the the growth single-digit mean, the from are we discussed, in

Gary Tenner

following that. And on then up just

production? portfolio in more obviously, $XX SBA, quarterly I think sales. terms a hold below less about million of or little for type in Is $XX million, number number quarter, given maybe quarter, is I think kind portfolio little that. you a SBA I on which this might maybe of talked average terms you a -- to thought the otherwise still of year growth, that bit average last

Bonnie Lee

number. million $XX the $XX is So, the actually million, number production

higher the fourth compare So, is catch-up kind to quarter of a But this third fourth the if quarter, million quarter, quarter I think production. $XX production. actually from is you

do track -- overall, we sold loans to dollar quarter. the per had [indiscernible] in But million $XX higher XQ. number on are about we So,

it higher. may quarters, be Some

million. of it's within So, expectations, line $XX million to much pretty our $XX

Gary Tenner

Okay, I appreciate the clarification. Thank you.

Operator

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

Kelly Motta

thanks Hi, expansion. It was had prepared in a great remarks, think Ron, the for I so NIM much you quarter. your nice some question.

get basis basis back said and seven the points. the you of you'll seven cost another I think points redemption from

mid-XXXs? be imply rate any that understanding before hikes correctly? going does that you're to Am in So, in I the

Ron Santarosa

know Kelly. and change -- the then is Yes, What week in starts will what Fed do outlook. will to what next June, you that don't and we are,

going. I about just be Fed that's up sure not so where basis And news, reserve, XX hold But would points. in by that we absent

Kelly Motta

a of of it. course. first at hikes, loan are trying of Got start -- repricing get in book? rate cycle. to And the those if just it. versus of Got you fixed there's the us the floating sensitive on any of more Can couple the asset your you color Just the you give on sense assets can composition

Ron Santarosa

Sure.

within part the those With of only our to of and down if would three-month The that is the quarters that hundred And million, XX% comprised would maturity that fixed in rolling all within very There's I represents That our a hybrid move. floaters burn portfolio reprice about are of us. off last the portfolio represents respect they're our three-month remember And course, total. all remainder three a couple for loans in date of not of rate consequential XXX portfolio our about to reprice nearly first the date. or the of So, of point basis look, adjustables. XX% interval. of those loans correctly.

just asset So, relative an much sensitivity. of anchor to won't be it the

Kelly Motta

any And there? strong, a although it. Got then was Thank color Can I those on in That's Ron. mention. it you. in special just provide credit. see turning did Obviously, tick-up migrations really helpful, to really you

Bonnie Lee

bit it's respect to chain being little actually supply any mainly the had company portion the distribution. as through -- have they The loss in the of expect with But indirect going coming an as normalized, composed well expansion, three quarters. relationship C&I it's CRE relationships. we to of and is portion. is It's so a don't One challenges Sure. combination a

The portfolio. have borrowers and other necessary the what's two are relationships the and status. to past taking the is loan Again, control hospitality back to being taking

Kelly Motta

me. question Got last then it. for And

On side, were the they expense controlled. very well

it Your Can for there's seeing pressure may might that be salaries looks know down a benefits in kind ticked how you I competition inflationary an lot where might a pressures. pace outlook be investing where like bit. and and you like? does and of the of look trend? outlook the What of provide you

Ron Santarosa

Sure.

say, well So, quarter, the our salaries cycle expect as we of increase annual programs. benefits second I'll our benefit beginning to in inflationary merit the the, increases and as because in the

that to show categories been We of evidence other inflation will some the of about. the start also that's talked anticipate

think starting we second non-interest first So, of where to we our quarter of fourth the in quarter, lift the we'll XXXX. expenses start and see were off in

Kelly Motta

much. Thanks Appreciate I'll so questions. step it. Got the back.

Bonnie Lee

you. Thank

Operator

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

Matthew Clark

Hey, good outlook. on one afternoon. Maybe margin the just

we You latest probably thoughts considered for quarter? outlook, hikes rate contribution. mentioned rate the are What floating your on deposit the last than the loan expectation beta given more

Ron Santarosa

we that that, to lower XX-quarter about So, Matthew, periods, the others. look XX-quarter what when that over that was do correlating about fund's beta some But was our backwards cycle, was in not a the period It last know in data XX%, is rate period. at linear. Fed we moves. higher And XX% was in

may anticipating take to probably of affect in I'm a case big and here, that not But not three-month XX% will the again, sure this how period. that what or beta a cautious in just any week, Fed So, move here, they can may next range. XX% do in we're beta

probably our know that's rate think the we to -- betas experienced don't unfold how much than quarter-over-quarter. more I be going I not last just will probably overall, So, cycle. in what

Matthew Clark

cumulative that to of think a is you XX% XX % more Do beta?

Ron Santarosa

have would cumulative. XX% the Again, been

the rate maturity we the XX% we a XXX% our deposits beta as beta deposits. models, in for So, and non-maturity use we for stress, --

sensitivity So, say, our is, we let's interest conservative. think rate

is the part So, the reality be. it's something cycle. on. just Again, going I two points how between puzzle unfold to just to I'm quite those where this sure I is going rate that's -- not

Matthew Clark

not feel just to hikes floating rate through going you're XX% because to those -- make Do loans. as the just might like you full your the Do you concessions? you the then feel on to we the about borrowers? be got And leasing see rate able maybe to like time Thinking Okay. business an over example. back pass

Just ability any --? the on to thoughts

Ron Santarosa

rate pretty it's that for doesn't fixed the much contractual. that's We affect a portfolio, so But think floaters, it. really

concessions. of as need no moves. rate It there's So, moves the

core no have I on So, concerns whatsoever. that

Matthew Clark

I yields, but us sense give are securities -- [ph] linked I at And on in for the Can you Okay. purchases up overall your think on are quarter, the here? X.XX in securities a think down -- new coming April quarter. what

Ron Santarosa

Sure.

So, cash all CMO complexion same. flowing -- securities, really complexion instruments March-back portfolio the style, agency. securities at about our or looking traditional mostly stay and We're that like we but will that's whether MBS portfolio

as So, this we'll point. that, to look market the at not continue keen small on at

but going it's some We the not will of look at, we're coupons, take where in two a grow to And we're of and current at. at appreciably MBS. it, what, terms from looking handles

So, to you'll $XX month between as start start cycle. to cash see that million portfolio which go in a million through rate produces this $XX we lift to somewhere up

Matthew Clark

you. Thank Okay.

Operator

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

Tim Coffey

Great. taking on for you sheet? me of what to questions. balance keep Ron, just cash my Thanks level remind like you'd can

Ron Santarosa

from $XXX cash $XXX pre-pandemic, as So, maybe well due was as million. about, I'd million, banks say, our

point. it us see takes it to at long levels those We'll some to And returning how so see I there. get

Tim Coffey

stock process then, levels? thought the And what these buying about at is Bonnie, back

Bonnie Lee

watchful. We are always

mean, just I So, take the as a necessary. decision we

Tim Coffey

those -- questions. you. And my were Okay. Thank nope,

Bonnie Lee

Thank you.

Operator

your Our next question. with JonesTrading. question comes Please from with Stewart of proceed the Jason line

Jason Stewart

wanted that taxes HPA, the affordability for increases in side? in the taking and your in the the of ask on thanks Hey, increase how what's given might production and mortgage rates question. view and I impact to rate side, non-QM was expected

Anthony Kim

impact mortgage QM higher in competitive. a much general. demand market on will the Yes. in more rate which lesser industry market, than non-QM impact is we the Certainly, But the be mortgage impact anticipate do will

to similar continued quarter. slows third and anticipate, looking expect we a QX down high production purchase pipeline, in however, So that demand starting homes the as at do level in we the due of QX for as

Jason Stewart

pipeline had historical concessions in Okay. of continue credit make at And any the terms to you quality levels? have to

Anthony Kim

No. No concession.

Jason Stewart

Great. Thanks the it. for Appreciate taking questions.

Bonnie Lee

Thank you.

Operator

you. Thank

questions We I'll have back this over Ms. at remarks. further Lee closing queue to the for Bonnie time. no call the in now turn

Bonnie Lee

Thank with participating to forward you the call We in continued our you throughout and today. sharing look our year. interest you. appreciate Hanmi for in your progress Thank

Operator

now attending you for Thank today's concluded. has presentation. conference The

now disconnect. may You

Hanmi Financial (HAFC) 27 Apr 222022 Q1 Earnings call transcript