HOPE - Earnings call transcript Q1 2024

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Operator

Good day, and welcome to the Hope Bancorp 2024 First 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, Nicholas. Good morning, everyone, and thank you for joining us for the Hope Bancorp 2024 First Quarter Investor Conference Call.

merger begin accompany will including remarks. the our call with and statement will slide using an brief Presentations we of a X, presentation to both let Investor presentation discussion a on page usual, of -- available forward-looking Relations be we a earnings which our As are presentation, website. Beginning in Slide agreement regarding this start morning, me plans company and call between financial the operating The proposed as Bancorp contains performance statements Bancorp prospects time as as regarding completing forward-looking Hope the statements expected of for the future line other well and Territorial combined and goals, synergies transaction events future the results, transaction the financial future regarding today and projections and including proposed and of the well the transaction, as Hope about of future entities. the Bancorp beliefs, benefits expectations,

including consummated, statements outcomes transaction in of other of statements. The of is customer forward-looking to or loss shareholders a and synergies, from guarantees forecasted of may and the such in not may constitute the approvals, deposit regulatory and operating costs, customary result what subject expressed the Territorial costs, the from proposed difficulties the results attrition, statements materially closing and Bancorp merger, These If is integrating are the transaction of Actual and business is other forward-looking performance. approval closing future differ conditions. following transaction not anticipated as savings X achieve we cost benefits higher-than-anticipated operations. the transaction disruption

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

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

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

Kevin Kim

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

on a overview begin us of quarter. Slide Let the X with brief

For share or income XXXX. net share the per first for of million diluted diluted with of or earned fourth $X.XX net per the quarter compared million $XX.X quarter of XXXX, $X.XX of we $XX.X income

Excluding notable items, our net million, income share and our $X.XX. per was $XX.X earnings were

items, $XX.X or quarter $XXX,XXX $XXX,XXX million the Notable items comprised costs after of comprised tax. in and tax, special excluding income, Last and or an of the notable restructuring $X or tax $XXX,XXX million quarter, restructuring incremental quarter fourth $X.XX merger-related cost share. was million an of per diluted net or special $X FDIC after $XXX,XXX assessment. this items after assessment FDIC charges Notable

the Bancorp, across we Islands. U.S. largest on Hawai'ian creates definitive asset Bank, bank $X.X in States agreement transaction Territorial a Moving to Hawai'i. regional the announced of in multiethnic catering billion X. This Continental the the Territorial based acquire company parent Slide a morning, state to of and United customers This to Savings institution the

Hope. strengthen a Asian-American continuity trade transaction, customers mortgage XX, The which The Pacific to After low-cost will communities Savings the partnership we banking customer do community. brand franchise and for meaningful to in a the Territorial opportunities total Bank Bank business providing of our a bank products base greatly deposits. Pro intend long Bank greater a organization contribute residential resources the of Hope's and and term an close Territorial the partnering legacy. To employees. to forma been larger financial over Territorial for as excluding to be XXXX, and services. century. and Hope the has Founded and core local under the Territorial's market, mix more that for our and values, to will build or by of grow was mortgage believe of storage being the diversification. Hawai'i a of enhancing would preserve part to is than footprint stable cost customer service to territorials the combined spot their size It expanded deposit continue X.XX% portfolio, deposits We Island attractive personal our Territorial Territorial large services into legacy the a of fund loan on with with X.X%, as Territorial's of double will company. has the shares market base XXXX, and name December excited expands long with and continue share supporting of their transaction create Savings public of residential and array loans ensure

and accretive growth be expected ended strengthening from the transaction December to quarter expected Slide X, profitability. On that our to rate, our and year-end expanded can XXXX sustainably is ratios The the close a see close XX, at you after immediately earnings strong is all we by XXXX. with to double-digit capital capital percentage

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

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

to XX, billion, our essentially Continuing were Slide March $XX.X quarter-over-quarter. X. XXXX, total stable At deposits

exceeded Our line a deposit broker their for groups quarter, goals offsetting of planned growth customer deposits. the of business reduction time

XX%. XX, was of March our ratio As gross loan-to-deposit

increasing. On with our loans, guarantees. details change quarter-over-quarter. estate weighted across commercial provide real Slide more real diversified estate recent low offset X XX% X, teams rate of a XX, X. are on March XXXX. loans. loan partially in in billion, decrease approximately decreased XX, March property loan At has majority of Slide The Commercial regaining to estate our momentum of $XX.X and The commercial XXXX, with the our totaled granular reorganization, commercial by and growth of portfolio on loan mortgage residential size. quarters from well personal which values are balances and our pipelines our full recourse loans average The our we and remain vast have decelerated with loans by the in following SBA real Moving X% negative at a portfolio type to

XX, strong XXXX. With I quality commercial provide the remains XX.X% will at details pass-graded quarter. Asset with additional being Julianna? Julianna on portfolio to first financial estate that, of our performance the real ask for March

Julianna Balicka

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

income average This interest decrease offset of higher million largely first totaled wholesale decline and and loans cost net reflects a borrowings. XXXX, a Our $XXX CDs of quarter decrease the fourth in a in of by interest-bearing the partially for average a quarter. X% from deposits,

Term early Program we We April. for the At cash the paid contracted the Net interest-earning X.XX%. Bank Funding million and XX of quarter, used was for points borrowings remaining of to our interest first the end payoff. off the quarter off XXXX $X in $XXX billion basis first margin paid

to BTFP $X.X interest contributed first on The All the positive the to forward. payoff income in spread borrowings earned interest net approximately BTFP a going be million else margin quarter. positive the equal, net of should our

Moving on Slide XX. to

X.XX%. linked X% decreased billion $XX.X The increased of portfolio loan our loans point average to yield basis quarter. Our on average X

our Kevin XX team's quarter-over-quarter basis deposits and lending weighted Average points. growth are $XX.X deposits trends cost the of average loan decreased X% increased of is As referenced, improving. rebuilding momentum interest-bearing million and

in cost quarter business to focused On In first deposits decreased our April improved I following of renewal line the the year as of of pricing reorganization. an XXXX, benefit first CDs that the from highlight XXXX, the spot our we has to from promotional like approach absorbed XX. of quarter. slightly would we Slide ago month-to-date

the in to with quarter, did the the loans XXXX. of quarter. in quarter service was gain noninterest SBA first $X the income million a Similar quarter for not other deposit was Our for prior on in $X fees noninterest we by sale offset of any million record decrease compared income. fourth first Growth

and Secondary improved by have are SBA of market likely year, XXXX volume resume small premiums second we to April a in the quarter. compared the the beginning sales of with loan

for are We or continually SBA originations. continually market -- retaining pricing evaluate loan we conditions selling

Slide on XX. Moving to expenses on

quarter XXXX XXXX. of in $XX expense million the fourth $XX compared first was GAAP million noninterest with quarter Our

$XX from from XXXX of in fourth items million was $XX million our XXXX. notable and $XX expense quarter Kevin of the first outlined, which from X% of first quarter the quarter-over-quarter down down is noninterest X% in quarters, Excluding quarter both million

increased in payroll our in from salaries million, offset X% increases expense to costs quarter-over-quarter taxes vacation the benefit accruals, and $XX and First partially reduced quarter salary quarter. and following fourth XXXX employee $XX restructuring seasonal million, by benefits reflecting up

Year-over-year, is down XX%. benefits our salaries employee and expense

of for rate the year tax compared first XXXX, quarter the effective full XX%, For the XX% was with XXXX.

million the year approximately quarter expect $XX XXXX, full and tax are we included million the not tax adjustments, to which be provision was expected Income $X.X true-up For first of XX%. for recur. effective will rate

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

XXXX. and loans XX, with $XX as of increase quarter-over-quarter The estate March $XX accruing increased million was of December attributable at X XX days due nonperforming XX, compared XX, Our were of past March to XXXX, assets relationship that to real March commercial $XXX XX X as XXXX. consisting in million as largely of million

with the are the were The Net basis prior no expected compared for quarter. XXXX basis average agreements in annualized of exposure X collateral fully points million secured quarter is first sales or points XX loans and the properties charge-offs $X.X place for in loss. with

as points that, back At receivable million, me up XXXX, first XX, call allowance losses of compared credit the was points of quarter, basis as provision basis from XXX loans XX, $X.X and points with our XX, XXX million for losses million turn credit quarter. basis representing was XXXX. With prior $XXX with March XXX March Kevin. December the in for For the $X.X compared let to of our XXXX,

Kevin Kim

Thank you, Julianna.

Moving Slide XX. to on outlook the on

with quarter expected Our impact is to our XXXX pending and year-end Territorial does outlook. Bancorp fourth by transaction close not XXXX

quarter, to XXXX quarter our up quarter of the rate fourth in XXXX. terms fourth relative we single have percentage updates. the outlook, we following a still the average actuals, billion Fourth $XX.XX low to grow expect quarter from fourth the loans in to at XXXX In quarter of digits, fourth

Therefore, in basis fund's curve Fed implied terms target September. the cut forward This factoring XX utilized of rate baseline. forward In January rate cuts interest net in target income, in our are fund's we X points X with of Fed the of rate interest curve we compares XXXX. current by in implied

to likely quarter $X expenses are 'XX quarter X% of by sales activity between quarter loan This of contributed of the XXXX. Year-to-date, have improved, fourth volume SBA the the in impact million for to we term quarter X% quarter. $XXX $XX for income X% a continue includes we the premiums to resume operating and interest and in program, small decline of quarter, the million in SBA million the market fourth in fourth which expect bank XXXX. fourth payoff over second a net Fourth expect positive of from to loan now decrease secondary the quarter still with our to XXXX. funding interest to net income net we Accordingly, from of fourth the sale

of XXXX resumption positive with sales interest income leverage the quarter expenses of of with net outlook the gains SBA XXXX translates into decrease from the Our quarter the when operating the in exceeding fourth comparing plus pressure. fourth

I organizations. to outlook, deck is basis Finally, transaction XXX I which assume in and now loans our switch ratio continue of stable reviewed basis merger of discuss pending coverage to Bancorp opening March our strategically some essentially attractive, my of will the and website. and points XXXX, we loans for to the proceed allowance to of as culturally Beginning XXXX. With and with December X losses in Bancorp key that, transaction-related XX, of XXX merger our Relations points as of loans bringing remarks Territorial was highlights compelling of credit with the an XXXX together on XX, with available the presentation, slide aligned the financially details. review Territorial X Investor Slide will

strong provide on at of the share on in look Hawai'i, April capital ratio will price XX, fifth tangible combined have of X.XXXX book growth $XX loans to based XX, Savings No island at fixed value. aggregate estimated years. closing capital Hawai'i. Bancorp. the capital ratios the Territorial the and earn-back company With to and in raise growth period after as a in branches consideration XX% close tangible the we The deposits Slide immediately value XX XXXX, dilution XX Hope's Honolulu, The a transaction, closer transaction approximately shares Bank the earnings Territorial of has and total the after Headquartered X, for to $X.X needed the operating per largest Territorial close. On support equivalent market book had The of state, accretive share. of is is total and Territorial's billion to of gross December exchange the Hope to Maui, we percentage X is will Territorial XXXX, double-digit $X.X Oahu, December assets rate. $X.X billion Kauai billion. complete be of expect be million at

XXXX. year. was XX% the asset common assets loan-to-value of at of just are represented equity tangible Slide we of portfolio residential XX, combined have company. Territorial XX% show the as loans total weighted mortgages, loan X, is of nonperforming quality has points forma and ratio assets low end excellent a XX%. On very of the Territorial's and deposits the December which its strong XX pro average Territorial's capital ratio of and over basis

from base. transaction combined You combined terms core territorials the loans company. more the Hawai'i third of outstanding of total diversification XXXX, we from the is public deposits. or mortgage cost stable XX% Slide $XXX,XXX by low-cost, to and Pro as deposits public The balances state. On are deposit deposit XX% deposits XX% will Territorial's can the average of X, forma, and consumer largest excluding that funds account company's is in at accounts and accelerates deposit a highlight account prudent doubling median $XX,XXX of was Territorial XX, over granular market residential The portfolio become balances non-CD of accounts. excluding contribution are Territorial's loans of Hope's approximately December loan total of in our of the see to X.X%, than $X,XXX. with size X.XX% the funds equal size than little less size.

of merger the which and regulators, easy the here approval details of but financial in presented the reference. remarks, I my for will recaps the shareholders closing of satisfaction X the already require conditions. your Slide transaction, approvals covered have of are customary The Territorial's

in Bank great Hawai'i aspect of is care. With any a continue to under be on transaction, completion X. Upon merger Moving Slide must the the Territorial Savings we integration important that to intend with brand. operating cultural addressed very

that commitment We look that cultural market. impact that to positive franchise Hawai'i that and legacy on are employees, the Territorial pleased long-standing customers and organizations similar building share the forward Hope the corporate and values serve. We emphasize has communities to Territorial made to a and we the strong

for will business this combination smooth M&A customers and We with completing realizing expect benefits team have employees. a diverse our of our which of management deeply proven integrating fully and Board histories have the process successfully transactions with begin shareholders, seamless a integration and to to models. quickly enable experienced We our us and

step and of operator, call to ensure prospects growth for fortifying come. With another the for Bancorp and the of many the transaction, Hope this many, strong we open success are to franchise years purposeful please With the up taking that, questions. long-term

Operator

[Operator question Gary comes with Davidson. First Tenner Instructions] D.A. from

Gary Tenner

expenses, I and thoughts the and in your merger expectations around timing onetime terms wanted marks those. if of projected deal, around to financials the possible, are cost some for for of more ask including credit saves what color, some of

Julianna Balicka

that the something to time. deal is or Gary, the valuation is rate reflect in The as going this know, you Julianna. marks forward are point at curve that

will the XX% we're the loans, will the years, the now, securities. longer XX% approximately loans, assuming this deal is shift. change be about on couple of on more right in But a lower a assuming are marks And residential that to because those on on So we income going first be accretion that portfolio, accretion that's dated. of mortgage right, bit little approximately

back-end to to prepay of life average life but loaded X years, rate we events. interest it expect changes, when change be The will in be

assuming we're a front-loaded not So accretion.

our we in million we're cost through in of expenses be planning still go and assuming the $XX $XX range. we're XX% million expenses, assuming to related subsequent process terms deal year. XXX% first then year. the of some In we're as the integration And the deal the And in out expenses, the working will saves,

experience This this cost on not that transition that transaction. that is customer are making a strategic the say base. transaction will and seamless. I is -- saves excellent is we a the high-quality market period necessarily focused expansion core sure us an deposit and provides And

I unlike that cost be saves to in-market are So maybe you number going told transaction, just about. the the

Gary Tenner

it state if any then that. that have Hawai'i several just wonder and And thinking I been could franchise longer as guys longer if the about to approaching of of color growth know thinking relates appreciate term? of I back market total. of in And kind you're that you're why term, you Territorial have broadly, provide I Territorial's you lagged more how of years, kind may Okay. terms market deposits the in about how the case? go that

Kevin Kim

we of will Well, expansion banking our good that for long presence market in broader has legacy array with and very also a of Hawai'i. good very larger sheet customers established in products have services, opportunities the beneficial become our Hawai'i share Territorial's the Hawai'i. and we in really And Territorial. think I a State of balance believe this experience And market

Julianna Balicka

can transaction the expenses. add was about quick I number. I pretax real that you the if to just What Gary, you quoted asked

want just to I So make clear. that's sure

Kevin Kim

expenses cost Territorial the be expected XX.X% that interest share will you savings. Did of

Julianna Balicka

And the as be deal It the happens in be savings XX.X%. to just cost. will the range cost same

Operator

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

Christopher McGratty

to X second, you earnings referenced, that I accretion you Julianna, mentioned going front-loaded. to want Julianna, notably a higher for the Slide double-digit accretable to or isn't that be just or Kevin go

of to how accounting versus purchase the kind say. core, I just digit, double unpack were you much like would If is

Julianna Balicka

the the which balance But mean rate accretion transition. are be of going as X cost going on current I going it's the be time the combination right, Well, we of a be X, to interest mixed The in accretion components core. -- it's over saves, EPS is the do accretion, phased to kind of sheet. environment, between between to in

provide third be with liquidity Territorial restructuring, the their optionality does balance cash and their sheet then repositioning position. component And balance sheet will us securities

and planning built accretion into that mean, be will well -- right now. process we're some integration as there So I earnings transaction our redeployment going our through of

kind up share tighten in we this will as the of of we model the So details. sense through going process, more

Christopher McGratty

Okay. just Great. the from could more. rate the diligence core any more be credit marks perception might that, that maybe color add to the And one interest did, understandably if bit The a large. But Hope little the I you on just not are legacy portfolios portfolio, of aside Bancorp.

Julianna Balicka

rate mean through excellent the I asset of XX% had we that of with quality low ratio it is we process. sure look a that portfolio XX due an is mean, the make residential this We It's ways points. a NPA marks -- in the balance between portfolio. mortgage It's took LTV. estimated credit. diligence asset correctly portfolio. quality the only sheet multiple basis and interest I clean Obviously, needed and at to on a

Operator

next with John The comes Pinnacle. Instructions] [Operator question Deysher from

John Deysher

the any if you this you curious other just about? And was us found were deal there tell bank? for Territorial? came could I bidders how How

Kevin Kim

at in And Kevin. interactions very concluded and current Well, counterpart a environment, Territorial Hope is compelling. both had Territorial strategic would the years. rate have between and over interest of this us the I very, Well, that be partnership my casual

a engaged had of this from signing with we end conversations the deal came And announcing the XXXX. towards serious up the -- we So morning.

most perspective, that that buyers. strategic the must Territorial deal this has potential would to other understand this have they But concluded Hope from for I talked for ideal So partner be deal.

John Deysher

Okay. That's helpful.

the to keep franchise [indiscernible] about intact. to at going the team management running Who is going What You're Territorial? be

Kevin Kim

to that at services and very most Territorial. for after continue to on frontline good at customer-facing us plan Territorial We And the and their traditionally we important Yes. close. would the loyal capitalizing believe maintain and very reputation employees good customers of be

employees. we So most will the retain of

mainly merger savings cost we market. redundant come of said, more deal the savings mainly a [indiscernible], a new corporate market or cost This and company public from be the share elimination the improve to And not that will strategic for will close. growth Like after of our this is expenses opportunities competition. is in

Operator

with next [Operator Tenner from Instructions] Davidson a The with comes Gary question follow-up. D.A.

Gary Tenner

that from Julianna, had average in full April, I of the first relative the rates follow-up. referencing quick quarter? just your regarding deposit terms a month-to-date comment were the to you quarter

Julianna Balicka

XX Just [indiscernible] March spots.

from So spot... March XX

Gary Tenner

I us the you I March spot? Did missed If XX apologize. it, give

Julianna Balicka

No.

spot we're now and right XX March for was in total of down several that XXX points from Our deposits, basis April. as

Operator

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

Julianna Balicka

comment. make spot from I Actually deposit that we our to excuse benefits book. -- hedge that quoted XXX a I at some Gary accounting me, may The have cost excludes just on

hedge spot that the basis balance So down several adjusted from XXX, we're is our points and present sheet average XXX. in is

So I clarify just Apologies. wanted to that.

Kevin Kim

forward to Once you for we today, all us again, you next quarter. look with thank and speaking joining

So long, everyone.

Operator

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

disconnect. now may You

Hope Bancorp (HOPE) 29 Apr 242024 Q1 Earnings call transcript