HOPE - Earnings call transcript Q3 2020

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Operator

Good morning, and welcome to Hope Bancorp's 2020 Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.

Now, I'd like to turn the conference over to Ms. Investor of Director Yang, Relations. Angie Please, go ahead.

Angie Yang

Nick. joining us you, investor call. Good XXXX morning, for you conference thank and for quarter everyone, third Thank the Bancorp Hope

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

of Investor materially well not company statements the based forward-looking our view remarks. presentation; and through differ you the These listening These forecasted does with the and any website statements. or today the you on from may the or the page of are Hope regarding within on These periodically what made have The differ visit the press results statement the not results which that U.S. our Presentations XXXX, a your I'd performance. such the is financial computer as the report COVID-XX the progress current from the company September slide projections on no as expected to we businesses being may results quarter presentation. in should and as of outcomes slides call Act any reported as to so in statements regarding the if as of the done performance from you result future about of call. be estimates, If to be may webcast, be company, management company please could statements yesterday. begin download assumptions and already, XXXX. forward-looking to to Form including guarantees statements We that the statements obligation as of the the projections the and markets to events. the XX-Q impact is complete two, in Relations of well forecasts, Private Reform able a like financial in SEC, the issued you future copy quarterly are meaning brief projections are forward-looking with contain screen, company ended through expectations, performance the pandemic, safe operate. future constitute forward-looking documents of Securities a Actual Bancorp materially cautions XX, Litigation forward-looking The refer harbor assumes to the included on financial expressed files future today. today's release in revise Beginning for

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

have here we Presenting will Kim, Credit Alex Ko, me hour management's Kevin? the allotted call President turn Kevin with Hope also Kim. Koh Chief our available President Now, one With Chairman the be and Officer. session. side and this Q&A is CEO; Bancorp's be the call. as today Vice over Kevin Peter and usual will Chief and Officer, for for Executive Financial us that, let to from

Kevin Kim

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

preceding of overview including in performance in or our results. by in highlighted share quarter, pandemic, challenges very this by have generated COVID-XX expansion and well diluted with presented million, financial trends the to three, key brief solid are other interest in $X.XX core diluted per a slide the million, begin share pleased $XX.X a the our many delivered positive with an Despite as quarter. per We growth, the areas, $XX.X net income things, or as Let's $X.XX quarter, with compared third ongoing of we second loan among quality net deposit margin.

quarter pre-tax XX% $XX second million of the in million quarter third a recognized We also in in income $XX.X the pre-provision our from increase XXXX. to

in observed recognizing current the loans. More with and importantly, manage we decline schedules, trends a we well deferred from our The payment returning in health by borrowers economic through well are positioned that effectively are standpoint regular as capital this reserve many a we as environment. to to quarter, of strengthen perspective were our we nonperforming loans encouraged trends seeing the

Our performance is of in of are quarter our we reflective long-term our legacy of expanding our the our this progress traditional the enhance beyond of franchise, and initiatives the base. characteristics composition particularly making designed to customer deposit also terms on value improving

to to deposits, capabilities. ability have to broader the technology we our and our relationships designed banking lower-cost enhance Over commercial we personnel discussed our the upgrading investments have core past including customers and with develop few management gather in years, strategies made treasury

are beginning our with by from meaningful relationships the growing see efforts to results larger deposit evidenced these We now customers. commercial as

third increased quarter-over-quarter $XXX non-interest-bearing the the banking with XX% by attributable expansion quarter, our million our During growth the largely to deposits existing relationships corporate with or of commercial customers. the

to Our lower-costing on reduce our enabled reliance us continue success base deposits. higher-cost in has our growing time to transaction of deposits

year, primary overall in to expansion of we deposits rate the past our increased from our non-interest-bearing driver in Over the in XX.X%. third the combined the environment in deposit reduction reduction drive cost of which helped from point have total the deposits, basis In was quarter, time achieved third the an improvement a with XX.X% mix XX quarter. significant a margin XX.X% while XX.X%, to our to our deposits declined have deposits in

annualized slide with loans the $X.X third new to $XXX approximately X%. We development loans originated in with had an at on We quarter total a strong total of quarter in billion four. rate business increasing of fundings Moving million. of

double the $XXX quarter, we are in the reflects as improvement million fundings fundings which loan second demand seeing Excluding in loan the economy the strengthens. loans, PPP total more than by our of level increased

$XX quarter, residential consumer $XXX loans production totaled discussed $XXX we is CRE C&I funded which in for C&I fundings the included commercial the of XXXX third the loan million loans; loans; consisting estate and third For of real quarter. $XXX SBA of mortgages; and primarily just in million million million

that loan of priority percentage are important our third we growth The relationships in production is by bank. meaning customers and deposits which our with evidenced deposits, loans commercial demand getting a full for is key both takeaway greater from a banking our now the as quarter

note is underscoring portfolio of successful XX% loans September XXXX accounted earlier banking at considerably important our a XX, year that for of from our loan Another growth up the commercial XX% group. corporate

Now five. moving on slide to

approximately our XX.X% loan as Let the portfolio. from the loans of update modification help we through billion loan to the September on This borrowers XX, me pandemic. of for our modified in represents XX. a impact of program program June provide an Phase manage total we implemented X had modification the of granted X.X% of decrease our $X.X At significant accounting

to-date XX%, our in form in and COVID XX% For to round default. order requiring related possible the account of largely The in of loans, been retail represents a Phase of residential C&I mortgage of modifications. X for which are and representing mitigate of personal guarantees the enhancements losses consider or additional CRE have borrowers and whenever a Hotel/motel credit just majority $XX volumes. with portfolio collateral bank of second million in majority potential vast to event we modification modifications provide respectively to for $XX in modifications all to consumer the loans million the the properties support,

slide to on six. Moving

economy duration than modification COVID-XX that program. is pandemic first on longer-lasting the the onset comment granted It briefly the our expected being and impact modifications of the crisis. me is on having is under on of type X apparent Let the we of Phase

we a or payment predominantly While Phase deferrals followed the our rest most period for the offering and modifications under reduce been borrowers. either that longer-term also deferrals, will some work full payments collecting for we durations we of exchange collateral guarantees were believe X for possible offered part, payment In modification interest-only modifications that X a term. In Phase particularly Phase combination our effectively potential. or loss for XX-day X, for to interest-only additional or the retail full hybrid have been we deferrals by have whenever includes hotel/motel longer-term have the payments

two At the All to modification. from at down viewed $X crisis most on like modifications of seven. our would with pandemic our impacted moving an represent portfolio granted the to I September portfolio. slide of modifications update been provide these are million had from in So our XXth, XX. have be handful billion loan to second hotel/motel on a a that $XXX the beginning of that we June but borrowers hotel/motel portfolio segments

improving As destination benefited as the majority opting from trends which trends part are properties our versus seen borrowers past for hotels heightened to of that the have our over involve borrowers from getting more type more few frequent occupancy air we much of service of properties operate limited drive months travelers the travel. our monitoring data portfolio general current have we and a basis. In on financial

payment for XX-month pie can of breakeven primary limited and with is these service a of period determining and payment chart seeing that goal stabilize properties at And our also the the for path on upper portfolio status regular slide liquidity extension to reported for to respectively. XX% we customers, with to borrowers the in As put closer The circumstances the to markets. level. with result occupancy that borrowers generally to modifications our hotel/motel is are goal the the regarding loan see hybrid RevPAR are modifications back and approach nine-month, motels COVID in to full to possible more build for customer solution our started for and we our hotels go account the and of of their or discussions X revenue the type need this available many this trends room consistent agreements for ends. In borrowers any have XX%, The our month you they our operations time provide after trends of these unique modification industry-wide back of operating each right place. seven that impacted best a put of schedules in XX%

of we continue positive will trends speed portfolio, to that for industry. this weigh within pandemic recovery we track our hotel on the are recent Although, cognizant the the

of during our brought total to XX in X.XX% our on we XXXX. of third quarter the coverage increased quarter-over-quarter at As which loans hotel/motel June allowance hotel/motel from portfolio such, the excess X.XX% XXX%

also provided California followed which have by in in We Pacific of is Northwest. properties geographic our the on distribution located slide XX% hotel/motel of the XX% this

on Moving slide eight. to

of portfolio. million portfolio retail equates improving under XX% CRE for of $XXX CRE we from loan June our this XX. just CRE at the is portfolio underscoring modifications XX Looking at currently retail our our had down which retail modification segment at of $XXX to million our significantly in September This portfolio conditions

mentioned properties anchored are which many by our retail represented by we before, times types is have mall markets. properties of grocery many strip majority of portfolio larger CRE As the of of the

partial least Given payments, these retail stability rent at the see of our the service-oriented borrowers. to tenants are are nature of these borrowers greater most for of so we properties receiving pleased

As shore we discussed as payments. offering when increase particularly additional likelihood taken collateral to we earlier, with the to returning will that up borrowers have the guarantees, longer-term of position believe modifications opportunities possible as these many normalized or bank's

distribution terms located is our XX% properties, New -- of York and California In in modified of retail and New CRE geographic Jersey. XX% XX% in

will performance I to provide Now details third our for additional financial on Alex? ask the Alex quarter.

Alex Ko

slide I as with which our a growth Beginning $XXX.X in $XXX.X The was million costs as reduction significant preceding liquidity. a net of result X% start quarter. to redeployment Kevin. nine, the due totaled expense you, of excess lower income net interest interest as increase income in in million, with deposit the of well from interest will second an Thank

fees and recognized the $X.X have have $X.X million recognized a remaining During quarter, PPP the in we million be net net in future. third to we earned

in last be our on we margin the in earnings case indicated of year our some in this half net we the expansion third expected proven to to call, and quarter. the As interest has second the see

deposit interest largely deposits and benefited fund, net of a positive reduction our and in our higher and point XX driven third point at by -- basis impact which lower XX our rates cost rate. non-interest-bearing was continued average to CDs a increased X.XX% of Overall, to CD a basis Our higher cost lower demand of as from margin interest decrease improvement basis quarter. XX had margin our deposits in the much mature to points net cost balance the in on the average renew

interest our in by net impacted liquidity we the was excess also took quarter. actions Our positively the during deploying margin

funding quarter in million a equivalents decreased $XXX the end ways net prior from portfolio. cash $XXX and in advances, a We have on cash million investment interest the the including deposits, this security Our and FHLB our fund in growth positive of quarter. reducing broker of our loan impact by margin, adding which variety used our will prepaying to

the in margin drove drive to Looking that third we interest ahead, yields expansion Earning additional will are expansion our forward. net continue asset the going stabilizing. quarter we believe same factors

as are net get redeploy We to quarter, full the our the in and fourth actions we continue will deposits transaction costs took we in liquidity. of that interest the mature commencing lower-costing exceed time -- to see And lower the deposit quarter. replaced we margin believe X% deposits. quarter fourth with Accordingly, will to excess our continue deploy benefit

on moving XX. Now to slide

Our non-interest second primarily income quarter. third $XX.X on investment XXXX from sale XX% the increase million the due $X.X gains million. an was to securities quarter, preceding was of This of for increase of

increased on loan variances accounts, other net income, had we in in deposit resulted in These by were value in of activity decline approximately non-interest during service income. and volume income gains, and fair business fee transfers, swap million. these declined general service by production residential Excluding a transactions gain the we increases and a international an and on saw lower fee due wire mortgage quarter, changes $X.XX increase sales. the offset fees, higher in the increases in with Consistent to derivatives

non-interest slide to XX. expenses on Moving on

was million, an quarter. preceding of expense the non-interest increase $XX.X X% from Our second

to incurred we penalty variances, significant advances, as FHLB which related view of the terms our of to $X.X non-core In a we operations. million prepayment

employee third was Excluding the primarily This to with salaries expenses, adjustment amount notable is million, offset early be this second quarter elevated variance quarter staffing third expense were loan our related made $X.X in to in origination costs from basis. variance, due a when the we the quarter-over-quarter range recognized increased to million. quarter, target on which prepayment the the quarterly non-interest in normalized a by deferred penalty, line program. origination to preceding the costs more the was in include and The our due This $XX.X of which savings quarter. benefit PPP

will I on our to deposit moving key slide Now, trends. of XX. discuss some

development We time run higher-cost non-interest-bearing continue deposits off and with efforts. business our to them replace deposits through

we of CDs deposits. by non-interest-bearing versus having meaningful fourth forward quarter another Our deposits average at and XX% XXXX. in at rate XX% quarter deposits the at X.XX%, of June are our an quarter, accounted have the In so $XXX increased for blended end of of reductions to $X.X XX, of quarter maturing total million we during looking billion cost

strong review Despite quarter, the restructured portfolio. including contributed national area are COVID-XX all Now driven and ample due to the moving force. decrease on which of one increased any million. XX% the TDR migration both three which saw generally The one criticized our weather short some companies cash we flow to the ongoing national shared recoveries decreasing quality. in to positive where The quarter. slide million we the during this to commercial impact by saw XX. These three This loans, loan, classified in primarily I $XX pandemic, brands, asset was overall downgrades non-performing of liquidity $XX will trend aggregated negative was credits, the loans with and to Non-accrual long-standing quarter-over-quarter. was with payoffs, declined which quarter-over-quarter. loans by

on capital We these into believe for additional if low. loss Taking and/or of that good any access very the loans have these being additional strong incurred needed. parent have we very factors can to markets likelihood provide is funding consideration, companies capital,

are as we mention However, downgrade this due to time. direct at prudent companies of special impact the experiencing the these the to believe pandemic, is result a

credits, these Excluding we in loan and three criticized classified would reduction a downgrade shared seen balances. for the impact of have national our the

we basis quarter. representing the relatively average charge-offs loan. was to XX of losses of in this contributor another construction with primary had of hotel low loans charge-offs level credit quarter points net terms losses, problem quarter one The of In long-standing

and modification provision to moving extension Now increased provision our $XX a quarter. for longer-term losses was of modifications. on as recognition activity the slide grant of key recorded we of A XX. the expense quarter million credit in this risk driver We the

the have to longer sector. those As motel primarily and require areas hotel we in recovery portfolio reserves that will period, allocated such, we of more believe

losses million the and $XXX.X Our end allowance for XXth, the second at of credit of million September XXXX $XXX.X from as increased quarter. to

to XX. slide Moving on

loans, allowance loans. at XXth from X.XX% discounts or September of are X.XX% if a credit to total purchase included, exclude XXth. As June total X.XX% losses percentage our increased loans to for coverage PPP also our increased accounting total When at X.XX% of ratio you of loans

to on moving Now slide XX.

capital update liquidity provide our position. on and an me Let

position Our very overall of XXXX. remains strong September as liquidity XXth,

the a over primary and Our to quarters. deposits two increase deposits be continue demand significant source customer recognized past funds non-interest-bearing in we of

maintain to Tier equity capital continue X a ratios robust total X and quarter-over-quarter. ratio. our common stable Tier with capital ratio generally We position risk-based capital all

to equity quarter-over-quarter. the continue shareholders' with also and increase tangible per common equity our share per book share value increasing We

meaningful continue above the positions, share. amount be the call of per me September maintained we or let to dividend XXXX, our Kevin. and As strong liquidity $X.XX And XXth, amount capital a capitalized. we required capital given to that classified maintain our well back turn quarterly considered to of With at excess

Kevin Kim

you, Thank Alex.

Let's move XX. on slide to

We lower commercial and production expected. deposit improvement are mortgage group, quarter our we demand, origination much interest We very costs in an an our pleased in as that our in unfolded net increased expansion traditional residential loan third margin. saw

levels working in subject operational management well will without be implemented continue efficiencies. We by recently our of of positive expect expected of of that in as Texas. that to lower our third finalized impact fourth as regulatory the the will adding to The further impact up middle penalty these these we branch plan approved are prepayment has six quarter California, FHLB expense Board first positive the a expense branches and XXXX We Directors expense plan be in quarter and initiatives the that operating Illinois, Washington on. the the quarter trends to and is trends impacted which non-objection enhance to will and to other rationalization

initial pre-tax incur be presence annual to XXXX. more We quarter onetime related a of in rationalization recognized the follows expect This for channels. opportunities are our which first branch engagement million charge XXXX savings expected beginning on plan. approximately of be to and the of market customer benefits fourth to $X.X approximately of in a pretax will basis comprehensive the quarter an the million branch efficient profitability review plan Projected of $X.X

fourth seasonally quarter relative be solid entered the to a we on the a slower expect third note. quarter and to the While close high quarter, pipeline period year a tends the with out to

So, overall, be to commercial another profitability deliver our to a good business year. position about good of to ability further we base. in are end challenging add more that will relationships operational perspective, quarter optimistic a we most a our core continue to From deposit development improve

platform management we to investments the that of in our sales we to the treasury in enhance With a fundamental seeing attracting are have bank. increase efforts and are customers made shift this our type area, we the

But of efforts be our and past a base a of interest we higher have in in overall is will With interest what we a our Hope than evolution net profitability on back rate sustainable when of generate and cycle. Our a is initiative rising very be for we returns cost a rates will that in lower interest will typically franchise. the remembered cost have deposit we to enhance achieved even as most future the we much lot that more the level the a important an beta lower us base in lower believe generate. have valuable overall a them XXXX we represent of and things on point will inflection deposit value impact believe perspective when to we deposit on margin able the of it it we look progress this negative. to will that the creating eventually rise positive be this our should from of believe Bancorp,

color Now, the open additional we take any Operator, call. and would be add questions as requested. color happy to any up additional -- please

Operator

Instructions] Sandler. session. question-and-answer Please from the go now comes of Piper We'll begin ahead. Matthew question First [Operator Clark

Matthew Clark

good Hey everyone. morning

Kevin Kim

morning. Good

Alex Ko

morning. Good

Matthew Clark

happen quarter in Do of NIM? a can core we have average so the to loans PPP to you balance the just try isolate

Alex Ko

movement We $XXX much beginning SBA pretty million. much the No, had but there's originated entire quarter PPP. remained Sure. total million same loans not $XXX the each for a

average say the So, I would $XXX million.

Matthew Clark

guidance, you be PPP I to core margin last a the about accretion. the and the X% on that that think expect NIM X% over as the on in well? core getting basis you quarter then And fourth the quarter still talked Great. over Is purchase excluding accounting case

Alex Ko

Yes. FHLB liquidity also to excess we have deposit X%. expect as been the increase deployment access to of in and And would including disciplined -- you in to strategies know We pricing very prepayment.

think a So, our basis core position increase will next X% excess we on in interest that quarter. by to us net margin

Matthew Clark

was Okay. average the production new loan what And rate quarter? on then weighted this

Alex Ko

originations loan on it's question but for large total we average New know your new we little to But a production. had a was quarter, warehouse bit decrease loans a our of which rate X.XX% answer have little to lower. I production bit is X.XX%. the from last

Matthew Clark

just I you then mentioned days. most round And think XX deferrals, of were one Okay. deferrals that the on your

the that round think total one I they? do in don't So Those exclude that two any are deferrals are still deferrals. round your would

Peter Koh

to trying we're active is right now modifications. the what actually So, track

that's most but this one. are there expired little those And a that those that of So of including were are have at round few longer. bit remnants a point, still

ins outs billion $XXX that so, $X.X and booked we that's And of in as have tracking the -- we of X. booked sorry also there. which -- the the X, there's But Phase that we're under terms XX, the modifications we separately modifications, number a lot active Phase September of actually the of million of

modifications quarter new well. continue as that fourth in round in on expire second the there's bring are to as of to scheduled modifications time lot we some a So, even the

Matthew Clark

Okay.

to kind -- lot than amount a you that So -- you're amount? you that? or happen know does of is closer that August that's it get Do at slug less there's still working to another with that Or one. round

Peter Koh

trying X% to we of actual think terms by so track about the percentage, in or did the September I end. So

the there's modifications book, forward. I also are going outflow we're considering think But even I be to as well. additional see I guess some those modifications to point to trying that that we make was to going modifications continue was of we move as as

we'll we tracking Does clarify? as that help be move what that's forward. so And

Matthew Clark

that And Yes, then, And just large does. you shared that credits, underlying migrated quarter? the on can is? are this what portfolio that national businesses the how quantify

Peter Koh

national $XXX Sure. There's have would we be -- million larger portion credits. A broadly our big more that of of which approximately syndicated shared of is going them be to many syndicated. credits,

have a industries so, different the different And also quarter in saw three we represented of downgrades of we types industries. all are variety there. And this that

food more say, would care as well as health industry service industries. some of I some So type entertainment of the industry,

here are diversified. None these we capital access say So would strong markets. I liquidity, to special good three at names see to we that are we of mention it's see see loans all modified. well downgraded that criticized levels very

modified. the none So, been loans of shared credit have national

see I So, recover. so, some are them now a lot right up strength continues say, these we aware And lot of think we to companies as and been the of through, here, are period we've the I to have of but think a good seeing gone of that impacted. and trends economy stability

Matthew Clark

me. for last then, And one Okay.

you do forward? the on this income swap think run there and about to fee mark going Just negative a quarter good fees, last guess the rate relative how the with other I lower

Alex Ko

income components, increasing we the QX be a a fee changes value in Sure. swap reduction, expect and that actually bit. little fair two Those will

on fair derivative a those that, be those loans, loans we reduction First, a are of position will be the is increasing for productions Actually had subject QX, have in have did we as would have value rate expect value. more we QX. that it we to lower I turned mortgage actually to the lock Because loans value the the positive. our on on But fair mortgage to will net interest to commitment more resell. that accounting. volume In loss

swap the quarter, quarter-over-quarter. last turn of fair would specifically, that loss, was expect $XXX,XXX And kind QX. So, positive fee value that I fluctuates, to but the income in a will

I we improvement a see So, accurate will real those QX. combined expectation. I don't two But have some think overall, in

Matthew Clark

Okay. you. Thank

Operator

Thank you.

comes question of Raymond David from go Please James. ahead. Next Feaster

David Feaster

Hey, good morning everybody.

Kevin Kim

morning. Good

Alex Ko

Good morning.

David Feaster

wanted follow-up to start and on of questions. modification I some the just on the

the For But you were or like some risk reserved that? the rating there downgrades dated I -- anything longer risk for a guys longer changes know any duration modifications. -- or amount of decent

Peter Koh

all yes been grade. grade, new a COVID-XX a have watch -- So the to modifications downgraded created watch we

for So of of all those better and management to identification downgraded loans. these that are grade just

we for additional think move to assess we'll I changes. continue continue as forward, rating portfolio to further that risk

recognize So I these a for do modified there this think But good of is the deterioration upgraded. reassessing loans. deferrals, for that we'll in that downgrades of be be largely as further we loans off hopefully potential come portion portfolio will additional if there's

David Feaster

longer are portfolio, to deferrals. going that new listening no getting that you P&I? the paying it and from I the coming agency sounded like is SBA prior And requests your just your still is some now Okay. borrowers how big conversations guess comments Is portfolio? how for those And with are SBA

Peter Koh

yes. now just so SBA our relief in September, government in borrowers. ended actively payment we are The with Yes, discussion

a bit the starting little So early are we it's side those borrowers. our on SBA to but conversations have with

I is roughly of portion think $XXX about million that SBA we there. our unguaranteed carry

that. dive Everyone into hoping so for have we'll additional is to stimulus. And government

there. the and so doesn't preparing modifications now are additional borrowers for that's But we're something fruition. that if that hoping happen, right will And to portfolio come lenders

just that So started. has process

David Feaster

just just And curious Okay. -- on your then loan thoughts I'm production.

front? of are for done new payoffs clients. trending? the and on What's big are pay guys where But a And across? have a How are -- credit? new seeing what tremendous you coming warehouse origination You new up job opportunities and I picking just your thoughts loan your mean appetite downs couple

Kevin Kim

terms our our recent banking mortgage credit credits the is used within group, experience, Peter commercial to buildup loan But loans in in middle led lot will appetite, warehouse security have have that the by in loan the under I talk in better portfolio lending to loan bank. as group. banking in better largely lending actual growth about looking our legacy think growth the corporate reserve growth quarters. these we of at the our and position that. balances the Well, than and the market driven a a And And the loss be a smaller corporate have

customers. of these well as loan I and growth as continue to middle in we appetite, warehouse market continued think in customer So in have budgeted have credit will growth we mortgage the terms sectors base

Alex Ko

me definitely. I If really well or just stable just from on doing or finding think are even the focused Yes, perspective, I credit environment. a -- benefiting from industries we very to let to that are current those add that

obviously, the So, side advantage or opportunities. were mortgage of opportunity mortgage companies on larger of there's warehouse our with the able of platform take a to warehouse Definitely and taking quickly execute those lot we we're that some things. of

continue that side the middle There telecom institutions some the on see do think there's that are evidence those we some good On those as financial we and take we're stability can seeing seeing. get or sectors also we of the of to be through be I as that we're market it of we'll as see opportunities whether period. companies market. And the here think, industries recovery that in we we'll I industries of more focusing kind broaden more and also well that advantage opportunities

David Feaster

Okay.

is And growing big the portfolio comfortable you to? How with that follow-on. warehouse? quick are where one Just

Peter Koh

right now. target a of kind have don't We

think just is is very segments a it lowest think the quarter-by-quarter our of low. anticipated we're of portfolio. probably that here, loss of is do credit with of loss level say which this taking I would I one the I sense. in expected kind

be here. to think I grow more there room will

continuously and that do that forward. as assessing currently we are we'll we move So,

Alex Ko

Yes.

Just business. add warehouse for the to

As expanding are low we A as it's of very But well. deposit I Peter coming credit, from big also think mentioned, them. risk. on terms in increase our them demand from relationship non-interest-bearing deposit, is

So well deposit from there is potential to greater going a forward. them our as relationship expand

David Feaster

That's now? Okay. warehouse the how And big helpful. right is

Kevin Kim

a end the the at of little $XXX more balance warehouse The million. quarter than is third

David Feaster

right. All Thank Okay. you.

Operator

you. Thank

Please next KBW. of comes go ahead. Chris McGratty question Our from

Chris McGratty

differently bit it -- the margin given about ask net How impact, in about come Good dollars about everybody. environment to flows little PPP thinking the thinking we this how wanted afternoon net interest income you deposit just liquidity of the exclude in Alex if you terms income. are prior to just a back deployment? and and are interest question a

Alex Ko

Sure.

on calculate of first. so, that our the small only We loan have very We changes in PPP touch terms expect significant would impact me margin. QX, margin. non-impact almost actually it's in on any Let don't but basis point PPP or one it,

higher I those in not loan overall amortization, than PPP including differences. yield but rate the our is of much yield think our

we minimum, again very Having that, you know, So expect savings margin why, we be composition, as FHLB PPP these impact big percentage might -- from again borrowings. net interest from huge But costs. said would also, that's increase. loans. the of million $XXX income paid increase. our our off not is It And to deposit of

$X.X We will would We pay about QX. of from million expect million $X.X prepayment quarter of savings there. this penalty

borrowing payoff. FHLB expense interest some there terms from this benefit savings will So, in be of

net going So, I of forward income. will think little increase bit it in terms interest a

Chris McGratty

Got good additional appreciate could disclosures. color. the If you. I a it. about I question ask credit, Thank That's

in debt the comment updated Looking ratios coverage quarter. went reserve credit on retail for by about shows portfolios and Directionally, service reserve the Thanks. at I the again, Is resolution a the slide maybe, you the of that book. that portfolio? hotel the it about? the down talked And the question had on any

Peter Koh

Sure.

And lot So, the stability. inherently more we're showing on lot more retail the actually of seeing retail is unlike hotel/motel sector a the a sector, think sector, I diversification. signs

you bucket regional or pandemic a to of portions portfolio of sector So there's take it. that tenant. there's property strength. It's retail into actually one bucket. always we if doing a are supermarket at and to that the that, are actually do the through There very property sectors look continue show national well But the well retail the done large have retail

the that So prepared we a the pandemic as that payments. reserve kind making we're lot more affected that of signs by showing also -- recovery tenants seeing of reserve of remarks, Also we the I our think the a tenants And now. have lessening sector. lot more right in impact are from of coming some been I are of their think seeing

payments this making -- payments, time. Some making some full making are are full many are at partial

still level modifications we're we're as So by there. I naturally think more seeing seeing portfolio we're -- higher of of think we're expected the And -- seeing evidenced modifications. stability I seeing level hotel the

On quite the coming down is percentage retail sector that bit. a

dollar reasons, a for And seeing all there. It's the million of think reserve I you're It's not those so -- reserve. actually reserve $X little bit only less amounts by amount a huge absolute of delta.

we're show it can show LTV, slide retail LTV. give that on If what slide on that information think and DCR that you it's we'll loan if LTV it show one will that nominal seeing. and And DCR based for second. can Slide the also on the the -- are is and find And currently the will five -- I pretty DCR hotel those me distinguishing you has you the and so I I and modified. just

X.XX And very good DCR, XX% for -- coverages, and retail X.XX for DCR XX.X% LTVs. So hotel LTVs. for XX%

went we think we pandemic buffers good this situation. I some have into So pretty as

Chris McGratty

whatever more. I it from up be increase that rates that taxes if in your could increasing managing in we And tax opposite similar you're proportional going what materially prospects directionally XXXX? ask get one anything different today there Is way -- the taxes happened is -- suggest but would wouldn't way in the the obviously seems. The of

Alex Ko

amount is rate. strategy kind will tax tax effective working general what Sure. we management sure we have that of After the we advisers deploy election is and corporate -- see I our are our right think actually rate strategy make of tax expectation it to is outside increase -- with -- tax can

A, a So specific have plan I C. B, don't

We increases are rate those preparing for currently. anticipated

Chris McGratty

you Thank much. Okay. very

Operator

you. Thank

D.A. Tenner Davidson. Next question is Please of go ahead. Gary from

Gary Tenner

morning. Good Thanks.

of Just questions. wanted a to clarify couple

So period give warehouse, us segment think what yield you gave number. us quarter? first on Can I and for end for the for was mortgage the you quarter the that the average average the

Alex Ko

warehouse. Mortgage

the that I think... I and the asking think dollar you're amount? rate

Gary Tenner

the average average the yield. the And The yield amount -- yes. dollar quarter, for

Alex Ko

corporate banking. forward to Looking

Kevin Kim

balance quarter during third average the the warehouse Mortgage was $XXX million.

Gary Tenner

And the quarter? do you have the yield for available

Alex Ko

is No outstanding rate of sorry. would would I X%, quarter. million and average about X.XX%. is the be say was balances -- slightly during million of I'm kind $XXX fluctuation below there $XXX And the because the

Gary Tenner

Okay.

direction talk in period outstanding warehouse mortgage So fourth the margin the assume obviously of in end a just number your the that the does quarter, volume? for average quarter, average seasonal about above you of terms of balances slowdown is kind but decline the as well from a

Alex Ko

Yes.

the more I much, have more SBA, But we warehouse. recognition for we productions. will -- average higher are think don't changes the I actually of terms balances in think of expect

don't warehouse we any the I significant the and are So think expecting usage. on reduction line

Gary Tenner

Okay. Thanks. is And on I'm Phase you the billion II $X.XX then not, just correctly. something this modification to, understanding Phase II. of data also gave maybe clarify The the

else had don't still provided Phase combined asked of but of the I actually I kind Phase you as in total think think II somebody modifications the place, XX? I September question, and

Peter Koh

So $X.XX it. So but is about call are that remnants, active active add billion just have you most little for different billion asking $X.X not from that modifications we're a expired. modifications? one -- wave the actually There's we so of all a bit of

really really coming two. most majority -- wave So, that of is that of from

Gary Tenner

for Okay. the clarification. All Thanks right.

Peter Koh

Thank you.

Operator

Management. Please next comes Sec question Our from Instructions] ahead. Cap go of Steve [Operator Marascia

Steve Marascia

folks. Good morning Hey!

had current you, Is of distribution number during this us I dividend comfortable two the your for to rate? the type quarter? presentation questions expect Just you safe during one, about growth X% And loan during loan the do don't but, if of still it feel you the for with quarter. your growth fourth missed just of rate know level concluded same quick I

Kevin Kim

me respond let that. to Well,

First, digit the competitive growth, current for still the digit and of challenging as year our but is is or high-single market loan targeted goal the low-double to condition very XXXX.

believe have With all reported relevant the so on at and we a to current sufficient our decision maintain on earnings dividend quarterly basis, quarterly prudent will dividend, far level. that factors. of account we we into been that terms taking In said are the keeping remain intent our level. make And of

Steve Marascia

Okay. Thank you very much.

Operator

This concludes our question-and-answer session.

remarks. to any to conference I'd like management turn back for closing over Now the

Kevin Kim

with all stays hope, you. Thank forward you us today. for you next joining look speaking again safe healthy. And And and quarter. we Once to everyone again, thank we

So, long everyone.

Operator

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

You may now disconnect.

Hope Bancorp (HOPE) 21 Oct 202020 Q3 Earnings call transcript