HOPE - Earnings call transcript Q4 2024

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Operator

Good day, and welcome to the Hope Bancorp 2024 Fourth Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Angie Yang, Director of Investor Relations. Please go ahead, ma'am.

Angie Yang

Chuck. you, Thank and Hope everyone, for us joining Good XXXX thank Fourth the Bancorp Call. Quarter for morning, you Investor Conference

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

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

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

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

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

Kevin Kim

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

Greater me our results, just about to a fires. we area comment Angeles take Before into Los moment let get the

to heartbroken are across We see the region. disruption our unprecedented truly

headquartered by in of great leadership fires. banks and this As we the to committed a addressing the independent needs those in city, impacted role taking are the immediate largest one of rebuilding

that of Way rebuilt Response and to unwavering will the our underscores cash our to recent Greater impacted United commitment better foreseeable Fund confident Wildfire be Los Our future. donation the am areas Angeles the I in stronger community.

our moving Now results. to on

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

the receivable of XXXX fourth growth pre-provision profitability. year the of in of total and revenue efficiency an as strengthening $XX.X quarter. XX, or December focused income as with compared quarter December XX% $XX basis our $XX.X half was position as diluted from on million, growth We share, million pre-provision fourth per down on of and to profitability. lowering annualized our $X.XX earned the we our of basis third loans XXXX, net XX, XX% and quarter down in X% and building XXXX, deposits up average corner deposit from a to June of turned was Quarter-over-quarter, on grew our as December XXXX. loans increased XX% XXXX. XXXX, September For decreased, expenses improving billion of gross the an net future we brokered X% up from revenue annualized a on Quarter-over-quarter, and XXXX loan of with from peak balance X% XXXX, sheet worked XXXX. We XX, XX, April improved for of base, deposits XX, second

and and improved XX% asset with us Territorial common will residential growth. Furthermore, ratios of in addition pristine and nearly are of loan growth XXXX. strategic XX, and ratio positive positions We our support optimistic outlook ratio driven the growth, XX% our over to profitability, equity with a in capital contributors organic company XXXX. On look total loans the as see low-cost to organic you combined core strong earnings coming This X, a in deposit our of mix, meaningful mortgage December capital income growth can tangible quality accelerating Slide fee be XXXX an year. well deposits and for forward Bancorp's by and strong to the

first to subject approvals. We expect Bancorp regulatory pending close with to the Territorial during quarter, transaction the

total Virginia prior million $XXX of were Our payable billion, on share record X, stockholders included branches, December $XX.X October our from Board the common which sale of This decrease declared the a of of closed deposits stock the quarterly $X.XX our to of Directors Slide of dividend down end X% of XXXX. Continuing from on to quarter. a XXXX, X. February XX, per X. XX At as February

commercial during industry. In quarter, the mortgage deposits we addition, the residential fourth year-end certain in in fluctuations typical saw

Lastly, due costs. to we high some exited deposits

the size. X Thus been more minimal on located less our in X, our estate at a $X commercial and exposure surrounding or than The well changed. with has we commercial XX, estate Moving granular XX. on to quarter XXXX. up real low September portfolio We $XX in type X% not million Fourth of SBA aggregate direct increased values At the from held in XXXX, of annualized loans $XX the of of of of basis provide our average gross with XX, customers. On compared mortgage quarter loan profile sold far, from excluding of for which an loans wildfires, loans properties outstanding billion, December Slide the $XX.X on are fire our portfolio handful the weighted X. were reviewed million quarter receivable a the and SBA, remain from identify third and and we average third approximately zones. million slightly from residential to diversified quarter. details Slides real loan loans has impact In December to XXXX, and fourth loans by loans property XX% regard our to the commercial, sale, in in

will remains quality Asset for additional at details fourth Julianna the our quarter. XX% with estate to stable year-end. financial real of the ask commercial on pass-graded I over With that, Julianna? loans provide performance

Julianna Balicka

million XXXX, the third $XXX totaled fourth for or net of income and you, good interest the $X with from Beginning X, million Kevin, quarter Slide Thank X% of quarter. decrease morning, everyone. our a

was rate interest-bearing This December interest-bearing cost Our our translates same on the average August fourth X.XX%. from quarter fourth cumulative net to margin XX XX, of deposits quarter beta weighted relative spot XX% The basis a XXXX, third was X interest Fed in interest-bearing by down basis as the X.XX%, period. The the points XX points of down to in as of of X.XX% on basis spot target to a X.XX% over for quarter. the from basis deposits points the cuts XX. quarter-over-quarter funds rate XXXX declined deposits

yields. from deposit impact terms In margin, lower from costs offset lower fourth the net loan of positive quarter the in the interest pressure

reversed to moving loans status nonaccrual interest in due of the fourth However, income to $X.X quarter. million we

XX, an impact we of the income trends deposit XX. for the our quarter, balances interest you average Excluding have and $XX the margin On average to net costs. On the income, fourth fourth the our Noninterest was of million in weighted reverse million loan from or X.XX%. Slide quarterly yields the been XX% show and $X.X increase quarter and interest quarter. would Slide third

$X.X During SBA we quarter, to from gains the on improved customer loans. the of $XX,XXX $X.X activity. in reflecting income fourth recorded the third increased quarter, million fee up net Swap million, of sale

on gain the a sale of branches. also recorded $X We our Virginia million

XX. noninterest Moving on on Slide expense to

expenses. manage continue to closely We our

rate the and lower driven expense, earned by reflecting as balances expense and funds interest deposits, noninterest X% expense. a million underlying was of fourth the credit in This $XX lower quarter, decrease Fed the cuts down the as was quarter. salaries in Our well average from prior benefits

reduction for revenue, the net notable the quarter growth Together revenue quarter. or expense in PPNR, expenses growth was notable XX% fourth pre-provision a the with down items, in X% quarter-over-quarter in Excluding in noninterest excluding total X% growth led to linked items. reported

full -- XXXX the items. of year For notable

with on tax tax expenses make credit made, expense. Due quarter. X broadly effective want in XX% third tax the that the comment rate Lastly, fourth talking investment income solar to we while XX% about was quarter we to here, a compared

full the year tax effective rate XXXX, was the XX%. For

Now points, X.XX% loans decreases X.XX% September points XX provision net problem Slide for and down metrics. XXXX. sales of were XXXX, XX% of fourth or the quarter-over-quarter were in Nonperforming of quarter $XX total of million XX% net moving million XX. basis average our as from quarter-over-quarter quarter. Fourth as was losses of compared with to loans. or in payoffs, These XXXX $XX of charge-offs XX to million total note December down on loans quality down I'll reflected $XXX XX December to million points credit full workouts, XX slightly of reflected improve of XX, assets total and loans of charge-off ratio basis year points annualized basis meaningful also equivalent activity to as XX, $XX assets. XX Criticized basis the The loans to review asset

basis in points and XXX With coverage at reflecting, loan and September points the reserves Kevin. XX, qualitative XXXX, allowance with December evaluated offset let in call back our increase criticized Quarter-over-quarter, loans. ratio XX. to that, basis partially was part, quantitative in me As reserves. XXX the by was reduction an This individually compared turn decreased, nonperforming at

Kevin Kim

on our Julianna. outlook I review moving will for I Thank now -- you, XX, Slide to XXXX. will

to first of of of the subject close includes regulatory the outlook approvals. Our anticipate Territorial in XXXX, we impact quarter which the the Bancorp transaction,

created We and about compelling the are through excited the this value pending merger combination.

and growth For Territorial moderate percentage the growth in XXXX, reflects high in loan organic loan expect range, of Hope which of the loans. single-digit we Bank addition

percentage double-digit in which the Territorial. -- single moderate range, from growth of organic income interest net Bank includes the expect Hope the low low growth in addition of and We

mid-teen rate reflecting million and from in gains forward expect XXXX. with XXXX, year outlook are October, and the in range, target funds SBA full continuing net assuming basis sales. in we loan grow interest of cuts accretion X each a income We quarter the May fourth approximately $XX rate points the Fed trends In of XX on are income income to our noninterest of curve. Underpinning consistent percentage

disciplined to approximately and We increase excluding low to to will to year-over-year. expenses, close We noninterest addition operating expense notable items, support $XX the growth. be related of double-digit from franchise Territorial expenses This the and in that talent anticipate range million XXXX. while continuing expect transaction percentage of invest reflects the technology onetime the Territorial in management in expenses

Lastly, rate an year investment of effective tax utilization based of low-income planning we full and housing for tax XX% for upon XXXX are approximately credits. the

for to on financial Moving our Slide medium-term brief targets. a look XX at

average strong range outpacing an X.X% interest growth assets return revenue this Revenue combined an target growth loan achieve net fee high loan over single-digit Our metric, margin. annual To growth and of is financial higher. basis, reflect income on with are XX% and growth the growth growth. bottom on in we expanding loan targeting a and line percentage will

expect mix. expand funding from improved market to interest Beyond changes our rates, an in we margin interest net

growth revenue and term, which medium disciplined will an the are the targeting expense of we management. Over continued XX%, also approximately of be the ratio outcome efficiency

strength the With well from up we the please and earnings we seeing believe balance built, With to that we merger, productivity are teams, performance our XXXX beyond. call of that open positioned the synergies improved are we and that, we from and growth in have realize for the sheet financial operator, the our banking improve to expect questions. Territorial

Operator

the come Clark Piper And Matthew Instructions] from will with first [Operator question Sandler.

Matthew Clark

first on outlook beta. on deposit Just the your

you interest-bearing, Are to XX%. there? past rate's I are thoughts this think this that cycle, match up just over or your what updated was cycle looking

Julianna Balicka

this Matthew, Julianna. is

as this deposit obviously, better to cycle, we looking and beta possible costs, to than want have beta are achieve high cycles. a In terms interest-bearing certainly in of one terms we achieve in a of past would

reach I looking in past And Hope's we'll cycles, to the hopefully, cycles, XX% Hope achieved rate cycles. past performance lower to to that. but being expand and we've at and look you'll cuts than this already help know XX% banks' what And need see more was around continue interest predecessor than cycles, rate on that the proactive us. the that at you we interest-bearing, cycle we're beta when on past we're So

Matthew Clark

to Can Okay, And guided and accruals on kind what of the rate? growth to to just It would that run a a just comp provide speak that off the $XX quantify little low rate, the then deck? have moving Territorial. expense digits maybe might of you to latest the get in maybe got you you you higher run reversal expected. seems just kind double double-digit million What with the then base was I low it. of than parts

Julianna Balicka

Yes.

kind look, the let forward the maybe -- me talk just me start more just Let about rather. with of

XXXX the still operating Territorial I you a course, the When of starting comes will integration. close costs we right? on addition sooner. But the little to happen Territorial more. first But work the transition a we're during of XXXX for of ease bit of of X in the includes expecting think help modeling, will April to transaction because that we're terms hopefully, quarter, X, as it with for from regardless, expenses it period but the the quarters

run stand-alone, versus our annualized kind annualized contributing this the deal that's higher think the you have And is XXXX, at only exit also run from: rate performance XXXX the of than year-end; XXXX. having coming a -- and lower in run So well. could expense of as in this close you cost be we to you be maybe is franchise, rate are full if year, to Hope a XXXX, savings, And versus disciplined looking as saw the transition run we're from on moderate part Territorial time and A, than kind will difference continued guide but rate investment the to vis-à-vis of technology growth, practice for albeit closing the that talent B, support in little growth of at your expense will. in that longer X/X of continuing expected, rate period statement of would management. But I help

Matthew Clark

Okay. provided those months assuming the on thoughts amount Territorial in of but know just on you're any you've operating expense And We and saves? ago, contribution terms obviously any updated what from of cost update numbers? the

Julianna Balicka

coming what and frankly Well, at employees the X I and the in say and about customers. And saves integrating than you that XXXX plan. also, announcement, we well-thought-out of building if in we're deal our talk because branch had outlook expense for at we about lower maintaining terms that not you franchises, will combined at network transition out looking the we're recall, that's company. the providing we're mean, changing the the conscientious did penciled being initially we the for a customer-facing experience announcement, I the growth, for that for have update cost that are the in is

and go So banking kind will achieve thinks the more one operations you support, as of we I that that. it of cetera, kind think need time, investment from process, an maybe maybe you initially over find reduces et But saves the through that you in, all about cost perspective.

Operator

The McGratty next come will with Chris KBW. question from

Christopher McGratty

the accretion. quick just question Julia, modeling on a Territorial

assuming million the from for accretion $XX securities double-digit loans. all that says it I'm parse think out I accretion. the you the to in or the low What are guidance? is trying

Julianna Balicka

are low much is we loan The how book guidance. accretion of reposition. keep double-digit securities that Yes, pointed so the we out want specifically. to securities income in versus the we And evaluating

So precisely. that that's why we haven't specified more

Christopher McGratty

shortly you Okay, great. And term? be then close -- that was my ROA follow-up to out could considering transition Kevin. Anything or laid might that the you've this perhaps for that that goals the medium close after accelerate at to

Peter Koh

Chris, rephrase that can maybe question? you

Christopher McGratty

sheet would is at the improve hope opportunistic sheet next X, being contemplated the considering you where currently years? to there capital you're sort to some more the from be could balance modest to The restructuring. that yes. close, Sure, X anything the Is that ROA accelerate your from balance help at transition You've acquired anything of the over there or either could got return? that absorb you're

Julianna Balicka

balance sheet discussing on premature of transaction activity usage great or Yes. the balance Hope broader portfolio X a balance it of Chris, to still of I Bank optionality applies now, and/or to keep are that sheet. kind you securities shared with kind we what before other purposes. question. pending. as commentary of just sheets both the I rather think But think our for I is that's the right And than we -- Territorial there, evaluating of want vis-à-vis sell while is acquired any And kind

Christopher McGratty

in on you that sneak whether something that be provide just close If the Great. consider, where your could Could post more thoughts Kevin. on buybacks, given is could latest you stock just would X I trading?

Kevin Kim

shareholders. short-term about Chris, in best deployment evaluate we that, past, before capital best and interest the as it the of both the interest in to comment the Having as that the the have is think point consummation of continue actual at repeatedly Board long-term our we shared of bank will premature opportunities this as the to in well merger. said

Operator

with will come next Instructions] from Gary question Davidson. [Operator Our Tenner D.A.

Gary Tenner

Wanted and success to competitive to away been the from in deposit a of had what question that ask efforts very maybe hearing shift you hampered side, interest-bearing little degree and though the on a noninterest-bearing did that about you money market heavier the even funding reduce the the environment pricing on trends a Obviously, competitive quarter. has have overall Korean-American the We've balances. side, in talk bit about remained space Could to costs? mix some you that's kind high. of environment the

Julianna Balicka

that fourth say you quarter in the Well, see us first a similar typically. is all, for I will that you in what of saw quarter fourth

We in residential the those property you and like. depositors commercial payments have of related mortgage tax fourth some industry depositors in outflows the -- DDAs see around quarter where the

I that is are of the So mean, say other you like But reality the I will of question for a for competitive XX% pretty pricing, our competitive of that's pricing in that your DDAs where of all And result that on beta that marketplace. across our that's just front a the our today. drive effect segments helping all that remains mean, costs our lines noting. Vis-à-vis good on achieving deposit the are I around part I interest-bearing think result. thank network, we to deposit to would the I Hope. across

Gary Tenner

the you million of And $X in year guide the basis range, for on full the year or of you of is million the you -- million year? it kind that $XXX in of half next on back sales of that expect quarterly 'XX kind of of kind would to kind $X.X range the a assuming -- to then obviously, this as a your noted, to relates income side, just fee benefit Are SBA.

Kevin Kim

loan sales? SBA on sales? Gains SBA The loan

Gary Tenner

Yes.

Kevin Kim

Yes, we quarter the I good a is said, rate. think SBA selling in loans as would we expect run generally XXXX. fourth continue to And

Operator

from is with question follow-up Clark a Matthew next The Piper Sandler.

Matthew Clark

estate digits Hope a the trying that On the legacy but the shrink are to high for continue Territorial, just portfolio growth assume think guess, of or to outlook, with or to give can I a on single C&I to shrink. stabilize get the sense sense us kind thoughts at shrinking you CRE foreseeable it's I'm that fair loan might your trends? clip for -- might just and whether a it real grow commercial what I not for decent will just continue future?

Kevin Kim

the had XXXX. Matthew, we Well, a turnaround in of quarter second

still So we from growth organic portfolio before moderate we single-digit portfolio. Territorial the side, our Hope expect in a low add loan the

Matthew Clark

Okay, to sense get a trying but the... just for

Kevin Kim

from C&I be The growth, if will And the coming CRE, be for majority side. nominal. is any will there that

Matthew Clark

okay. Okay,

attributed then of on charge-offs might than to little this of have that just losses we higher to been credits? good. X rate and Is there expected. some something get sense a call or the charge-offs to. might Sounds And net normalized run out normalized terms a to a the where quarter, or of reset for trying Just X in there net kind

Kevin Kim

of charge-offs points be will to our XXXX really XXXX XX predict But And fourth when And elevated. charge-offs we and you quite a of it with look were XX is at than Well, quarter level. if that's the XXXX, basis is continue entire of it manageable manageable levels. little to basis a difficult still accuracy, some anticipate lower we at even kind but points charge-offs had the it at year charge-offs. was

Operator

over [Operator conference concludes question-and-answer to ahead. closing back any I would go session. Please our remarks. turn Instructions] like management This for to the

Kevin Kim

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

Operator

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

You may disconnect. now

Hope Bancorp (HOPE) 27 Jan 252024 Q4 Earnings call transcript