Earnings call transcript Q1 2023

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Operator

Good afternoon and good morning, and welcome to the Hope Bancorp First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [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

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

we of our a using Relations website. discussion is will to Investor on usual, available page our which this slide Presentations the accompany morning, As presentation be

differ Beginning X, the These the regarding future begin performance of let from with regarding events. brief statement materially projections on remarks. contain The due may risks forward-looking and results Slide company statements future uncertainties. forward-looking and call me to a today actual may financial certain

on In call addition, some of the are information measures. referenced financial this non-GAAP today

SEC, more detailed Safe Harbor well in a measures, forward-looking and non-GAAP obligation as our risk factors statements financial may yesterday. any issued call. revise press no a projections the reconciliation made please assumes refer For that company's Hope be as of GAAP today's to the Bancorp to description the of to release the with on filings

usual have Operating for also allotted earlier our year. be Koh, Financial Kevin Julianna us Now, be Financial will call. CEO; President Interim Chief Bancorp's with Officer, Chairman, as stepped the us Hope is and our here the today Balicka. have will Chief Peter with here one and as Q&A this session. from we and available Officer in this we Chief And Malone, our side Kim, who management new hour Officer for David Presenting

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

Kevin Kim

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

Julianna pleased a would we to our new how CFO. few about my on begin Before as presentation, say I like Board I are to have words just

today, already. our And is running days fitting Julianna in Hope analyst research is we certainly transformation and right of as predecessor known since have as and a have a undergone up We she banks. Bank while her covering

let's Now of our X overview with on brief quarter. Slide begin a

with X% increased to The $XX.X a March of high of XX, year-over-year. at our company's basis up available quarter-over-quarter quarter quarter quarter-over-quarter. levels XX Bank total of increased points sheet billion the capital deposits Hope XXXX, first and ended balance ratio XX.XX% and capital For with of risk-based the X% XXXX, total strong liquidity.

the cash to X.XX%. our a XX, was use in of XXXX. income. to at and term we March to $X.X industry substantially funding Hope's the mid-March, December bank The funding of use program increase substantially reflects from term in response increased is to of disruption the sheet the cash In of $XXX conservative in on-balance approach Bank equivalents banking XX liquidity risk program bank net XXXX, management through of a up interest and cost million This funded contributor at positive billion

share the diluted and per our was For net million earnings $XX.X $X.XX. of our first income quarter XXXX, were

X.X%. equity Our return was tangible on average

moving to Now slide review our for X of on a capital position.

to ratios. capital robust We continue maintain

company bank regulatory All XX XXXX, year-end. our total was well-capitalized ratio risk-based our and above risk-based capital At common ratios ratio capital our requirements level basis of equity X XX.XX%, are At XX.XX%. quarter XX XX.XX% of financial for up from total was ratio Tier March points capital was institutions. our end, meaningfully

pro been of to has A this forma quarter capital. attention lot paid

like hypothetical remain has of very after credit ratios adjustments allowance Board I our Directors announce us and marks, quarterly capital strong. a dividend stock $X.XX common per our to losses to share. all For for including declared also investment adjusting of that for of security would

of December financial was higher from cash cash At with of $X.X quarter sheet as X. heightened a level were XXXX. prudent and our we Moving cash and cash sector on up the We light to XX the significantly closed and of billion, balance usual this equivalents of March on equivalents than slide volatility. our $X.X in XX, billion believe

At the cash to of securities quarter, uninsured deposit cash $X equivalents borrowing unpledged well-exceeding investment our balances. our our XX% billion available with was the end together of and and equivalent total first capacity deposits and

repurchased million quarter, of convertible $XX first senior notes. our the we During

pay in cash. May million the to off our balance remaining of expect We $XXX excess with

Our positions will remain the strong liquidity and capital payoff. continue following to

with Continuing Hope approximately its X. consumer at of our our ratio with March $XX,XXX. December balances or an deposit deposits. of of commercial predecessor one-third $XXX,XXX Bank Over had and At down Many from Bank to of XXXX. an approximately size of account of XX% are deposit bank's granular XX uninsured has banks. relationships consumer to of average long slide have a depositors average base XX, improved size time account the Hope XX%,

million Now rate in first $XXX quarter, we X.XX% was XX million year-over-year. than new to had $XXX represented production. moving quarter, on up on of funded points In average commercial reflect lower of preceding production which changing and production, the demand higher loans, environment. in in we first industrial the quarter-over-quarter loan is In loan interest our The a the quarter, loan XX% the basis up points customer our total quarters basis new and which rate XXX slide first and X.

Slide on to Moving X.

of decrease As was XX, March a $XX.X our portfolio of X% loan quarter-over-quarter. billion,

of real X%. in offset loan New by first warehouse in loans the credit. loan as decline utilization well a Year-over-year, production increased lines loans of as pay-offs, commercial the total estate early was quarter maturing

Our of commercial loans. are mortgage well among consumer is owner-occupied and residential which and portfolio commercial loans commercial real major industrial, estate predominantly the real balanced types estate, loan

loan is by diversified Our well commercial and industrial industry. portfolio

real estate Moving on for Slide an to and our XX X of overview portfolio. commercial

vast average low well although all have our estate estate diversified segments. and The weighted loans our real of real loan-to-value estate are personal Our are portfolio guarantees. is majority commercial XX.X%. real with The across ratio, full loan-to-values by granular, recourse property commercial type commercial loans

Office is of of with representing district commercial real segment loans small and business estate no million, X% total $XXX a central exposure.

loans you XX, can in see over chart million and Our million $XX Slide on in as size. eight average real have loan estate $X.X only size commercial the is we

can have of ratio low the see ratios over across real of size XX%. loan-to-value segments. that loan-to-value X% that consistent a Only You estate our commercial also loans

will on our I provide first With quarter. performance financial ask that for the David additional David? to details

David Malone

Kevin you, $XXX with income, XX, million Slide with good yields. quarter-over-quarter. interest environment, Thank our partially was net reflected of the more quarter, everyone. cost by of XXXX, down customer in attributable the offset to increase start higher asset and and which will margin expanding interest basis the for XX an preceding in points rate for quarter. a interest This interest-bearing quarter first average of Net X.XX% which deposits, was a preferences XX% first I our totaled from Beginning morning, representing decrease primarily yield earning fourth

to XX. Slide on Moving

our Our of and loan average decreased the yield XX portfolio average quarter increased up points linked X.XX%, to quarter-over-quarter. billion, $XX.X on basis loans X%

X.XX% quarter-over-quarter. Slide grew of to XX, can that and average pace average fund mid-March. deposits banking in the On industry you preferences of see increased disruption X% the The $XX.X consumer rate Fed of cost rapid our billion, reflecting deposits hikes,

in On fees you quarter. first was gains other quarter, service loan million income sales by increased, fees. decreases can XX, fourth from non-interest offset deposit of Quarter-over-quarter that our see a and income and X% net slide preceding on $XX SBA decrease the for the

XX. non-interest Moving on on slide expense to

typically was payroll increase in first the expense, and the to $XX largely which non-interest by is in from other expense quarter X% higher compensation an first quarter. was driven preceding due items. quarter, Our the million This taxes of fourth

March rationalization, incurred estimated million of result $XX charges. annualized is million severance Related a to to we we executed In cost XXXX, staffing $X.X in which savings. of this

been benefits employee would and also expense have quarter-over-quarter salaries item, non-interest this total Excluding increased have by and up X%. our expense would X%

quarter was For XXXX, XX%. first the efficiency our of ratio

the $XXX,XXX of Overall, Now, charge-offs credit less healthy. losses March minimal. ratio built moving quality, which point. XXst, net first to We asset allowance net a for XX. one only slide a our on review $XXX of I had million to to experience quarter, to our charge-off loss representing annualized ratio remains coverage continues X.XX%. be We in basis will than which during at our

December compared were December XXXX. Total March million basis XXst compared of basis XXst non-performing assets loans assets Non-accrual XX March XX total XX at $XX million $XX at points were with with at XXst. points XXXX at

loan. million loan commercial midyear current of primarily anticipate this by loss. linked $XX.X we The our solving quarter workout secured to risk plans, minimal [ph] change due with was on Based fully

concern Looking entire the at our asset any of metrics broader and we quality remain portfolio, healthy. issues systemic are not seeing

With that, our the me of a call turn let back Kevin discussion to outlook. for

Kevin Kim

Thank you, David.

full Moving loan year few interest for environment. our in estate customer the commercial wrap-up expect low This on reflects growth to with will We lower slide XX, rate in higher a single-digit comments currently outlook. range. demand loans a I real about

quarter. that expect of income our the first interest cost second funds in the we Given end will the of our net decline at quarter,

loan stabilize half to to the the of growth. that expect supported year we Thereafter, begin in increase by modestly second and

rest terms year. the expect non-interest modest to of we the see of In income, growth quarterly for

improving we efficiency Importantly, on are profitability of our organization. focused the and

We cost see efficiency driven in first by from improvements expect to the ratio savings quarterly part staffing in quarter our rationalization. the

pre-provision we pretax in of revenue growth the together, year. expect see to Taken half second the

David quality asset our as discussed, Finally healthy. remains

of to for year. we allowance backdrop, continue that Given for to the losses expect the credit remainder our modestly build

have institution strength we stability several strong our economic Over capital liquidity, through as of financial and strengthened balance interest cycles. all with a sheet, and past significantly the source franchise our for years, customers our serves and rate our

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

Operator

first Matthew go will Piper We session. [Operator now Instructions] Sandler. comes the Clark from ahead. question with begin question-and-answer Please Our

Matthew Clark

Good morning, everyone.

Kevin Kim

Good Matthew. morning,

Matthew Clark

me of upcoming where you total us Can for on deposits month the trying margin out just average March? in the margin the one quarters. might the then just the gauge interest-bearing to either First rate shake spot and around in the it give

Kevin Kim

at was X.XX%. rate for points. the XX remainder you interest-bearing of quarter. the basis of Yes. it deposits quarter and the sorry, projection deposits total The of for deposits I'm asked the -- the the deposits NIM spot at X.XX% interest-bearing Total also end And for

Matthew Clark

in just month Yes. March? the Or of

Kevin Kim

For the month March? of

David Malone

X.XX%.

Kevin Kim

for NIM the month quarter third of yes. third The the quarter, --

Matthew Clark

borrowings. plan to borrowings to on we to of just for you put you while, And expect then cash? Great. hold what's the paydown. a or to for plan Okay. – the fund that billion $X.X should on the cash that Is

Kevin Kim

Yes, for Yes. the Yes. near-term.

on our an compared historical with not term a levels For expect of profitability. hold is we cash program drag amount funding usage because to term -- bank the elevated near of term

and being. we hold prudent it time to So think use through as cash is the

Matthew Clark

then shifting Okay. And to credit. just

I What of what commercial the was there? And this commercial to that loan added criticized the mentioned type -- situation then in criticized the You drove at? separately what's increase in was non-accrual. uptick quarter? the the guess what's loan And

Peter Koh

is Matthew. Peter. Sure, This

circumstance unique was mentioned Right there. So credit. a of would of say I a that with -- a now management C&I non-accrual actually to the you the it's there kind is loan a credit. sort industry-related that It gas

So we are as is in a And do there minimal stated, feel that one. we there on like very we workout situation. loss

the quality But of of that And have in assets relationships that have well is low again basis in quarters And here. a general, criticized things, look over they we the we slight -- very which still bit minimal or on X% year we very at still -- looking the about our as for like look we do are and we somewhat a a sense, And still so criticized reduced asset size in the the of actually for side We're I we at think contributing at uptick. an I so loans, feel the are of to last you quarterly very credits, each of at individual healthy. criticized loans, just loss unique feel -- little manageable with uptick level. believe secured credit last is are level we circumstances potential. a increase many

Matthew Clark

Thank Okay. you.

Kevin Kim

Thank you.

Operator

D.A. go The next Gary with Tenner from Davidson. question ahead. is Please

Gary Tenner

of side. the Thanks. on A couple questions deposit

of quarter, is time of the terms deposits adds deposits? so? that $X how much of timing any if the And growth nearly in if billion In of what it was the the was in broker of broker deposits those

David Malone

broker deposits during quarter. Yeah. of We $X approximately billion the added

Gary Tenner

And weighted was it of terms in occurred? when that

David Malone

of end the the quarter. Towards

Gary Tenner

that here? stabilization NII versus have you there do modeling the the Are is migration? what on a it you within back assumptions year half things that then of that Does assume of -- in non-interest-bearing to deposit time terms of And certain guidance regarding from your what stabilize percentage guidance? deposit in embedded

Julianna Balicka

our Julianna. and is looking outlook are our modeling terms When we this financials. Gary our in where the projections and we're of forward at with

back. happened a what core know a trends lot well shift have coming caused of we are you customers their As in to in mix deposit relationship seeing funds March quarter-to-date from banks and positive our

the in of forward, the of deposits. branch-based assumptions. deposits on happened couple of our March, replacement of expect when i.e., broker going we in looking increase relationship-based the big of we our concept outlook cost things a with projections are the we have So within with at rate. some that do in margin spot a we've brought The deposits the And

interest-bearing at this DDA time deposit and in is point So stabilizing. between the the mix

our from conservative base. strategies kind So informed some some of our have assumptions will projections also quarter-to-date incorporate around we that still also by behaviors, our that but the of our strategies retail and DDA trends informed strengthening and branch-based by are customers have deposit for continued

Gary Tenner

Great. Very helpful. Thank you.

Operator

from Instructions] go [Operator question ahead. Chris McGratty is Please The KBW. with next

Chris McGratty

QX? How Great. back the we you QX. ask decline half in guide, to I bit growth about there because pressure interest decent Obviously, little stability. we how Hi. about, much NII think income of events dollars on a QX wanted the to about off talked a Thanks. the see start I net the the get there's this rate the should from Can of -- down of change before you more quarter inflection. step but of

Julianna Balicka

the a how ago minute give to I funds NII give deposit by Well, model and I'll Mr. quarter if that should in at you to that your you go exit you work idea think, kind with a of this where an was on interest-bearing the cost for framework will of costs outlook. quoted of call Malone. the look

Chris McGratty

get guess, NII? of forward then, to on guys cuts, your rates to And using assume are the you rate you the guide, in the assumptions curve terms I in do

Julianna Balicka

lift the rate are counts. rate are we deposit terms in getting at a We from or but in forward rate benefit cuts, pricing point as any of you just using curve, know, lift this not from time assuming

cost first I power going the Fed the deposit in banks appreciably. to to couple reduce give think of pricing funds cuts are not

order point ourselves So not to at benefit baking in that a giving -- we time. not are we're in this

Chris McGratty

Thanks, convert. the And Okay. Kevin Julianna. on then last one,

the maybe, cash and in replacement? prior potentially without it. on in sheet, replacing the think said, million simply all Is just $XXX quarters cash because May, away I it now you on goes balance hand a of the

Kevin Kim

Yes.

will the I raising okay convertible to think without notes. X% we funds replace be

And is terms of enough debt cover capital have liquidity just in to It We capital. that. borrowing. our not ratios, is senior

capital ratios our level be at will holding So the company not affected.

Chris McGratty

Thank you.

Operator

we from concludes ahead. [Operator further our with session. Instructions] do Excuse Janney. question Coffey have I'm This a question-and-answer no go me, showing questions. Tim Please

Tim Coffey

Great. How are it I you in. got doing?

Kevin Kim

morning Good Tim.

Tim Coffey

your How had question sense what just estate of especially for about, pocket a do that commercial that you borrowers. last? have I air Kevin, kind you this you're borrowers, long might think seeing real among

Peter Koh

Can you by elaborate pocket? on what you air mean

Tim Coffey

originations interest at the the made conducive for wondering, see credit in from regard. being light environment two quarters if a comments terms tunnel you've you last the of as for higher customers. your demand not for rate the the that about end of Well, I'm additional

Kevin Kim

our expect range we Tim, growth single-digit Well, XXXX. in be loan the in to low

change terms drastic our demand in production or the much projected loan we CRE a of in of So, do area. see loan not really the

growth the every XXXX. of unit board see least from across business will in much organization, be not our of we that X% do change a coming Although, at

Tim Coffey

Okay.

seeing So, right? near of much then? going steady the you're an balance Is point of be term? inflection not this that across the to Is year then

Kevin Kim

I that's Yes, think, correct. generally

Tim Coffey

Thank right. my questions. time. Great. Those All Okay. you for are the

Kevin Kim

Tim. other Operator, any do we questions? Thank you, have

Operator

to back like turn remarks. to I'd queue. for over any management closing the in questions more no are There the conference

Kevin Kim

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

everyone. long So,

Operator

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

may You now disconnect.

Hope Bancorp (HOPE) 25 Apr 232023 Q1 Earnings call transcript