HAFC - Earnings call transcript Q2 2024 | Hanmi Financial Corporation

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Operator

Ladies and gentlemen, welcome to Hanmi Financial Corporation's Second Quarter 2024 Conference Call.

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

Unknown Attendee

Thank you, Joe, and thank you all for joining us today to discuss Hanmi's Second Quarter 2024 results. its today's and call. issued presentation supplemental Hanmi accompany to afternoon, earnings quarterly release slide This with and Both section Financial Ron website today Santarosa, of are Corporation; the Lee, documents available Banking Officer. company's at in Anthony Kim, Chief hanmi.com. I'm Officer; of Financial Executive Officer Chief the Chief IR Bonnie Hanmi President and here closing on Bonnie comments questions. Bonnie activities, Ron deposit discuss loan will begin and the then open today's we and call provide before with our details call an will your performance, provide overview, Anthony will for financial will up

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

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

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

Bonita Lee

in joining second Thank for Hanmi everyone. Good us to challenging results you, Thank XXXX afternoon, a banking quarter, second the you results. discuss today Ben. delivered solid notwithstanding environment. our quarter

on and and our core second quarter. strategy well, we expanding our our the X-pronged staying market during relationship remain enabled deposit further to to approach franchise. This to and portfolio continues us expand share true team execute Our loan banking model, diversifying our focused always

Here $X.XX quarter. diluted was highlights or the of million per are second income $XX.X Net share. some

X.X%. equity Our assets return on stockholders' average then on return and was was X.XX%,

quarter-over-quarter. increased New loan XX% production by

have deposits. noninterest metrics X.X% quarter associated quarter, new in quality deposits salaries total finally, costs Importantly, remained X.X% prior our investment lower consistently income a and declined and now from first in from with Noninterest by grew asset the of labor employer Demand and increased by benefits origination XX% strong. comprise seasonally and our driven taxes system. capitalized a primarily expense from loan decrease X.X%, the

new Looking detail of talented a our and in in XX% XX% note to in activity investments business in particular attributable was loan more increase loan SBA our the at increase production the increased bankers. production,

C&I which a Additionally, to sequential C&I a contributed on year-over-year, X.X% XX% basis increase production by increased and XX% in portfolio.

While loan and production we Deposits margin were stabilization. was the payouts accounts and on deposits grew were a flat basis, level relatively higher an we are first compared strong, due to encouraging of residential the mortgage sales of X.X% an demand On by loans continued annualized note, loans. stable. to quarter seeing

second grew noninterest employed the we management. quarter, rigorous During expense income and

Turning asset quality. to

We continue quarter. during credit exercise the to management stringent

loans a remains compared the XX% As our first declining to quarter. criticized by with asset result, excellent, quality the over

of average points annualized. Additionally, net loans basis low at be charge-offs to XX continue

market. For residential quarter, loans consecutive the the into second secondary mortgage we sold

our market also also We and mortgage capitalizing base that enhance pleased anticipate revenue sold supplemented diversify We during both and our opportunity to balance the very sell are growth good. contingent SBA strategic more actions our noninterest to on loans, loans initiatives quarter, report on our further income. sheet. I'm This residential will conditions.

and of with second $XX serves a to than Initiative in referrals. represent higher Korea loans capabilities. Corporate Corporate total strong XX% increasing million approximately XX% our sign production our Korea the with Korea million as This deposits. the first $XX at our number of Corporate customer currently deposits. total continues quarter our and team's in of confidence an of quarter, Our slightly our line well was new and perform in expectations, In

exceeding loan SBA $XX million. million of target production to production $XX million, our quarterly reached $XX Our

forward, production Going we line with target. expect to in this quarterly be more

consolidation Ron we locations, During will X which completed the Tony and later. of the discuss branch second quarter,

actions a integral an of As maximize and to strategy growth cost are reminder, these part generate savings. our

footprint. will continue to to our optimize future We opportunities evaluate brand's

where customer more system. Finally, year-long one as platform. loan completed processes support a This The our now system to growth, in effort and occurred all new new now production investment new loan and Kim, our part the commercial Officer, origination people, process we efficiency the more well-rounded loans Chief lending second deposit origination. I'll experience Anthony? origination of our is a over system continued technology offers expected and loan the to loan a a closing Anthony in implement Banking call solution activity under of than to to turn detail. for enhance quarter and through discuss underwriting improve to

Anthony Kim

you for Bonnie. loan details Thank joining us by production. all Thank begin you, on our providing today. I'll additional

It up $XXX we C&I an quarter and during in the demand by growth across was have the due increase with average driven meet or coverage $XX SBA, reflects C&I of strong estate, were million second $XX current production or XX% of CRE first quarter, the environment. production CRE average the million our production billion $X.X from interest up the an basis. up million, the added loan in to production markets. Production quarter, up or loan Korea, the XX% million rate XX%. for $X weighted We $XX to with are impact million service over million, second credit driving ratio [ and due increased the which from of standards rate the Outstanding home was increased remain loan-to-value last production first businesses million, residential team in total to ] was the Total we increase debt during from The quarter, commercial has small second Corporate annualized pleased remains of weighted balances leases from weighted quarter primarily declined million SBA represented commitments levels. the interest was quarter. XX% quarter. Residential the to purchase lower XX% California and a underwriting grew the on first Northeast. The $XX X.Xx. quarter. refinancing first talent million $XX our lines in Residential rate with production the in current this quarter transactions we in the volume We market over a the mortgage This lending opportunities a the from in ratio XX% represented traditional high-quality environment. higher quarter marketing high activity. loans with demand to continue average to disciplined our and be the of the X.XX% was year by of loans in continues loan subdued. pursue Most of a XX% approximately our increase an ago. interest commercial of for total to $XX purchase $XX quarter, environment compared increase down portfolio. while previous utilization X in portfolio, due rate refinance quarter in for X%, our XX%, increase quality activity C&I of the resulting production last million loan loan Second XX% from in up mortgage as as our as our rate from $XX the to same that remain X.XX% loan of second quarter. The in was real and

accounted million from portfolio we demand $XX quarter, first mortgages the during million respect sales for noted, our portfolio of residential to are additional who market currently sold approximately Bonnie million of again these depending conditions. customers, $XX $XX production, Corporate which from Korea, healthy approximately and production. total on loan we As of includes With C&I exploring saw

efforts the represents balances expand total XX% $XXX first are quarter, or and continuing Our approximately these of USKC million, fruit. our in and were $XX portfolio. bear up to X% million relationships loan grow to loan

accounts quarter, Turning were to demand second the deposits. X.X% grew from our over previous annualized the the same quarter, X.X% period. X.X% or In although down deposit deposits

continue We production in Corporate partnership with our $XX a million the of our clients expand quarter. Korea deposit to with base

grow XX% adding total which model. Korea XX% of believe relationships time. success base demand making At our remains of banking deposit and good our our that progress our reflects relatively the quarter deposits new composition is team in Corporate of we represented Our deposits. The relationship deposits end, can of over stable,

quarter our discernible continue to impact no mix Officer, evaluate branch to to noninterest-bearing in optimize XX%. of completed over deposits branches demand successfully hand Chief details from We'll our deposits. of results. our executed quarter, call XX% consolidation the financial increased on network second the with our X Santarosa, now to second was for more on I'll We the May, During footprint. And and Financial this Ron

Romolo Santarosa

cost basis taxable the the we to principally net interest quarter. may XX our million, due it you, basis was Net down X the inflection increase half directional basis be the margin point also equivalent income for Thank first saw interest of in Reviewing our led of for decline This quarter. indicating for an as the point a X% net our quarter uptick interest This a and second an unfolded an change margin to was June, year, which the was X.XX% in in increase on $XX.X point interest-bearing decline second deposits. trend. from in the first a Anthony.

that time average is Looking quarter the far for rates. those for rate low forward, the we current deposit our see paid and of maturities not that is amount that third somewhat the from maturities

about only average. basis deposits cost of higher X quarter the second than to is points date for addition, In our interest-bearing July

at Importantly, recognizing quarter, a make margin second the our into expanded month production rate average X%. to third end net positive does In indicating exceed inflection of that summary, a trend, loan X new the of quarter. continues not interest hopefully the our the

from to income. million, noninterest X.X% Revenues $X.X were first the quarter. Turning up

and sales the second the sale diversify X.X% quarter to gains the further than we $XX.X transaction, revenue was $X.X income and million rights the the consecutive of quarter, million. premiums the quarter from gain which although servicing we second expenses bank-owned increased from $XXX,XXX. Noninterest of first X.XX% $XXX,XXX residential insurance trade as to will the from quarter, For retained for life second loans mortgages, increased declined less our for $XX,XXX in to increased Gains had this the sources. SBA

saw effect the system we mentioned. seasonally benefits Bonnie lower Here, as of well a as and taxes the that in loan new employer origination investment

the real completed recovery addition owned off-balance expense and sheet noted, $XXX,XXX. Credit of of at at addition, Net loss end consolidation other and of Anthony estate provision million annualized, of loan for was for $XXX,XXX, expenses and for low basis loans favorable. of asset a overall a in $XXX,XXX. points loss $XXX,XXX of resulted quarter in loan comprised the to quality remained $X.X a May average branch remained In charge-offs second quarter that items XX as the we second of

capital. equity to Turning

increase an in increased our increase after-tax our available-for-sale from AOCI hedges. $X.X portfolio negative losses well million on an unrealized on flow Our losses after-tax securities as cash unrealized as in

the the XX.XX%, bank common the minimum was will equity continue ratio you, company the book ratios exceed of call repurchase second the per million our company's was a The the subsequently, Hanmi to to total $X.X that, turn shares XXX,XXX XX.XX%. With quarter, $XX.XX. continues During ratio announced we was average bank Bonnie. end was value bank's the capital the and category. to Tier the and share at X.XX%. at I to back Tangible new ratio exceed purchased share requirements, price minimum program, and asset the regulatory the well-capitalized capital $XX.XX and of equity for tangible second quarter tangible an capital and X

Bonita Lee

ongoing am their I thank for I to you, dedication. bankers. team and Thank Ron. like commitment would thankful to our our

foster our well growth. customers positioned continue value. our for meaningful is with franchise Hanmi sustainable to enhance and We relationships

Our our capital credit is excellent and liquidity sheet strong ratios, by evidenced balance quality. robust as solid

achieve loan to confidence mid-single-digit is in Our this which our healthy ability our loan reinforces low pipeline year. growth and building, to

have have of core to We recently an a mix improved stable deposits experienced DDAs. shift and base

are with our to broader year. us expanding in banking uncertainty all our metropolitan enhance questions. and drive We strategy. remain we'll foundation. and reach execute opening value a With the to branch operate for model guides Operator, the in region we are for expense today, management, committed of stakeholders. Thank now ongoing We we persist, this time ability It is and growth macroeconomic later finally, please the Atlanta you how geographic confident disciplined line. relationship the your for open our franchise call and our open our your our

Operator

from of first [Operator Instructions] Kelly with the our comes KBW. Motta line question And

Kelly Motta

Maybe starting growth. loan with

as flat. to higher, in your as was up have together, all in as growth that it production well mentioned remarks given conservatism you what And drove your putting Wondering like paydowns of think with that markets? bank. had the you're expectation look but it any seeing working certain themselves I potentially ahead were if your loan XX%, this and looks seems like as of do for what you any relationships prepared to payoffs, reasonable you what out at if balances their commentary juncture a

Bonita Lee

Sure, Kelly.

we So to a Q, was the than higher in the the had but Q, I obviously, first production second average. from -- mean payout better the compared

looking of quarters, from So X $XXX prior our at high last payoffs the low $XX X million, average -- about million, of $XX so million. range

the average, We cash-out good some This aggressive in have quarter, things retained asset than are of terms some competitors manifested. of of coming than lower offering But market. higher always loans. quality the balances X and -- obviously. And of in, the to we on offering much and quality, was it our some welcome payoffs the more did rates the increasing that

to we unfortunately, so And that go. let have

think the that's I on the million with the net $XX into going up expect course $XX building that that we growth. and to mid-single-digit stay of quarter, think we of looking forward, staying So low average assuming payoffs pipeline annual third the to within can are million, just increase

Kelly Motta

margin That's there? And a migrated, yields didn't looks a color that lesser relatively there impacted that part there question, low, wondering interest reversal quarter? like of much. it Got the was to note may yields a as that loan turning any I'm OREO. Can any was the really NPLs things any And are have to that of understanding helpful. if expand pickup, credits in million loan extent, this second nonperformers asset partly you then and still quality, $X provide as to it.

Bonita Lee

Sure.

Due the small equity about loan. And So roughly loan any actually the at sufficient first accumulating July. loan, million. quarter and coming anticipate beginning million. was commercial are of The from the And in $X the a of $X.X of the in about prior property, not one $X is one that loans we is actually the the couple that, about loss of in NPAs are main the That a million. process. up all, already in property brought previous do are rest particular of then is contributor downgraded current quarter, which was foreclosure them was out of the and to to actually, that identified

as compared said, In -- flat. compared loan that of payoffs actually this basis quarter, yields is we to prior the it was terms was higher quarter higher paid a that The related payoffs. down. loan bit it's X to the a little point the the in It quarter. And had rate yield, down I -- prior to got loans the yielded

why So down. or that's yield the kind in loan production new -- the higher, overall stayed the slightly of although flat came yields

Operator

of And the line from the Tenner question comes Gary next D.A. Davidson. with

Ahmad Hasan

you rates of point, rates Is here? seeing on Gary visibility Hasan lower here touch for Ahmad are mean deposit any may rates in September deposit on out -- there Tenner. a is wanted rates. the I peaking at end This moot to but this quarter? on make I the top

Romolo Santarosa

about the basis it's indicated, modest little a bit are little increase so interest-bearing deposits up a representing points, rate. of we cost of only X of mix, a bit very As

think we that out, of July. more to So -- we meet tried again, point When we we're peaking, between transpired. June see we evidence as and again, but what's exactly we'll affirming have we

Ahmad Hasan

right. All

period end Sounds good. the was deposit spot And rate? what

Romolo Santarosa

you repeat? I'm could sorry,

Ahmad Hasan

period rate deposit end? the The spot for

Romolo Santarosa

June, for was for average interest-bearing the of CDs end the for X.XX%. and the X.XX%, average So for was June deposits

Ahmad Hasan

assume it stock? the recently, guys will squeeze stock Is if continue remain reasonable maybe tangible buying shares you can back more. move And Even Buybacks. I one below with that to book. positive

Romolo Santarosa

the the Clearly, say, way quarterly. the most weeks. were the attractive. We shares our review before So gap on other considerably dividend, calls, several let's share trading mentioned actions. narrowed were, our meets review over recent has the capital repurchases we as Board moves, we previous That highly last here

X over So quarters. continue, the certainly I saw continue they could that last that same they the but you may level anticipate perhaps won't at

Operator

And line Butler the Sandler. Piper from of next the comes Adam with question

Adam Butler

for Clark. is on Adam This Matthew

date. I commentary, the quarter mentioned, cost and to So loan bit, Kelly was July as linked in of mentioned you stepped down And up to you or deposits remarks yield that a that were Ron, slight NIM at bps -- in you in your guys IBD the mentioned you elevated And may end the quarter, your previous payoffs think that the related mentioned have inflected. the higher of also yields. at the X

happen to NIM So us fair to have in to is yields it loan assume with spot you modeling? do those guys July recovered? a help out little bit And the that

Romolo Santarosa

it's the daily Bonnie the point that I which do you differential, than would less as a is call So Residential backwards. to the yields, small, percentage yields NIM picked also just underscore small, moved a CRE pointed a don't up. average I respect would in on a and higher to saw mix bit just financing With flat. in basis. bit, in, out, put it But production we and addition payoffs, had on a down basis shift was so loan basis. little portfolio. Equipment working No, the a

you quarter-over-quarter. With a see, -- you It's it year-over-year so more it again, smidge, to too than see much. a just make so it's I evident start it And is wouldn't that finished respect deposits, quarter, met out basis quarter to I on the we XX. we month-to-date the indicated cost were, a again at points when basis, last interest-bearing XX over. of We

basis it, about quarter. think only last point a over you move second months the X if X the that's So of

Fed Here same idea for going market the quarter. That's X third sense people that particular no for September. one, just there's that now to should the of I basis And to the to expectations conducive do be outside cause we say, X assuming, of decline. -- further might a conditions the moves rate have you're expect not our at may that that I kind second, will any probably are points. ways most in or competitors that act would see environment

right the out, as it and is, September I the we pointed trajectory So seems but really inflection, trend. the to we're like on July, in affirm that, August fact, for need that

Adam Butler

Slide over been plan like maturing have loan in and it year, that. or Okay. for growth coming I maturities if look million funding? so production helpful yields And you have good on or rate XX, the cost appreciate the fund $XXX off some up next over some repricing, per information. do I looks loan That's on portion, guys about fixed And you repricing. information free portfolio fixed the that right I use are higher quarter to now? or What guess maturing to you

Romolo Santarosa

I that for particular Adam. see on have and don't think, you, an Yes. will point go it, let me you better data earlier slide. And I backwards. of I kind can say,

if a you granular but see, can that relative which those because piece, a XX-month -- look maturities period. a lines, loan X. C&I are larger And a fairly Slide to over -- typically So the XX, typically are X as at to you credits X is you category, are it's that class. And as the can see is term

in followed if a certain, and down perhaps renewal largest is the hospitality, could I bit loans, you And the roll then by go of perhaps more property element, being office the phrase. the so retail. into say, commercial one line, let's particularly the use And that

a that it's Bonnie we another comfortable that a or credit what of long out term. not a will a benefit we're rate those how cash kind as either in would terms may for just that competition with much quite mentioned, the a there'll feel perspective, that I other or think, selective in renewal Anthony mentioned, offer need comfortable look don't from we either at institution we tendency where our of bank feel the one, as we from that portfolio so where be might lower And with, than or we're financing we're parts perspective, lending have

Adam Butler

the some in Was Helpful. a just just one in reflective me. X Texas you of initiative? saw for might quarter. a more Okay. guys footprint? And that broader then I branches this be that missing but And of Or I that closed product redundancies is information, like

Bonita Lee

optimization evaluation branch it's our That's branches, effort. Yes. -- an our of and ongoing

Lee I Dublin, X Fort second we this one branches, only quarter, in X one we but branches Metropolitan consolidation the X remarks remember, branches, year California last in new X And in and the later my the year, we not So you Texas. closed And opened during as of the had open emerging in then mentioned markets. the prepared -- in in area. the Georgia of and in plan part one that in to if

So ongoing process. that's an

Operator

line Matthew comes question next The from of Jones Erdner Trading. with the

Matthew Erdner

that The increase should loan we internally? And that you quarter-over-quarter loan-to-deposit Is revenue? loan forward there. as ratio kind creeps increased to a of gain kind guys more growth going on to due ratio net there are expect sales up, of targeting this sale the

Bonita Lee

think So loan-to-deposit try and and I I rate whatnot of coming that below we are. And we'll think of shared environment, are ideally, a to where a -- pandemic XX%. target couple I -- then ratio out interest target quarters, but we the the with

to we it the So sheet, sales of and will managing warrant and in bottom the residential portfolio we in I as the loan continue we'll with now. contributing balance also mean, sales take for then terms loan line see

Matthew Erdner

think half then of of rights Got you. servicing second me? the earlier. that. you Because kind I Could you out missed flesh that mentioned I And retaining the for guys

Romolo Santarosa

Sure.

was servicing idea explored and then portfolio it released. So of servicing sale, first one, in the executed In we this retained. the

term. loans we point our we at the enterprise with we're particular the make to or element, another providing over the that that the continue to for we trying marketplace, production revenue so in as at will beneficial either to think source be and these again, to longer And retained continue retained appetite to would explore look us the the look released,

Matthew Erdner

of or is the then servicing that the coupon average on I you. are selling? rights loans on guess Got guys there an And kind you

Anthony Kim

] points XX typically servicing. We do the to basis in XX.XXX [ charge

Operator

of next Kelly question And come with again the the line KBW. from will Motta

Kelly Motta

core expense I was hoping run the rate. to on more go bit a

to later you in strip you nice coming branch costs reduction mentioned You have guys cost. consolidations, related in And had when online -- onetime branch reduction another out this the do a year. you a part nice

where to to production work of wondering, costs which this the and year, we ahead, rebound a we run Just any continuing expected good ahead areas rate a out bit? there especially the to as other look is Or look to is loan half you're growth back build from? as on as is

Romolo Santarosa

movement the So that expenses noninterest the quarter, When $XX.X balance rate, a our of good numbers some for balance decimal over of of point. But to run the be the second the able the seems be to look were about it right Kelly, for the out million. hold seems on like vicinity that's to year, we for to going that pretty the allowing year. at

Kelly Motta

Got I are been than me. XQ, your conservative it's your is as niche. but know question was concentration I guys above That that's historically, At least And lower then XXX%. within last CRE of I it. know for believe you helpful.

that. that's level? a Is Just that growth, mix your fund you wondering of a and if do at Or consideration about feel at -- that thoughts as constraint? look all the good to you

Romolo Santarosa

the occur concentration our over, I'll has growth ratio, [ to number variations in specifically, comes kind So a the allowed us as some can't such the regulatory not balanced EFAs, so. much producer quarterly to let's investor so I little decline past mind. The diminished combination categories, is years of say, bit illustrate that in the XXX% slides, our that which remember more X say, classes the the -- a other quarter-to-quarter. be, C&I And the ] CRE a but slides, -- loan or we of lower notwithstanding lending those residential other more because recent decline typically mortgages,

a number. In also see addition, which the then you to that in in general leads growth decline capital,

kind decline matter, in or drive that a we for continued slow today, at ratio. as any or directive, see you're to So point it I to think desire have particular below a likely particular policy that stand XXX%. don't We of a this

Operator

questions no management this Ladies time. you. gentlemen, call back remarks. closing the and hand Thank there for at further to I'd like any are to

Bonita Lee

XXXX. your Hanmi to continued today. with balance interest in call our throughout joining progress you and appreciate our forward for of Thank you look We the sharing

hope you Annual XX, We will Investor there. you. of I York Thank be and participating many KBW July on XXth in New Bank in the see Conference Community to

Operator

This concludes today's conference.

You lines. your may now rest Enjoy disconnect of the day. your

Hanmi Financial (HAFC) 23 Jul 242024 Q2 Earnings call transcript