HOPE - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to the Hope Bancorp 2024 Second 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, Digital Director of Investor Relations. Please go ahead.

Angie Yang

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

will regarding this The contains the financial the available with a we accompany call on of Slide as of today closing statements of future customary subject conditions. usual, other of be statement well and the me slide Bancorp website. Beginning stockholders and the a As the approvals, start Bancorp of approval let presentation is closing transaction our our events IR discussion future proposed Territorial performance regarding company the transaction regarding to morning, The Hope forward-looking in is regulatory brief projections X, and Territorial the which Presentations between page as using to Bancorp. forward-looking remarks. proposed

future Forward-looking call. to no Actual performance. outcomes statements and any assumes be revise on guarantees forward-looking may not may Bancorp obligation materially. that made are Hope of differ results projections today's

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

harbor as press reconciliation as detailed company's more a factors filings and to non-GAAP the the please GAAP the release to with issued SEC risk this a description financial safe the our of the measures, For statements of in refer well morning.

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

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

Kevin Kim

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

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

million of net For XXXX, or we $XX.X earned the per diluted second share. $X.XX of income quarter

special accrual and assessment. million, partial FDIC prior $XX.X per of reversal items, quarter merger a were included items our was earnings notable our net for costs share restructuring-related and $X.XX. income Notable and the this Excluding a

results following in progress late our improving performance quarter Our this reorganization financial strategic year. our reflect continued last

XXXX, net margin of the our interest quarter expanded. During second

return improved. Our expenses decreased and our operating on assets

working stable with look diligently franchise their on deposits double contribute the forward year-end. will and are than We loans merger Bancorp will integration our pending low-cost residential Territorial transaction to Territorial and Hope's to mortgage more and our by closing planning portfolio.

can and On ratios all capital we expanded X, Slide March XXXX. quarter strong you XX, see with our the capital that from ended

of June X.XX%. XX.XX% As ratio XXXX, tangible was and XX, common was ratio total equity our capital our

emerging opportunities. ratios Our growth high strong a capital with are support to which base

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

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

to customer offsetting continued demand planned deposits. in of largely execute brokered with our runoff well and deposits, line front noninterest-bearing an Our other deposits increase a

Residential real mortgage on sold second Slide billion, X. a At Moving SBA this quarter. and from growth $XX XX, of loans $XX.X was to production $XX were estate our of this quarter. less XXXX, once improved or loan robust, June decrease than decrease stable. million in loans totaled gross quarter-over-quarter. X% Overall, again, the commercial was, loans million

positive was C&I our are within in paydowns on strengthening this elevated loan However, quarter. pipeline, forward Based payoffs third by loans. looking offset we the to and growth

which XXXX, June low the and not approximately more remained values on XX, The loan granular property are XX% changed. details real Slide size. well provide portfolio our a X weighted in we commercial type of diversified our and CRE X, at profile and loans, average has On by with estate of to

XXXX. was pass-graded commercial the June at stable is quality real Asset of portfolio XX, and XX% estate

to the that, With second quarter. Julianna? our will Julianna additional performance financial for provide I ask on details

Julianna Balicka

Beginning Kevin. Slide you, X. Thank with

a decrease decrease million was net XXXX, totaled income of $XXX Approximately from million interest the first quarter. the Our the net of for impact to $X sequential quarter $X of attributable bank million second the of in cash. margin points and in interest term borrowings to expanded our by payoff X.XX%. net Quarter-over-quarter, of off X funding with late which program our full March interest-earning we early paid basis April, the

A is changed of rates lowest Quarter-over-quarter, cost quarterly basis the the XXXX. deposits. quarter by our since total our cost notable of highlight the points, average deceleration the in of X increased deposits of first quarterly increase only have

balances average we Slide XX. the of show quarterly yields. you cost On loan and Slide in deposit XX, weighted average trends our On and to our

from of was $X quarter. sale. conditions Our $XX on $XX in first X(a) the the $X We and continue the resumed noninterest improved. million income in net year. half as of to for the million XX% We a plan quarter loans market sold selling sales million increase SBA SBA We million booked gain second of an this quarter, loans second secondary

on XX. noninterest to Slide expense on Moving

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

million, items, quarter employee was X% X% quarter-over-quarter down $XX noninterest largest and and which notable The salary quarter-over-quarter for year-over-year. down XX% year-over-year. is the second expense, component expense was Excluding X% down benefits and

the see can impact comparisons. positive of You the year-over-year the restructuring in

of for XX down down XX. Now XXXX annualized compared XX. points Net from quality, asset XX, review ratio at at XX% to our quarter-over-quarter. asset first loans, with continue XX quarter average charge-off annualized quarter. points the of basis million as of charge-offs in the and moving levels XX points low March basis were Slide assets to Nonperforming I assets or which XX, be June basis Net were June XX second $X.X remain stable. total basis XXXX, will $XX improved The on continues points to to million, nonperforming manageable.

with compared credit $X.X was second At losses for was XX, with for last quarter. million, June credit million, quarter, XXXX, our provision representing allowance the $X.X XXX million XXX $XXX losses March For the coverage as loans of or as XXX points XXXX, ratio essentially December comparing has points basis basis XXXX. receivable. points stable of XX, The XX, basis reserve of been

Kevin. back the that, to call With let turn me

Kevin Kim

Julianna. you, Thank

the on to Slide XX. on outlook Moving

in unchanged. actual the following outlook, percentage terms the remains quarter our the quarter updates. grow In single digits XXXX rate Residential mortgage we Commercial to payoffs looking to have loan expect quarter and strengthen, robust. moderate. Fourth positive in paydowns and second low average for outlook continues XXXX we quarter, half to fourth to forward be our of to to of the growth loan at the fourth fourth are results, growth relative to the loan pace a Accordingly, we loans continues year. of production

XX% program, term expectations contributed to for originations shift lower, reflecting which payoffs of paydowns quarter, as X% mix. impact successfully and pricing income interest $X income of impact in net quarter interest year-to-date very net our payoff million high. the fourth the of net spread remain and We budgeting, expect deposit XXXX. of $XXX compression net the of XXXX rates decline our remains comes first the deposit half the from on loan now competitive the of positive long as the income to fourth but fourth market-wide from are cumulative in in million approximately year, -- new second of initial the controlled quarter the We the in a Approximately Relative of deposit the decrease XXXX. costs to interest this funding interest the our bank quarter in rates

the Fed terms points or rate XX near growth be In fourth the mainly of second factoring income of fund's loan trough One in in cut interest of our at quarter of to growth. with basis September by of by outlook, quarter are the in we XXXX. target net we XXXX expect quarterly XXXX, Overall, driven

expense expenses, in an SBA SBA fourth expect loans of remain the outlook update excluding notable to In $XX the for second We compared operating This control. to our continue sales is expense of to X%. decrease than second by loan on from sell XXXX expect quarter, with disciplined year. our fourth X% We focused in items, an XXXX. decrease the now we million and the over quarter half more of prior resumed quarter very

we XX, loans continue to stable an was of Lastly, which as June of and XXXX. backdrop essentially reserve stable asset quality basis assume XXX points coverage,

high realizing revenue return loan Slide and over financial are under on as single-digit you on X.X%. plus toward growth assets Overall, see efficiency track medium-term a growth to leading we goals, over XX, our XX%, namely on right ratio XX%

XXXX we a and and profitable improvements deposit on growth. in focus scalable core support initiatives, efficiencies our is Following process as the XXXX quarter, year reorganization to building operating fourth

are achievements of We the our excited medium-term our accelerate about pending Territorial Bancorp merger will contribution whose targets. with

With call please up that, for operator, the open questions.

Operator

[Operator Instructions]

Our first question Sandler. with comes Piper from Clark Matthew

Matthew Clark

pipeline one digits going on at second first on to to and need half what the loan the through fourth this stage? for step-up what a just drive talk quarter average Just the here. outlook. decent to single into like Can the implies to Backing do you growth what's you looks in low the that get growth

Kevin Kim

have we been loan historically, you terms as our strong Matthew, may new originations. of Well, remember, very in

the side our was times. loan the growth deposits as issues in much were pace we organic the sheet. at the most had in for Our a engine most of we had of the saw the faster what But past peers such when industry-wide challenges production years, X we of pre-COVID the driver main than balance in liability

we loan a had a deposit we Obviously, 'XX, before loan strive deposit our wanted of achieve growth. meaningful it to more was when to support designed growth. franchise focus So enhancing reorganization on we and high-quality strategic in to October

time see so priority front, the such meaningful Our numbers nominal our XXXX in NIM began quarter of customer of broker expansion increase deposit as we cost growth deposits, average deposits, our on. in second in to reduction very indicate deposits, quarter-over-quarter that results on of and

environment growth loans -- and half has is past loan And for we So will growth of of we building half will now to in our second in be had think the the year. our in accelerated, better -- the when shown expect we as that we been our both high-quality grow we our engine deposits. loan have in growth, confident deposit up I second actually. the the as the loan and 'XX pretty a pipeline loan And focus nicely feel balances be production pipeline

Julianna Balicka

production the and elevated could as are opposed our real quarter issue quarter in is actuals second our was has at to second comments. for the today, headwind this for beat estate look us And Quarter the the budget us to commercial in example, for beating and the up. when And loans Matthew, I quarter, a add payoffs couple we just able more or to the if second Julianna, budget. commercial been paydowns

when look that the the feel aligning second half So are the well. we drivers out into of year comfortable we

Matthew Clark

they And Great. yields, loan or down that the sales was loan just not. to on SBA then not this Okay. quarter. I'm the were if due sure

Just related the any commentary outlook. and there

Julianna Balicka

originations. of were terms spread in of running And mix just the kind of this the to loans, year in off. compression It being terms has was originated vis-a-vis that does commercial reflect been the loans of there what

compared So of also compression. outlook and kind in slide. that And yields loans widespread origination the XXXX, nonaccrual you did items, not such estate the reversals yields of income changes quarter-over-quarter the commercial but or as part have of quarter-over-quarter that of, the when loan which really, the factor reason course, does to prepayment for accounting-related lower items does accounting say, look NII changes their outlook, why outlook into compared is the you to at but plus, fees real non-yield market the into we our commercial housing XXXX factor in in

Matthew Clark

and have margin, the of then of the June? June spot And it. Got rate on end at on deposits average the month you do the for the

Julianna Balicka

X.XX. spot rate have for June, I is a end the of which the

Matthew Clark

then on the And sales... loan SBA

Julianna Balicka

sure rate make deposits. number, about we're Just the to total spot talking X.XX of same

Matthew Clark

then loan quarter? should sold sales, per it. in amount second we assume Got gets a on similar year half SBA the And the

Kevin Kim

the we and more began SBA we sell to Yes, We third the third will second second had the total loans in in I the the sold are I quarter that selling quarter, more loans to be than quarter, in and loans currently the so. believe be quarter. in the expect number

Operator

Our next Chris McGratty from comes with question KBW.

Christopher McGratty

are basically the beyond. Slide medium-term a which doubling I look that's I ROA. and of Kevin, your profitability, If targets, mean XX, 'XX current at

the about medium-term into talked incorporated what is rate target? outlook You expenses, this

Julianna Balicka

the for factoring only of rate curve September in 'XX so XXXX as forward your on see, second. based we're X.XX, for much the But next which this variability. near longer term, eventually settles current the there's the rest because numbers you to can current question. you me get at Fed term, the the things cuts forward although It's just funds, in curve, we are factoring Go a and in on let on year,

Christopher McGratty

I follow-up I Great. rate the be was would Okay. for deposits your assets? are what and betas -- assuming guess, down both you for the in

Julianna Balicka

the when have know, are just of deposits, timing first the that assets, are within going variable rate low high beta, a kind you as to to over assuming floating of we time. kind beta for is we cuts more matter happen. It's Well, lagged get the cuts reprice of month loans. automatically. a beta And normalized before assets, for the beta Those a those rate a several rate upfront of because a

One of One deposit exception out ahead. and sure thing that reviewing out thing exceptions I pricing exercise will I'll and pricing go have making this of all point quarter, rate control is warranted, to so -- in an gone to deposit the through we cuts. our are our ahead start costs point

and a to we not change improvement. And but upfront, high approach be a we're assuming practice an disciplined pricing our vis-a-vis that will to before to we in beta deposit post so we is assuming reorganization. how able deposit are our That continue be

Christopher McGratty

I Okay. about rate Great. the How we be tax just would rate. the had one from And tax be last thinking then should here? just

Julianna Balicka

the are XX% for We full assuming year.

rate does a year on of of lower So hit our when investments credit amortizations tax the kind that based the have half tax second the and P&L. certain in

Operator

[Operator Instructions]

Our Davidson. D.A. from Gary Tenner with next question comes

Gary Tenner

of CD provide maturity back rates the are coming that with could the the you year off. for the Hoping schedule half

Julianna Balicka

question me X.XX end X.XX the following Fed of got terminal finish XXXX maturing let in CDs at of answer just in at -- maturity Chris' And back the to and XXXX. XXXX. for that neighborhood We've billion. funds the And our here the coming are the off the of $X.X the we've are maturities the we've quarter off of half kind quarter, got $X.XX got rates X.XX, in second are fourth third and and -- in is year, the coming billion the X.XX,

Gary Tenner

renewal what would your be? And outlook what's quarter, the third to sense was going the rate

Julianna Balicka

reduced renewal I that current simple hopefully the recently be the pricing. we one rate have for think outlook reason lower will than the

Gary Tenner

provision mostly of I the Okay. you the the my answered. wanting the your quarter, in but other the the release the could press were was questions one, noticed is press -- release hoping one But assuming And on of I'm confirm the tax then in versus on walk-through -- just deck. different kind items nonrecurring that. on correct

Julianna Balicka

use document. your the tables source would release and earnings as primary the I

Operator

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

Kevin Kim

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

So long, everyone.

Operator

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

You may now disconnect.

Hope Bancorp (HOPE) 29 Jul 242024 Q2 Earnings call transcript