HOPE - Earnings call 3 2023 | Hope Bancorp, Inc.

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Operator

Good day, and welcome to the Hope Bancorp's 2023 Third Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. And I would now like to turn the conference over to Angie Yang, Director of Investor Relations. Please go ahead.

Angie Yang

Thank you, [ Marliese ]. Good morning, everyone, and thank you for joining us for the Hope Bancorp 2023 Third Quarter Investor Conference Call.

website. Beginning be morning, slide the brief which of Investor will our to Presentations statement we let our this X, discussion is Relations regarding usual, forward-looking using with presentation a accompany page me remarks. As begin Slide a on available in future events. call The the may the of forward-looking contain performance today company regarding projections financial and future uncertainties. from may results due and differ risks materially actual statements These certain to

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

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

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

Kevin Kim

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

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

in of the interest in diluted with resulting expense expansion third growth in the margin quarter of Highlights share. maintained our to income. a per basis $XX compared noninterest quarter X% net expenses a We disciplined quarter. third which $X.XX interest led For of results linked or XXXX, was our points income net decline control, million preceding X% quarter include quarter-over-quarter, net XX

increased to second did and not for for provision gains in third reoccur. $XX quarter million the noninterest quarter the from income However, credit certain onetime the losses

result, a decreased basis. on linked-quarter net a our income As

forward. Total planned by continued customer All of us advantage reflecting quarter-over-quarter, profitable deposits positions broker going stronger quarter, well partially expanded. of to time balance grew our deposit ratios third a of offset the growth reduction to take deposits. we X% opportunities During capital strengthen growth sheet, which regulatory X%,

to ample. Continuing more our a for of capital. Our to Slide be detailed liquidity continues X review

are expanded all capital ratios Our regulatory capital quarter-over-quarter. and strong ratios

common for quarter-over-quarter. As September was remain ratio allowance from Adjusting basis capital ratios X the our XX, losses XX, total ratio up up investment equity and was all marks, for Tier XX of and points our security XX.XX%, our points basis XX.XX%, for hypothetical June capital adjustments including credit high. XX

common of share quarterly dividend XX payable of Our to per XXXX. November November Board a Directors of $X.XX of on stock stockholders declared record as X,

in frontline $XX.X offset reduction company, customer quarter. accounts, a the September excellent and on were Moving $X.X core for XX, we to million September equivalents increase XX. from cash At key a third primarily third $XXX billion money reflecting At growth $X.X uninsured priority savings the balances. Continuing quarter, from results of X% deposits billion, quarter X. cash together X. quarter-over-quarter, total and the or X% broker at our equivalents Increase deposits time deposits. is securities of cash investment available cash our capacity, to our billion saw during and in with exceeding June efforts XX, up partially increased our an of deposits billion, to our XX% linked borrowing our At $X.X in end deposit unpledged of were and and market and of Slide deposits by Slide well the

of quarter. XX, XX% XX% at was from the ago at ratio of XXX% at the down September loan-to-deposit gross down prior quarter Our end the end from and the year

warehouse and XX, $XX XXXX. September September lending. an reflecting Mortgage to decrease was our in lines prudent billion, at X% quarter-over-quarter, of to X. loan growth approach $XXX to mortgage XX, quarter million $XX.X Slide in third portfolio the At warehouse on loan million Moving our intentional declined a decrease

process of business. in this are We winding down the

In Slide on at addition, loans our diversified September average real central business values of quarter. Julianna? commercial which ask low represented in rate and I payoffs paydowns financial provide recourse property Julianna X% of provide The that, for LTV and growth. On properties performance just X Office in CRE total commercial loan by district hamper segments, a and portfolio loans, was details have weighted our personal and more guarantees. we real X, of The estate estate to all high majority additional $XXX XX, these are with vast size. total with granular environment across interest these exposure. With continued well full for type to million our CRE loan are will the to no XXXX. of on loans XX% details third the

Julianna Balicka

Thank Beginning you, Kevin. Slide with XX.

interest-earning XX $XXX for totaled X% deposits driven income and The receive other banks, quarter, interest-bearing the increase to a interest our linked XXXX, net higher net the third reduction loan we pay after next average cost year by on offset forward executed a midyear year and higher swaps effect cash from term and the go fixed of volume margin driven third basis an of will interest income in yields deposits a million quarter billion average into expansion of partially start that. a in interest and by interest-earning on in X continuing and net that in X-year $X our expansion reduction In assets, a X.XX%. balances. net of and at float have on point was quarter Our borrowings our average by quarter interest the second of up margin in increase and debt

to Slide XX. Moving on

linked points portfolio loans our average increased decreased yield $XX.X to basis up Our quarter. average of X.XX%, XX on QX. loan The X% billion in

decreasing of change basis cost quarter. average in quarter. the cost X.XX%, increased second $XX.X by Our average of the were quarter. deposits The of the rate stable, only from points to million of up the second $XX essentially deposits The billion deposits in XX from decelerated

Slide on XX. Moving to

for a cash million $X was compared affordable quarter loan $X SBA in distribution million noninterest to elected partnership an XXXX. related on $XX income of the retain to second $X an third the we of million quarter, SBA quarter X(a) In sales. onetime housing with income investment and million production the balance noninterest in Last quarter's third Our gains included on sheet.

income these gains, $X Excluding million QX quarter-over-quarter. noninterest decreased

to Slide on Moving XX.

We continue expense to maintain discipline.

million X%. noninterest of decreased decreased quarter-over-quarter expense benefits of million $XX Our expense salaries and X% $XX

in slightly Our from September XX. as ratio The efficiency in of ratio primarily decrease XX, income. XX.X% was the as up was the change XX.X% due noninterest to June efficiency of

on will Now I our Slide review XX. quality. moving to asset

the September to basis XX quarter-over-quarter total points decrease nonaccrual $XX million linked XX, reflects in for totaled an full quarter August which by offset charge-off quarter and XX,XX new Our entered third idiosyncratic of $XX Chapter assets. nonperforming payoffs of $XX.X XXXX. decreased million workouts, X XX% assets inflows. that included borrower charge-offs or million, partially a liquidation related loans, of at The XXXX, Net charge-offs to

to have in As reserves recorded XX, related million $X.X credit. this of June we impairment XXXX,

million, the June basis receivable. provision credit increase in for $XXX losses was million, The for XXX of third XX XXXX, quarter, was losses September as allowance For credit loans charge-offs. points. XX, $XX of our allowance At coverage XXX representing our basis points was reflecting the

XXX issuance allowance points. loans Year-over-year, Special the up related $XXX impairment completed same within loans quarter at the basis of of local call XXX Overall, in of linked decreased million million coverage secured reserves XXXX. the portfolio. With XXXX, were me seeing to $XXX $X.X September the let temporary allowance of mention occupancy well is are jurisdictions. the projects September substandard issues excluding awaiting million. charge-off, idiosyncratic points from million basis of not increase that, loan XX, to XX, $XX the quarter-over-quarter by as multifamily Kevin. coverage Substandard June However, we are at turn our to systemic the loans back was increased the XX are certificates during broader to projects. These period. residential any their and

Kevin Kim

Thank you. Julianna. you, Thank

community headcount. production of its product Moving lines bank. delivery Since enhance in made long company Bank on value its reorganization regional strategic we traditional Accordingly, over around X. reduced shareholder has its a term. into diversified Slide great structure and inception, is a capacity bank the of to business channels, to realigned Today, progress growing the from optimize Hope and designed that announced a

continues changes meet and to secular challenges model our However, success. undergo these our business adapting long-term to is industry essential to

X This growth, client more relationships, groups of business we run region-based distinct Retail our Banking, instead us this generation expand and Fee-based enhanced Institutional efficiently. With namely bank will Business to Corporate Banking, Banking and deposit have and our will enable empower structure, our prior reorganization, Commercial revenue a Group.

this and this the this action network planning next thus, We of down rationalize we part decision certain to approvals are a lightly. are not transformation, customary X branch made notices component As noncore businesses. human our understand have over months, and subject winding has to we and

take decisions XXXX the the color process allow dispense annualized light realize in quarter full up related that, million and to branch the additional with you providing operational many benefit our provide making to happy every of recognize these to are We reduction, reorganization. These estimated we franchise. and XXXX. In earnings improvements. over an $XX add year of expand will for approximately their customers, we call. in remaining your term value we would requested. to are by expect us Operator, will $XX and to more staffing support never of for employees organizational a effort the rationalization ways when shareholders will sustainably questions and easy than reorganization, Upfront, the to fourth long onetime believe X employees to please we profitability. and we be in the year, outlook charges the to those open January. With We Related the any in report months restructuring, the our contributions changes deeply expect and largely the outlook as affected cost we we million of savings,

Operator

comes McGratty from Instructions] KBW. from Our first Chris [Operator question

Christopher McGratty

it In of limitations it $XX Will the of wanted because has we judging into rates. to ratio start what the the how strategic million be to past, the reorganization. thinking that capturing I this asset I'm about for you've kind its bogey to interested the the understand expense talked ROE, be efficiency which should company will Kevin, I'm managing ratio, the an numbers? trying about metric? just Will be to with success? be

Kevin Kim

we long than is have much of how to term is with but restructuring profitability this will we Well, the profitability consideration. those of All sustainable that level economic longer-term the the the profitable, better more to change And the operate provide have shareholders. services relevant, our we and past. better the a whole painful stakeholder more a out at we are a a an predecessor we to run ROA level this this that baseline which efficiency we their organization, obviously existing ultimately this really It's vulnerable really and manner. go rate think career -- to But very how is been very trying purpose for have to over obtain were higher customers, And people inherited is will interest bring in in metrics and on obviously, and motivate let that, be return to And better where from employees basis. time organization. main we all structures a can which turned structure to process organizations a a sustainable sustainable we situation took can the and opportunity a certain very ROE profitability how be of pace. better to a we ratio. this fundamental in our unexpected in an a fluctuating can in I very reassess rapidly how company And had

Christopher McGratty

or moving could about, whether I a is metric. this to to -- you further, outright higher, asset the expense is outright ask given this for capture guess your pressures certain it's or maybe is on metrics If spoke [indiscernible] it follow-up an to Is these the goal environmental metrics, I reduction? efficiency reduce

Kevin Kim

our of fragmented we reflects prior office region-based been have of because redundancies business, around and lot both lines the structure, independent business back which A staff. frontline reduction resources kind have our and In of minimize redundancies support Yes. regions in their in were realignment -- the The operations.

this of consistent a alignment, in will of as lot a so level with effective result a bankers providing customers we be more think excellence service. more our I And

we drive This So fundamental in do business from this measure. change our how savings is cost is our a just how profits not we more and a our businesses.

Christopher McGratty

some are one could capital. free the how How more Maybe not if of the we about I on return, stock we'll up for core, ask quarter outlook businesses given thinking certainly capital, and that you you're 'XX? about Kevin, get these about value shrinking are thinking buybacks some capital every of the you

Kevin Kim

very this capital current preservation they We environment. important are Yes. capital expansion, and believe in

dividend capital think In opportunities I give ratio. more are advantage terms payout shareholder growth base eventually, of return, strong us forward. will effectively And going a we of maintaining to take our robust opportunities

more are not shares, asking will be beginning our to is So if repurchase likely. where specifically -- whether you -- to beginning that I think our share we

Operator

Clark And our next from Piper comes Sandler. from Matthew question

Matthew Clark

of for the not will get or for necessary a fall to sense the First $XX reinvestment that or the businesses? one sense a line might there you Trying million Can or and expect to savings realization to bottom some be me million these $XX realign whether not? that to whether those and you around us or of extract. reorg timing savings for give not

Julianna Balicka

amount you going expecting come $XX from last we reduction executed million of the that million, $XX this is Thank namely Juliana. A that savings cost is that that question. of week. the that Matt, we substantial of for are staff to

So that branches will then that months, in and continue roll throughout plans year. over and some cost savings months. XX in whole is we consolidate the of phased first now. will start and And next be our the will to the operating beginning results next itself in process have some from half in Then already savings X the cost from in manifest the to the of improvements lastly, place

And operations for and of providing That million said, are the of through XX, efficient, necessarily improvements question, drop and to that be to much total quantified. was bank and the that growth on bottom redundancies to think is designed the needs is line, to position Near-term and benefits this our of cycle to products. will in to continue around So banking restructuring and to that identified consideration being you that's fee-based invest business second your removing organizational franchise, well-balanced in an banking. And to Slide that's when important in an high-quality, between past. talked of considered succeed, continue expansion part we need for the this promote groups to actions regardless more number. you business relationship going and then And about our streamlining the are loaded to process reorganizing our how our the collaboration of we've simpler to organization are fully generate to terms operational not $XX we yet you

recently Washington. this And management isn't anything in new a that So investments new we've making Bellevue, been about in treasury solutions. for opened example, branch we

to our So investing processes technology to in people, and bank going ongoing. is strengthen be

not However, making expenses not what that investments do large approach is that management, fluctuations our we we to expense practice have in to disciplined point we the have important and is that caused been do expect out because change.

firmly, state the into case. extract could just to not not yet was unveiled to redeploy So projects. the we so designed some restructuring large cost not scale, new That's savings

for XXXX outlook your say business would will modeling we savings the as I have cost your expense to organization. that baseline, growth naturally your our that share and will an And are improvement existing around in in baselines thing assumptions typical January. one usual However, purposes XXXX is

And so would be where the that's applied cost to. savings

Matthew Clark

question the Got the And balance of I then can myself, it. warehouse remind business. the answer rationale there end the that the I just Great. the just then at And exit think on of to us quarter? business, mortgage but

Peter Koh

wind Peter, and is actually down. This $XX Matt. is continuing million, been we've balance The that to

down think this made profile And point. business, for I of overall, pricing that that know, we winding us more that mortgage of thought and sense the business business slowdown. a think at as had big risk has you I line

Matthew Clark

your us there ] And that just [ whether there? exposure. there exam, the and you not or downgrades any Can and portfolio on whether upgrades update not or of recent Okay. a you size through SNC are any or went

Julianna Balicka

Loan it's that's have related that at of National portfolio, $XXX and million year. There we to from portfolio approximately the type $XXX and were the down downgrades exam Shared Term lending approximately million, the the beginning syndicated Credit the B

Matthew Clark

deposit you then of to me Okay. if for the rates [ one the the September. spot [indiscernible] ] end just on costs, at And last

Julianna Balicka

One second.

XXX [ -- get total spot to [ be ] the you excuse was the spot deposits ] just ] Let me for [ rate. rates. XXX That's me, clear.

Operator

Davidson. our Tenner we And next D.A. [Operator Instructions] for from question, Gary have

Gary Tenner

questions. A couple of

First, it a mix of more yield was in terms Or quarter? the the of was yields of quarter-to-quarter? quarter, change kind loan that drove unusual in this some there loan anything expansion of that

Julianna Balicka

combination The The things. interest interest one thing I'd a loan interest income answer. quarter and our variable And add rate like X ] Matt's increases my rate and interest question to higher mix accumulation to It's portfolio recoveries. over moving change into of rates on prior was of to -- [ quarter.

of of Our at spot quarter, XXX was [ ] on up the XXX [ from quarter. the end rate ] at deposits end the the prior

XX spot moved the So points basis quarter-over-quarter.

Gary Tenner

income that much prior Could maybe impact on Balicka, that, recoveries to mentioned. an Julianna you relative you how quantify guess, of I the quarter, the that was. just interest

Julianna Balicka

interest quarter, income $X million. the This recoveries were

Gary Tenner

amount [indiscernible] the any in second quarter? meaningful

Julianna Balicka

meaningful we improvement -- expansion, expanded question the of from There income [indiscernible] your recovery that margin terms second of liability even the in wasn't back our margin out, on interest quarter amount the net interest interest the still net net our a with when in side. kind

Gary Tenner

on then Okay. I what on swaps those? the is appreciate rate received you the that. And mentioned, fixed

Julianna Balicka

XXX over [ ] SOFR.

Operator

have McGratty question do KBW. one from Chris from we And more

Christopher McGratty

about be little feels trajectory recoveries, NII. margin, interest balance the whether comments. smaller I net the sheet more interest might It Julianna, maybe net maybe Normalizing guess, comments income interested but income. Just profitable, a in a the help in to like of coming back for the your trough but on

Julianna Balicka

the obviously, January. XXXX improvement and But our saw with even terms are recovery. we net interest that have net do the in that the all this interest thing pleased $X.X outside year. is will ran margin last income One some billion you -- we talk of that we in of fourth income in interest we and about expectations, will promotion with from quarter about a CDs expectations we maturing quarter remind think I the I of

downward put quarter. cost that pressure rather So on of in or will the some deposits fourth upward pressure the

deposits, will But cost flexibility higher in to So my continues run us customer when which but frontline our the SOFR, left and in ]. in this the be dependent, on of what curve said profitable that more and talk coming happened [ right, XXX longer NII interest us trough at fixed in. balance the execute about terms of I off excellently for gives positions versus higher we'll just with NIM have to to now, answer prior And funding. January. rate net-net then It's sheet. kind quarter [ the we're I And growing pleased rate is XXX a it just over ]. on the

So your clarification. that was for

Christopher McGratty

The what I $X.X for billion, renewal, rate sometime? was last up that Juliana the guess, was that's coming on, probably put year

Julianna Balicka

on these last was because the quarter XX-month in when year It were fourth CDs was it on. put put

X.XX was [ rate that on average the put ]. that, So was

Christopher McGratty

And have maybe near selling loan then comments. thoughts retaining Okay. you last one, . versus Do the on SBA sale any term?

Julianna Balicka

more to moment, At economically it is FDA loans. more the profitable, profitable

Christopher McGratty

maintain them, you is To be sure, said? what that

Julianna Balicka

sheet. balance maintain to Yes, Yes.

we So profitability. that a of evaluate from perspective

Operator

comes David from next Our Wedbush from Chiaverini question Securities.

David Chiaverini

to NII wanted question. guess, up, follow on I I indirectly the

loan guidance regard? or In in any informal sheet figures of growth, terms that growth and balance kind of

Julianna Balicka

XXXX January, this can we're process, you in at we a going guidance informal our outlook are and as budgeting through reorganization. we will imagine, through guidance time, for and No going provide

David Chiaverini

kind areas. quality. shifting to gears And of Understood. Yes. credit then other Any over

particular great. you're which areas the You not can with real any and out but like any other attention laid exposure on systemic low the paying seeing you that you mentioned that any slide you're in to? the on? any I risk, comment that you're commercial is more LTVs, estate focusing But areas

Peter Koh

related a Actually, process No. years. last concentrations know, some CRE of as pretty went our in couple over you derisking to particularly may through we hotel areas. the of substantial

one-off of at seeing the seen that had systemic. anything of really, not sort this So quarter outside this we're time, case we

David Chiaverini

related I'm confirm one-off that was that you to And it was oil national Got related it. can the that assuming credit but an company, case. to? shared what

Peter Koh

was It that participation.

in think was with covered I credit, do was and We related industry. generally have lead a it [ bank. Yes. to gas it [indiscernible] that participation ]

Operator

a Instructions] question Right follow-up Matthew we from Piper have [Operator by Clark Sandler. now,

Matthew Clark

office amount just you against portfolio that CRE I the up is reserve and and on want follow update what getting that to on portfolio have criticized? the

Peter Koh

very We'll small look at now. as But office you right know, the portfolio. CRE level a reserve we have

portfolio and metropolitan is really do of most think business exposure, I office -- of XX% Class areas. central any We have is it So over district not ours of pass or in around rated. XX% B in properties our

the And the So concern our perspective, signs really an moment. not from reserves? we have within we industry concern but seeing we're understand any do do any portfolio, of at

Julianna Balicka

very the of book Well, covers in and portfolios points, basis total our that our XXX are all small. is reserves office

reserves go So basis we a the would have What I that the XXX specifically coverage. Thank is on meaningful you. not office [indiscernible] with point number, for

Operator

and time, remarks. this over to some turn further no questions. like management And back closing at we conclude conference this the this for I session. Thank would will you. to have

Kevin Kim

all strategic and us next more our improved Thank bank for benefiting enable am you that look and to stakeholders confident operate efficiently, quarter. to will profitability. today our you. customer all thank joining forward you sustainably Once reorganization today, with through us expand customers serve I speaking better announced we our relationships our again,

Operator

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

now disconnect. Have may day. good a You

Hope Bancorp (HOPE) 23 Oct 232023 Q3 Earnings call transcript