Hanmi Financial (US:HAFC)2023-07-25 23:37Financial Data and Key Metrics Changes - Net income for Q2 2023 was $20.6 million or $0.67 per diluted share, down from $25.1 million or $0.82 per diluted share in the same quarter last year [4] - Deposits increased over 7% on an annualized basis to $6.3 billion, with noninterest-bearing deposits remaining high at 35% of total deposits [5][16] - Return on average assets was 1.12% and return on average equity was 11.14% [10] - Net interest income for Q2 was $55.4 million, down $2.4 million or 4.2% sequentially from Q1 [17] - Net interest margin declined 17 basis points to 3.11% [39] Business Line Data and Key Metrics Changes - Loan production for Q2 was $259 million, down from $304 million in the previous quarter, with declines in CRE, C&I, and equipment financing loans [6][11] - Residential mortgage production was strong at $100 million, consistent with the last five quarters [12][29] - C&I lending funded $36 million in loans, a 34% increase from Q1 [13] - SBA loan production was nearly $31 million, down from $35 million in Q1 [14] - Corporate Korea loans represented 12.3% of total loans, with a healthy pipeline entering Q3 [35] Market Data and Key Metrics Changes - Corporate Korea deposit activity was strong, up 22% from the last quarter and 64% higher than a year ago, now comprising nearly 11% of total deposits [55] - The utilization rate of commercial lines of credit was 37%, down from 38% in the previous quarter [53] Company Strategy and Development Direction - The company is focused on growing its residential mortgage platform and expanding its Corporate Korea initiative to attract new lending relationships and low-cost deposits [4][8][25] - The strategy includes optimizing the footprint to serve growing markets and maintaining a disciplined approach to lending [9][28] - The company aims to continue executing its strategy while managing expenses effectively [30][62] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by rising interest rates and economic uncertainty but reported solid results due to a successful relationship banking model [24] - The company is optimistic about its loan pipeline and expects customers to continue viewing it as a trusted partner [27] - Management plans to remain selective in lending, focusing on high-quality borrowers with deposit relationships [28] Other Important Information - The allowance for credit losses stood at $71 million, or 1.19% of loans, with net charge-offs annualized at 12 basis points [41] - The tangible book value per share increased 1.2% to $21.56 at June 30, 2023 [42] - The company repurchased 100,000 shares of common stock at an average price of $14.44, reducing capital by $1.4 million [42] Q&A Session Summary Question: How are you viewing new loan originations versus share buybacks at the current level? - Management indicated a selective approach to loans due to the high rate environment, while share repurchases were opportunistic given market conditions [45][46] Question: Can you provide more specific color around recent trends in noninterest-bearing deposits? - Management noted a slow shift from noninterest-bearing deposits to interest-bearing accounts, expecting noninterest-bearing deposits to hold or decrease slightly [47] Question: What are the expectations for margin moving forward? - Management expressed uncertainty about the timing of margin inflection points but noted a deceleration in margin decline [48] Question: Is the current expense run rate sustainable? - Management indicated that the current expense run rate is reasonable, with some stability expected around the $34 million mark [49] Question: What is the outlook for borrowings going forward? - Management expects borrowings to remain stable, reflecting the decrease in reliance on borrowings due to increased deposits [51] Question: Can you provide an update on the status of the specific reserve increase on the C&I healthcare loan? - Management confirmed that the borrower is undergoing reorganization, including a possible sale of the business [67]