HOPE - Earnings call transcript Q4 2019

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Operator

Hello and welcome to the Hope Bancorp Q4 2019 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Angie Yang, Director of Investor Relations. Please go ahead.

Angie Yang

Thank you, Keith. thank Fourth joining Quarter and Hope for everyone XXXX Bancorp Investor morning you us for the Good Conference Call.

will to this we a usual begin will we As be slide presentation accompany morning. discussion our - using

computer If slides copy Presentations Relations of as the please should screen page the presentation. the able not from Or you view download are our be a webcast, through listening done into have progress to already, the visit so website your of Investor the if to we you you presentation.

on does like Company Slide statements X. may future and projections begin meaning materially in statements. on expected as the statement statements the US XXXX. is the Beginning in outcomes about current brief assumptions projections future management and what based is Reform Act regarding forward-looking of remarks. I'd are future to future well the These the expectations, may today results and to forecasted call estimates, and performance with of the of performance These Company The forecasts, a within Actual as and from the financial regarding expressed forward-looking statements events. contain of statements These such Company not operate. of Securities or forward-looking Litigation guarantees businesses which performance. forward-looking Private markets differ the constitute are

the documents no the statements ended the reported any financial with assumes from included periodically to in projections differ revise could SEC complete the as cautions December Form be XX, call. today. files Hope the you the XX-K to press our today's XXXX may on in on Harbor forward-looking made Company Company being release the results that to be The well quarterly refer results year Safe the issued report for materially We obligation financial that Bancorp as yesterday.

release for information financial to referenced to GAAP XXXX the call earnings non-GAAP of on Please refer reconciliation today measures. some our financial fourth non-GAAP In measures. of quarter this addition, the are

the Executive management Hope President also Chief Vice Now, hour we in the Peter our have Officer, session. is will us Kim, here one and Credit participate allotted today Chairman, Alex today with side call. Presenting and Chief CEO Ko, Koh and President and Q&A be from Officer. Financial Kevin for will this Bancorp's

With to me that, Kim. let call turn the over Kevin Kevin?

Kevin Kim

you, Angie. us for you everyone morning thank and today. Thank Good joining

Slide with begin X. Let's

Our Hope Bank enhancing fourth for a the quarter year results of the our of capped franchise. execution strategic of consistent successful value on priorities

million net We per a in continue to deliver of $X.XX fourth of quarter income diluted share or high in generating $XX the profitability level XXXX.

This reflects a preceding call you may back quarter. discussed last the of we over improvement slight Taking for the recall fourth year. or step the million quarter in the at full third looking number January, key a a our and priorities earnings year, $XX.X on $X.XX

very I'm these progress excellent made pleased have on to initiatives. we report that

lower cost First deal course having XXXX, at depositors in to level of deposit and particularly improved deposits, are accounts. most success attracting dramatically our notably, the we where our core branch a of we the retail great over

reduce XX%, increased in growth X%. balances we deposits XXXX, This deposits bearing deposits. our us deposit core time During market enabled our non-interest by strong by higher now and to our deposits and dependence by XX% money significantly on costing savings our

of we XX.X% end success The XXXX, the prior at from of fourth our to during which end proved the deposit better on at quarter. significantly of result, critical in plateaued of XXXX costs, manage then time in our our executing XX.X% have the deposit declined us quarter down core total a the helping the deposits, deposits As declined third gathering had and initiatives to during year.

assets average despite able enhancing of and to improvement ongoing was XXXX. in achieve priority the a continued efficiencies were investments reduce able to X.XX% Through non-interest for year, on levels. this implementation our from including the our CECL. of the We a we down spending focus to X.XX% consistent on were percentage expense key projects, non-interest as expense organization, tightly managing another throughout Second, our

is was a which priority growth. always $XX.X support for strong dividend, third, to attractive program stock effective And repurchase ratios our management. future XXXX, we while capital Bancorp maintaining Hope capital returned of capital million and to in Through shareholders

were Moving able to in loan had the more success have active deposits, cost on lower Slide we X, gathering our production. to in addition to in be we

As fourth originations of $XXX loan million generated a up originations had third in fourth We $XXX a in record the level we from quarter. result, preceding the quarter, funded quarter. new in loan in million the

We payoffs, in the fourth preceding quarter, quarter. totaled which in up and $XXX prior in $XXX paydowns also $XXX the the versus a million quarter. million saw $XXX in fourth Aggregate million million record totaled from payoffs quarter level the of

and We deals. win continued aggressive smaller in offering to past see opportunities to the banks larger have pricing than the mainstream lending very they targeting

level increased loan record our total $XXX our with basis. to on quarter. the million of X.X% annualized end an This loans the from X.X% equates However, or preceding originations, of

major accounted and Looking the primarily have loans accounted of well-balanced to XX% production total real breakdown of for a comprised Commercial for we our at of XX% of loans, consumer mix the mortgage new quarter. comprised X%. loan loans, Commercial in estate loan category, production by residential originations. continue loans

loans for preceding million the CRE $XXX quarter. the third originated quarter, We $XXX up from in in million

warehouses. some quarter CRE a and originations. increase a in loan another the With mixed loans areas demand we hospitality, C&I saw including of had modest the number facilities interest capitalized in lower of on we rate, attractive strong opportunities for and We use

new quarter. production funded fourth in million in $XXX the C&I We

expansion with have the with top C&I entities, opportunities also on has market banking contributing of focused to franchises, corporate our our targeting lending middle loan to mainstream our tier building we existing addition of group operators In on been seasoned been production. which relationships

this $XX booked at million to in is the continue average production, from positive the $XX retaining having increase We loans on our than originated Turning our since our And is strategy business. rates quarter. we loans, an in which preceding which SBA yields. impact SBA overall see higher loan this average third we are to million reflects

an overview of I financial Alex? our Alex as for on will provide fourth ask efforts, performance details additional that quarter. our development the business With to

Alex Ko

Kevin. Thank you,

This compared to with decrease September the cuts preceding in I rate start totaled my third As financial results, just lower $XXX.X discussion with and I will some mainly net the to Slide more loans our the our Beginning limit of in will million October. income was quarter. review of income items interest in due million on X. interest quarter. interest to due $XXX.X the I significant the impact which with

points. was our X interest core October rate asset On relatively our earnings yield. net net line by points cuts with declined X.XX%. given the XX basis This adjustment, purchase declined expectations Our accounting to by margin September a margin basis, basis our in impact on excluding of and interest both

mix a partially Kevin environment. lower cost core Our repricing yield, which lower payoffs deposits loans XX our cuts, was our yielding interest on rate This following rate loans that income, This originations the to September in discussed. basis decline of - variable-rate of preceding rate substantial in loan the driven by October the due new declined by and exclude points offset the the from quarter. on mix funding accretion and was third higher the

deposits this to of when costs of and X.XX% XX last the of deposits decrease the I point total declined in XXXX was that first basis X quarter the in cost three the years. cost time from prior cost is fourth note The decreased basis deposit in would point. Our quarter-over-quarter deposit declined quarter by

continued has guided the since last of peak downward we As quarter, total deposits July its XXXX. cost in our trend

excluding On in in Fed full interest basis, the a cuts quarter to changes November December X.XX% and XXXX. impact X accretion in see cost a net no month-by-month was quarter decline in to XXXX. and With of in October a the October, X we income of assuming basis rate, our approximately points expect further in the X.XX% deposits our of X.XX% first of margin, rate funds

on to moving X. Now Slide

variance from was income non-interest million, loans. the gain from other unchanged a of Our quarter. sale in on million quarter $XX preceding $X.X the net The essentially the increase third primary preceding was

compared loans in million total million During the $XX.X quarter, $XX.X to sales preceding amounted quarter. of the mortgage with

our completed fees. This by increase quarter. sale other loans, an for which of been $XX on held aggregate XXXX of and gain quarter-over-quarter, to a of fee note CRE transferred million which of In in third loans partially end in decline income had other offset addition, sale reduced was we swap sale income at the loans $XXX,XXX

Moving on Slide on to non-interest X. expenses

Our third preceding $XX.X the was modestly million, from non-interest expense up quarter.

fluctuates well given million significant each by and due of cost, of self benefit insurance terms quarter. funded employee as as based salaries in variances, retirement to declined a benefit the In group insurance on expenses which claims $X.X lower volume levels lower quarter of our expense

reported declines the our These expenses an we assessment of our increase in of quarter. offset no all of assessment which remainder by some, not were bank and expense utilized our for fee assessment credit a We in third XXXX. offset to small but FDIC this quarter fees

in an fair And by value fluctuation OREO of now, lower increase credit-related adjustments. in expenses we also a amount OREO-related had driven and income

was our quarter, non-interest which in X.XX% last reflects success expense unchanged our continued management. average asset to the ratio from For expense quarter,

key Slide to on moving our trends. some of I deposit discuss will Now X,

the prior coming of approximately lower in deposits all total end categories. by Our our growth the increased cost of X.X% from quarter the with

increased deposits NOW in X.X% increased while respectively. to and and deposits the bearing quarter, X.X% by market savings Our and X.X% non-interest balances account money

compared a the long to of XX.X% deposits total our in the of with the quarter. of increased deposits improvement our at XX.X% As time end result prior mix, deposit

continue expiring renewals the in We delta or see and renewal CD's the rate also gap between to time the on rate. positive trends deposit repricing a

our renewed weighted CDs than point on issued rate CDs During rate the was were fourth basis that weighted the lower average matured. XX at those that quarter, average

As the deposits of X the cost points declined basis our quarter. time preceding a result, average from

and review on moving asset our trends. quality. X. remains quality our will I healthy asset Overall, to we Slide positive continued see to Now

at our levels MOE $X.X total million criticized declined since by Our in XXXX. loans our lowest and now another

the increased extend to we loan of the the of before not completion a and $XX non-performing maturity placed Approximately the million the our the funding that was status. to project. However, end which nonaccrual the stop date loans quarter. half that increase advances, million by matured attributable the construction of from loan new $XX.X We loan dictated prior chose of

proactively complete we The project potentially-problematic the well our lose appraisal to example is that data impairment effort credits. another are of exists. current manage and This secured and very no XX% and above identify shows is

on loans non-performing the We temporary renewal lender. analysis the are expectation accrual increase quarter plus in process, of The will the that an refinanced loan to remainder this the with workout a of in delays be the a impacted XX-day which borrower primarily delinquent currently with our loans by status. in another relate also

through worked month. have most these for We the of we to migrate already expect status by and see the performing to loans part the these delays back end

very charge-offs Our We loans loss $XXX,XXX low. just on quarter the experience average in or points had of basis. continues of net X be annualized basis an to

the charge-offs average of amounted basis points year, For net to full adjust X our loans.

of level $X into million. new low of the modest impairment had the we loans provision quarter, a in and Given non-performing the of net loan inflow loss this charge-offs lack requirement

let turn call to that, back With me Kevin. the

Kevin Kim

Thanks Alex.

growth we Let's on and that of in controlling we will the the I positive as with anticipate CRE highly we expectations continue We last sluggish. will to and expenses continuation focused comments year, to Similar and priorities that gathering market will in Slide deposit for have be move will transaction expect on both to XXXX. about loan activity few trends a XX. see environment challenging, remain for a had conclude expect we to our areas. be

in be in production to loan active more expect we XXXX. new However,

be We have our are our high continue portfolio payoffs better growth. also will seen focusing on in profitable quarters. on of focus But to from generating we the recent existing defending level importantly,

profitability. We to ensure originate disciplined loans the very will in our be that targeted continue levels we meet to we of

Over the beyond have year, expanding traditional last we our capacity core in markets. our lending made investments considerable

expanded diversified The base. services group expertise the been originating beyond C&I loans focused of other from is our of gathering financial banking deposits now bankers in areas. has team includes middle corporate market Our and experience and customer rather on industry corporate

can more and without believe loans We model gather and hire need to to deposits established we business substantially originate have a scalable personnel. highly the continue

opportunities residential about optimistic the mortgage warehouse in also growth line and our business. are We

leverage generate year, that terms add a volumes the we our higher mortgage clients new base. of line will warehouse interest that in retail the business business, existing can believe to result better customer for generate more our number network in branch of over are We to should our entire our of referrals we income. course which working And funding from

residential loan that to our our To customer mainstream coming originations offices, pleased our from had and focusing units. More have base. target we on branches mortgage California date, we have volumes come are the origination business been production recently, growing which through referrals we see from growing of mortgage our most these Southern

with of that higher loans. can additional have other positive impact the our geographic some non-interest will believe parts focus training of levels We our the and of referrals generated of increase markets, gain the from in other the in sale which generating branches from country, other income on we

group growth Collectively, of generate lines, with credit supplementing this our and we the of than line did believe higher banking business we our can year we contributions traditional from our warehouse in corporate level loan a XXXX. units, business

single-digits. growth organic for budgeting to For range XXXX, in the low-to-mid are we loan

we shareholder growth. remain committed ratios support our strong maintaining always, while capital capital strong includes to management returns, that continued strong And that as

have an approximately attractive plan program in share to that repurchase currently active yields dividend place. currently $XX we and our with X% We million remain

XXXX. wrap believe for deliver we of note we To initiatives up, strong our shareholders momentum and start to we as value We the year key positioned our further lot a on our are of good ended on franchise. we well and another enhance XXXX have a

let's please answer have. open may to the any you call With that, questions up Operator, call. the open up

Operator

with the question And Instructions] from [Operator KBW. first Christopher comes McGratty

Christopher McGratty

ability the bring Alex start down environment about But this the has a have guidance in your the Kevin costs, outlook in and to the margin, margin, maybe little rate first in tougher prepared you bit - could I flow do you if the the steady, which how and remarks. the quarter, think talked on for obviously we deposit for you appreciate got the ultimate of but - the where when? remains about or kind stability banks.

Alex Ko

sure. Sure,

a will rate compression second have interest But As quarter disciplined increase. have start in to loan expect very quarter. indicated, cut, I our indicated, October we net XXXX as We we initiative continued rate competition - competitive half the expect the continue cuts on is terms second of still especially we though severe. and to as rate next as even we it pricing stabilize margin of the quarter would very the to experienced very would we that in the on would year, given then deposit, to have deposit proactive next of expect well

Christopher McGratty

come back maybe business, where question, the thoughts be down think of kind strategic as might have comment today? with I maybe Kevin, model, you And rates to and a the any SBA on on thought, going sell potentially premiums originate

Kevin Kim

average ago. is loans, the loans SBA And more in have overall selling keeping portfolio than on the our rate higher profitable our loans obviously, other are element year rate loans considerably stopped the Because this an of strategy. we important growth than a higher

monitoring the is the current premiums continue to diligently very better. the we is market always, been the but situation becoming our retention market secondary intention the in it for as So time have being, policy and

continue books. time for but being, retain our to So time this and evaluate, we them to to on continue at is the intention our will

Operator

question Tenner And comes DA with the Gary Davidson. next from

Jake Stern

is Stern This going How Gary. actually for is today? on Jake it

Kevin Kim

Good.

Jake Stern

Good.

then levels? first So buybacks runs is would utilize Is to full early reasonable to the authorization trading you expect by the XXbX-X announced or December the program January. through closer question likely end it you in of only XQ XQ

Kevin Kim

active $XX first we end the be active to first noted upon quarter. million fourth overall quarter to complete in back in Whether by program will the as continue shares we market own we were we Well, depend will release, will our of able that the in buying and the fairly activity. the quarter in earnings our remain

Jake Stern

about And how fully buyback current authorization once are you is the thinking used?

Kevin Kim

our past, We plan another the situation not a place monitor that capital program this time. consider and I market the not do we in our have But this to situation. later the capital will any depending situation, surprised, at additional And year. upon as Board continue in will would be

Jake Stern

for Thanks answering Okay. that.

Angie Yang

- and is blackout in is blackout XXb-XX our Just not period period. ends. ends when Jake, program The to January clarify which February blackout a our

Jake Stern

appreciate answering you the I question.

What CD GAAP for to it is one quarterly repricing schedule up. another Just on maturity XXXX? the follow sector

Kevin Kim

let's expected have, $X.X total billion X.XX% million mature. at about first And last $X the a we billion billion. an of of rate say, $X.XX with at $XXX a quarter CD, XXXX, about of to average about rate XXXX, at $X.X a Sure. of QX rate and starting the X.X% XXXX, quarter QX quarter is second And the is at of of rate X.X%. billion or a

X.XX% XXXX that billion. just I a about of the is all maturity, if So $X.X total aggregate

Jake Stern

color the appreciate I that. on

Just out here. step and I'll more then one

looks further for to the three like operating your it level at average four of has last that quarters. expense assets you been that the comfortable opportunities So is to or level X.XX% lower there Are level are at?

Kevin Kim

but I it, with the growth. will such to profitable for have would improvement but operating we reason And a continue I improvement. grow, expect feel comfortable is to some

as average to very or we disciplined some we very such but CECL, did in that and So fees substantially as and happen expect especially, expense monitoring we do investment professional have sizable continue are assets not of closely is decline in no also the XXXX. XXXX, more to amount our grow a there monitoring need

fee and some But there some such FDIC offsetting is increases other. as assessment

million, say ratio to So average X.XX%. even expect assuming below total the see non-interest would $XX than over similar million the of level asset expenses, $XX expense or I let's non-interest slightly

Operator

from the [indiscernible] And Management. with next comes Instructions] question [Operator Security Cap

Unidentified Analyst

XX loan higher months? portfolio anticipating questions. past you of trending the you current from for are do see And Lower fixed forward? - the the or from X.XX%? of how do you level going variable? also, And during what next loans your couple What a percentage quarter versus Just were that the of

Kevin Kim

Sure.

the with variable-rate you know, let as of start into so have hybrid mortgage variable. me and we fixed the mix me let loan. and break loans Now But fixed,

mean it we what but is, hybrid, variable, at let's called say fixed, but call So is is if it's hybrid, it first if and it hybrid fixed. fixed then as rate, the I within five years is a it fixed

a So $X.X and variable a And about XX% total mainly of consisted of of also X.X%. the is X% loan is at variable LIBOR-based. And fixed XX% a at or rate that XX% billion XX%. a rate is hybrid and prime-based rate

about the XX% variable is indexes, remaining on based out other minor. loan, other and and some LIBOR So of on but based are the entire that of loans the is the rate very prime index

the So of that's I or of ask the the second and the loan loan the the composition you kind fixed volume? think and pricing variable question did about

Angie Yang

for yield loan. expectation was It

Kevin Kim

Yield, how the competitive. rate the the still competition or side who going the lending but so, months so very be interest XX is in forward, knows rule next on

think our will the will So in realistically, I see increase yields. on on don't loan small a yield, loan rule we compression our more

Unidentified Analyst

And question final from me.

what dividend you - is What forward, dividend have going increases would because the potential haven't in going You forward? dividend raised criteria quarters. your for your policy six

Kevin Kim

into our is a with other the factor our and lot we as our determine returns when is dividend current comparative dividend one believe. overall we and the shareholders, the good capital per $X.XX I which look the of level methods and quarter also there is of - currently, mentioned we be and script, dividend dividend way around other compared in returning And other payout pretty the in players to will good. market but of at We The rate. X% considerations yield is position

think So time position, dramatic I the change unless will capital continue the being. our or in there is market situation for that a

Alex Ko

program that's forth. we add, through So ratio healthy continue our to capital will or Kim share repurchase and we of just X% either indicated, active is needed so and the we fully as have as to share Mr. which also dividend payout maximize believe repurchase dividend level very and

Operator

And the Tim from next question Coffey Janney. with comes

Tim Coffey

some wash are the those Looking million loans, year, at million, dynamics that of balances down? the decline $XXX bringing car what in $XXX gas and last about are station down

Kevin Kim

some the are we certain at tighten depending to do different risk. see trying and we We industry up on things and looking areas are marketplaces in

some have just are efforts at also made any at are the strategically it how down are they competition of industry, aggressive We we those looking of terms proactive also But to in balances. getting. not we bring looking the

and have you're in of But see any the think some market, stated seeing concerns the before where we our competitiveness in I the in we big And there. cycle. show don't terms we we as terms terms of are the don't overall balances. terms of balances in the up in see of industries, markets those of concerns in overall we But general

of more it's competition. a of think the reflection I

Tim Coffey

I those Are competition And driving guess national market banks I is the right local that if or may, more now. banks?

Kevin Kim

various we position see from in where We're places. the a competition

competing So, we have the the of we for banks. but banks some large are space, seeing our smaller also

of a see all So size we banks. variety do

Operator

[Operator comes Piper Instructions] with And Matthew question from Clark the Sandler. next

Bob Sean

is actually Matthew. Bob How for you Sean on doing? are guys This

Angie Yang

Fine.

Bob Sean

guys had for update I just was a us wondering you you can CECL if guidance implementation give? and any

Kevin Kim

doing Sure. the are kind from about CECL It are expectation. of run the for increase the and because and loan one past a from testing impact implementation increase. the the loss our in relatively might minor. subject the - parallel in in the kind to on is Day XX% of terms XX% CECL much there due we of change We second good That's we to not changes is previous the capital and about did shape progress disclose is to allowance

forward is well. not I going major from as there major So I think don't expect changes do changes and any previous conversation

Bob Sean

I'd And thanks. sneak to one more in. Okay, like

how flow strength positive have trends or you of that in of customers to over past the the quarters? trended cash ratios Regarding of loan couple has your and customers, seen values your the

Alex Ko

think [indiscernible] been far. very I industry areas, stronger flow We see it's in certain good cash much so a a position

think And stable. they've been I pretty generally speaking, think I so,

basically that's stable positive as before. asking, or trends as any across we showing industries. are have seeing not are But mentioned are - hospitality seeing I guess we question that if think the I we think I industries like I major we're seeing improvements you're some changes

Operator

does that our And conclude session. question-and-answer you. Thank

the would I over management closing like floor return comments. to any to for back So

Kevin Kim

thank look speaking in everyone again for again, Once you. to thank you you joining us today and forward with Okay, we three months.

everyone. long So

Operator

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

You may lines. your now disconnect

Hope Bancorp (HOPE) 23 Jan 202019 Q4 Earnings call transcript