Hanmi Financial (US:HAFC)2023-04-26 02:07Financial Data and Key Metrics Changes - The company reported a net income of $22 million for Q1 2023, reflecting a 6% year-over-year growth, equating to $0.72 per diluted share [32] - Net interest income decreased to $57.9 million, down $6.7 million from the previous quarter, primarily due to increased costs of interest-bearing deposits [16] - The net interest margin declined by 39 basis points to 3.28%, influenced by a 60 basis point increase in the cost of interest-bearing deposits [17] - Non-interest income increased to $8.3 million from $7.5 million in the prior quarter, driven by loan customer interest rate swap fees [18] - The allowance for credit losses rose to $72.2 million, representing 1.1% of loans, with net charge-offs annualized at 10 basis points [19] Business Line Data and Key Metrics Changes - Loan balances grew to $6 billion, up nearly 1% on an annualized basis, with first-quarter loan production at $304 million [8] - Residential mortgage production was strong at $97 million, up $36 million from Q1 2022, despite a challenging mortgage market [12] - Commercial lines of credit commitments totaled $1.05 billion, with outstanding balances decreasing by 30.6% between quarters [13] - The Corporate Korea portfolio saw loan balances of $764 million, up over $100 million from the previous year, representing nearly 13% of the total loan portfolio [14] Market Data and Key Metrics Changes - Deposits increased by 2% on an annualized basis to $6.2 billion, with non-interest-bearing deposits remaining high at 38% of the deposit portfolio [8] - The cost of interest-bearing deposits rose to 2.73%, reflecting a 103 basis point increase [42] - Time deposits constituted 38% of the deposit portfolio by the end of Q1, up from 16% at the start of the rate cycle [43] Company Strategy and Development Direction - The company plans to open a new branch in the East Bay region of San Francisco in Q4 2023 to meet growing client demand [10] - The focus remains on high-quality loans and disciplined underwriting practices, with a commitment to responsible growth while maintaining strong credit quality [47] - The company is exploring opportunities to optimize its footprint in key markets across the United States [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of customer relationships and the bank's financial condition amid rising interest rates and economic uncertainty [32] - The company anticipates that customer sensitivity to the interest rate environment will impact both deposits and loan production [47] - Management remains vigilant in credit administration practices and is committed to delivering attractive returns to shareholders [47] Other Important Information - The tangible book value per share increased by 3.7% to $21.30 at the end of Q1 2023 [20] - The common equity Tier 1 ratio for the company was 11.59%, while the bank's ratio was 13.06%, exceeding minimum regulatory capital requirements [20] Q&A Session Summary Question: What gives confidence in the deposit mix perspective? - Management noted that most of the heavy lifting in deposit mix shifts has occurred, with a significant portion of deposits having already moved to time deposits [50] Question: Clarification on the cost of interest-bearing deposits? - The cost of interest-bearing deposits was noted as being up 35 basis points relative to the average in April [54] Question: Update on deposit flows through April? - Management indicated that there have not been significant inflows or outflows beyond normal fluctuations [58] Question: What is the outlook for loan growth? - The company expects loan growth to moderate in the first half of the year, but the loan pipeline is showing an increasing trend [74] Question: How is the commercial real estate market performing? - Management indicated that demand in the commercial real estate market is down due to the current environment and rising interest rates [100]