HOPE - Earnings call 4 2023 | Hope Bancorp, Inc.

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Operator

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

Angie Yang

Thank you, Danielle. Good morning, everyone, and thank you for joining us for the Hope Bancorp 2023 Fourth 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 on financial call The future contains company the projections forward-looking of today and the regarding performance future events. materially from certain uncertainties. to actual risks due differ results may statements These and

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

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

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

Kevin Kim

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

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

notable quarter million restructuring income after X earned $X.X the this and $XX.X a million the of assessment For included $X.XX $X.X we charge or diluted quarter net of million tax Income fourth per share. FDIC tax. after XXXX, of of items, special

deliver up XX% expense share quarter-over-quarter income Bank designed growth realigned net continued income our lines per of $XX net our In business meaningful and shareholder of the structure XX% important to quarter. positioning our XXXX, years strategic value and loan products, $X.XX, in of of management the improvements asset more to support and quarter-over-quarter. and returns operate October we earnings our enhance on our quality A efficiently, over key drivers notable growth in up around announced this million, focus come. high-quality reorganization were improved and Hope these a to long term. We items, were Excluding deposit was

progress making on efforts efficiency frontline on to management and to substantial their expand transformation, attention empower are improvement process customer this focusing grow and portfolios and We relationships. our

We grew a X% from charges. Continuing restructuring of book as of part was and cost position, previously consolidate quarter of accrued ended X. fourth announced, half first with the XX XXXX. will the branches to capital -- capital the As tangible in certain very the our on year reorganization Slide in which and quarter-over-quarter value the expanded XXXX strong all as We and of September of ratios we quarter the first year-over-year. plan XXXX, part

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

quarter average of per Directors Continuing XXXX. February were of Our Slide of X as X% record of a billion, share At dividend than to $XX.X Board billion, in quarterly decrease X. declared of deposits of of the February deposits stock $XX.X common December quarter-over-quarter. stockholders less on to our $X.XX XX a XX total were payable XXXX, fourth

quarters. fourth residential exit line seasonality unrelated deposits declined outflow funds to brokered reduced in September reflecting mortgage XX. Quarter-over-quarter, these seasonal $XXX quarter, in During XX% business. in time or quarter warehouse from customers the fourth the million the commercial of we customers our of rebuilds These flows fund mortgage are in subsequent demand deposits the industry. the by from Normally, residential the

the of were deposits our up quarter-over-quarter strength given in XXXX. in This X%, reflects communities deposit XX% disruption franchise consumer which is of deposits the in the serve. first that XXXX. total consumer notable industry represented stable we the are at deposits Year-over-year, of banking and our year-end the Our half

ratio of loan-to-deposit gross was Our at XX% 'XX. XX December

We operating below at are targeting ratio a loan-to-deposit XX%.

portfolio to Slide fourth billion, the on of Average XXXX, our X. December XX down Moving At totaled decrease quarter-over-quarter. loans quarter. $XX.X for $XX.X linked of billion, a X% loan XXXX totaled X% quarter

accounted for completed decline loan the mortgage of of exit the line business, the we quarter, residential in balances. $XX During warehouse our million which

Looking well guarantees. this see our which to personal The Accordingly, following ahead loans Slide are property average is full growth. X more type on of loan details at gearing for and size. recourse our by -- our strategic the I'm a commercial are and our reorganization, XXXX, provide X and granular real at have sorry, growth December year. On diversified positive up low estate expect remain across X, we estate vast commercial majority portfolio frontline loans, pivoting X of real of with The and XX% XX loan-to-values in weighted approximately XXXX. we with

of financial Julianna? quality year-end no any systemic of with portfolio will fourth commercial Asset provide Julianna signs to that, ask risks. With XX% estate details on performance and with the real XXXX quarter. strong remains for additional I our at being the pass-graded

Julianna Balicka

morning, good and Kevin, with everyone. X. Beginning Slide you, Thank

XXXX, related a which million of points from income interest The to income $X quarter. third $XXX interest basis of quarter quarter. net the recovered quarter to interest contributed decrease in fourth borrower the X margin million third the third totaled net X% preceding X included relationship for of Our

quarter the Net to X.XX%. interest recovery, X% for XXXX the points Excluding net interest decreased basis income fourth contracted XX quarter-over-quarter. margin

this contribution billion from million end $X.X the up BTFP the Funding assets. At beginning opportunity of quarter we and quarter-over-quarter. April, and to end March will and interest interest-earning the away, our also have balance net positive deposits the will to of interest comes of by income the our Program after balance XXXX, the for investment partially recovery in interest an earning reducing quarter the pay average the linked $X quarter and and positive in average margin the of income change margin income decrease interest-bearing from go cost When on a decrease The net a the off contracted with other points borrowings. of XXXX. cash. average first interest deposits The third will of first spread net at renewal fourth the net This a of the was and quarter, X the off offset and yields BTFP quarter. plan interest earning interest income higher Bank in in basis of assets Excluding borrowings loans, we impact interest-bearing of higher securities of reflected pay net Term

XX. on Slide Moving to

average Our the contributed average points basis yield X% our points declined mentioned loans previous linked yield X basis preceding X to and third on recovery quarter, in approximately of X.XX%. $XX.X the loan slide the the to I The loan on interest portfolio billion decreased that income quarter.

no promotional $XX.X ago. increased XX yields partially and fourth than fourth The a quarter, in points deposits the maturing There expanded income income CDs originated repricing billion were of to the the increase in interest material interest the recoveries in X% quarter-over-quarter. year basis deposits reflects the X.XX%, Excluding of loan cost less up quarter. to the average recovery, quarter. Average declined

Moving on Slide XX. to

distributed Our of businesses. of plan more the quarter we happen increase we in production Fed our it was million economic income XX% SBA and the market our XXXX. Current is gain on loans. from are sheet interest fourth third income return $X balance to sale rates. $X record production various to the the did on X(a) improve will last noninterest which was to an growth markets time. approximately fee million Noninterest quarter, not the reduces secondary premiums We after X% Similar this the across when quarter, secondary for of selling income SBA X(a) premiums SBA anticipate in to retain at any

on Moving noninterest Slide on XX. expense to

noninterest of for was quarter assessment, of million of accrual FDIC $XXX and included $X expense X $XX pretax fourth notable million million related $XX our pretax X% million these items, the decreased notable charges expense our Excluding operating items. reorganization and to restructuring special quarter-over-quarter. Our

or the reduction the fourth This part as quarter was benefits reorganization. salaries $X a count $XX of our quarter. and at from the undertaken end of third reflected of decrease million X% of October Our impact head expense million, the

Now quarter. I fourth during to will XX. Slide improved which moving review the on meaningfully our asset quality,

at total assets December and million XX% XX, nonperforming XXXX, an assets, basis quarter-over-quarter points Our of XX to $XX September points decreased XX XX. from basis as of improvement represented

linked of XX, September low, were Net Our annualized. XXXX to criticized special The $X.X loans X reduction both points XX% XXXX, substandard basis loans. from mention was million. very only fourth quarter and average the charge-offs in quarter for or decreased million $XXX loans

XXX $XXX increase coverage $X.X let million. was credit for the XXXX, basis back fourth loans quarter. With quarter, allowance was which December the turn prior to Kevin. our the in receivable, X For representing me our from points losses an was the for that, credit losses end points of of basis provision At call XX, of million,

Kevin Kim

Thank Julianna. you,

is The Slide XX, bank Hope on foundation and we On provide a XXXX for was client we focused quarter laid build fourth that deepening outlook. XX. as more on quarter regional to and highly a broadening efficient of to our Slide Moving key the Bank stronger relationships.

are a of we We feel are at company quarter low our percentage fourth billion go the building loans the the in to transformation for the a from up with XXXX. process. Fourth of sense we quarter of which fourth which compared rate grow quarter $XX.XX as we direction fourth quarter XXXX we quarter, average through expectations digits, the XXXX, fourth the presenting our provide in of to expect single will in better

the to we half We have project plan second and XXXX. loan-to-deposit year finished to anticipate moderate businesses, growth and exiting the be to noncore portfolio maintain loan average an weighted in ratio XX%. in to below of paydowns the We

of million we quarter In decline quarter, single digits rate in terms of our This $XXX in impact interest interest low at which, XXXX. quarter the our includes fourth Julianna payoff a term fourth to interest quarter income, program, fourth the to mentioned, 'XX. fourth from of $X the of net as in percentage income bank the contributed million positive to net of funding the net income expect net planned a

the to business expenses to quarter from operating fourth quarter, revenue and our to restructuring cuts our an continue interest income to merit to increases, items, from with was loan Fed A our X technology of by be Excluding we the BTFP, Cost improved offset we X% Fed assuming and further. decrease investments XXXX XXXX. funds. In rate, cost that quarter fourth fund benefiting expect rate net are operational beginning our more be quarter million in customer XXXX, partially run growth development of -- modestly would up outlook, impact rate realized quarter May fourth to of XXXX support quarter than gain for in will generation the in hiring consumer expect for $XX user operating we funds year-end and anticipate funds improve the fourth our the which compared restructuring of of planned selling to expenses, cost of our quarter fourth operating Fed the well expect outlook portion should decrease year the the target expense of XXXX, we sale efficiency improve, continued as when from and as fourth loans on of a excluding outlook, In will premiums of SBA expect fourth notable experience. by savings X.XX%. we we with -- from by savings return the occur our our upper this XXXX. In to of expenses

to into expenses translates in to positive decrease 'XX operating would comparing income. with quarter operating expected of quarter to fourth interest be the fourth additive SBA leverage incrementally of headwinds the gains with net 'XX of exceed when outlook in quarter fourth the positive leverage. the the Our the XXXX

ratio losses not concerns XXXX coverage portfolio. provides systemic our of current we future we see a credit loans. upon sufficient loan the currently emerging to believe Finally, we assume in Based our coverage credit allowance any do for our stable economic outlook, for outlook, in and allowance risk,

of on we benefits. continue We will Moving efforts Slide realize results make XXXX medium-term we post-reorganization. its will building believe have the a progress XX. as our view to now and potential to bank's reorganization on a our and generate begin better clearer be year to

modest are that assumptions with backdrop based ratio would the of on that toward. We our We a continued are we economic underpinning are forward targets curve, constructive our implied sharing current you note some the growth targets percentage below medium macroeconomic with these and range medium-term driving the medium maintaining over loan-to-deposit while realization term. the single-digit over term, expect: loan growth in XX%. a from of First, benefits Using strategic assumptions the high we our diversified and the reorganization

of medium outpacing growth revenue fee than annual margin. to supported accelerated Second, translates net growth in expanding income loan interest growth an XX% growth, which term, and by loan the greater revenue growth

expand, interest expect base. of the only because to deposit because stronger but not We interest a net margin rate of changes,

Our generating on and reorganization is wallet growth customer core share. expanding focused deposit

greater by Third, and discipline us a return on on and XX% drivers operating within we expect our of strengthened the we And process level we we prospects sit reach. And excited move today, that deliver believe finally, forward strategic than average keeping banks underway, are aggregate, summary, operational open we is and Hope. value efficient up path to long term. efficiency more returns excited attractive progress revenue of for an together is With you the transformation improvement. strengthen profitability enable all regional operator, forward call. growth, United leading driven improve expense ratio apprised our assets X.X%. In continue management under in that, in continued stakeholders our bank, to with will, the better the these medium-term firmly And is here about States. With as Bank of to the our for growth I stronger, the one look a team to of our for from enhancing renewed Asian-American ongoing energy franchise position of please as as our the well build to initiative to

Operator

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

Nicholas Moutafakis

outlook a change your Maybe single-digit get does Nick with year? less How NII Chris. this Moutafakis starting guide we for is the has cuts the This if on decline. just NII, rate low

Julianna Balicka

then we year, If a outlook get will our cuts but will probably bit worse rate get -- substantially. not this fewer it little

drivers is interest -- -- the which loan our So A behind to are rate -- of because on interest income one our hand, which interest rate outlook as growth, the net we so return -- irrespective follows: outlook. will

our start -- will allow funds costs. is, the cost where rate to deposit the in having repricing interest of course, downward Of us cuts X of realize beta the on year is coming to

assumptions. beginning, the our beta in However, we lagging are

deposit half really So the not latter we're cost picking up year. until improvement of the

share a will mean, -- driver you'll impact cuts net the third versus, our rate the -- regardless that's of So downward end I'm interest loans, cuts, improvement where of net if improved is as X. And X then up it margin sure not cuts -- in cash, the going will if experience of be there that focused [ improvement with going the get decrease substantially to rate material the I 'XX, say, slower be which the customer margin, the fourth to come from be interest But BTFP, we because deposit operational of regardless interest excuse to and XQ will and right occur our of deposit away, me, variable income more getting quickly net to not you're part the between accounts. come expanding net to that to interest going 'XX growth, on wallet net ] $X on XQ earn is upfront. to the from contributed And right? So portfolio able NII the million beta loan the from on earning we're repricing income, cuts. spread if not is quarter of then to impact XXX% going

income interest So -- to cuts make I getting to change whether our interest X is substantial outlook. our X, that going we're a X don't or think

Kevin Kim

think and And more current XXXX from the impact we would if more 'XX the the the earnings beyond. see have, cuts would moderate, projections benefits of the we are I that delayed in but be on

horizon. midterm the in So

today projection sharing our stand. think that we would I are

Nicholas Moutafakis

return, any potential around and discussions north stock just ask 'XX one if in a maybe of CETX or 'XX? given book, just on And Great. below a buyback capital XX% more, I could

Kevin Kim

Yes.

reorganization, capital of take means repurchase our do we have X to As our This change base growth strong advantage and noticeable well with opportunities share of our we mentioned, a strategic terms in are that ago XXXX. have a position not plan. we positioned from months we in

Operator

question [Operator The Davidson. D.A. next Tenner Gary comes of Instructions] from

Gary Tenner

fourth about for X%. expense had question fourth a the obviously greater year than -- quarter, guide down, I quarter year-over-year the the to or

savings payroll, the Is seasonal -- or Just et back of the about think then benefit remaining year the quarter any more half a the the you cetera. versus that restructuring quarter As fourth above year the typical first cost quarter from from bit could kind and thinking a about first quarter-by-quarter second decline? of half the little of a of the there. increase trajectory

Angie Yang

the res ] through the not rolling going cost saves. that because already see Gary, after savings you. cost actually, [ October, be No, going the our the of savings bump up in is quarter and you're offset to only happened year-over-year run are cost because usual, fourth thank rate in to quarter first started that by

Gary Tenner

on assumptions to you've assuming your relative a income Okay. this that And are year deposit beta what then in the cuts follow-up potentially X you interest guide, got guide?

Julianna Balicka

of Sorry. kind assuming Can assumptions what? beta to what we you -- are relative

Gary Tenner

the got cuts To betas... in X your NII deposit what of kind guide, you've

Julianna Balicka

Yes.

bit still into we're It's XX%, going XX%, the market But handle be put over on for on assuming a back -- just cut be the of going the this, we rate some you going is by in the in have assuming beginning quarter. beta little up fully to under fourth before around are a a context of start trailing the more of deposit and repricing rates cuts, so total because that the to total So right? to kind beta realized book. deposit -- -- on to we're time example, our to cycle still the of it's the XX%

numbers our until the start don't side XXXX. flow downward really to on So we really the beta into to assume of kind

Operator

like back to concludes to remarks. over the for management closing I conference This would our turn session. question-and-answer

Kevin Kim

look again, and speaking for thank to X in with Thank months, you. you us you joining we thank all again Once today, forward you.

everyone. So long,

Operator

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

You may disconnect. now

Hope Bancorp (HOPE) 30 Jan 242023 Q4 Earnings call transcript