Hanmi Financial (US:HAFC)2022-10-26 00:54Financial Data and Key Metrics Changes - Net income for Q3 2022 was $27.2 million or $0.89 per diluted share, an increase of 8.5% from the prior quarter, with a return on average assets of 1.52% and a return on average equity of 15.58% [11][47] - Net interest income increased by 6.8% to $63 million, driven by higher average loan balances and an 11 basis point improvement in net interest margin, which reached 3.66% [10][36][37] - Non-interest income decreased to $8.9 million from $9.3 million in the previous quarter, primarily due to a decline in SBA gain on sales [42] Business Line Data and Key Metrics Changes - Net loan growth was 2.6% over the prior quarter, with loan production at $492 million, consistent with historical levels [10][24] - Residential mortgage production reached a record $140 million, representing 29% of total loan production for the quarter [13][24] - Commercial real estate loan production was $133 million, down from 42% of total production in the previous quarter to 27% [26] - Equipment finance production was $86 million, slightly down from the record in the previous quarter [29] Market Data and Key Metrics Changes - More than 18% of new loan production came from outside California, with Texas showing the highest growth [16] - Deposits increased by 3.7% sequentially to $6.2 billion, with core deposit relationships driving growth [17][33] - Non-interest-bearing deposits remained high at 45% of total deposits, reflecting strong customer service [34] Company Strategy and Development Direction - The company is focused on diversifying its business and expanding into new customer relationships, particularly through its Corporate Korea Initiative, which has seen a 31% year-over-year growth [14][30] - Strategic actions have been taken to prepare for potential economic downturns, including enhanced monitoring of loan covenants and business conditions [20][22] - The company aims to continue delivering disciplined growth and attractive returns for shareholders while celebrating its 40th anniversary [51][52] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism entering Q4, emphasizing the strength of the balance sheet and healthy margins despite an uncertain macroeconomic environment [50] - The company anticipates continued healthy pretax, pre-provision earnings in the coming quarters [41] Other Important Information - The allowance for credit losses was $71.6 million at quarter-end, representing a coverage ratio of 1.23% [46] - The tangible common equity to tangible assets ratio was 8.4%, down from the prior quarter due to unrealized losses on the securities portfolio [47][48] Q&A Session Summary Question: Interest-bearing deposit costs at the end of September - The interest-bearing deposit costs were 112 basis points at the end of September, with October rates already at 45 basis points over the Q3 average [55] Question: Thoughts on through-cycle deposit beta - The company anticipates uneven dynamics between yields on earning assets and the cost of interest-bearing deposits, with uncertainty on when the new rate environment will stabilize [56][57] Question: SBA outlook in a higher rate environment - The company maintains guidance of $50 million to $55 million for SBA production, with premiums expected to hover around 6.6% [59] Question: Updates on C&I loan growth - Commitments for C&I loans grew from $902 million to $977 million, but actual balances declined due to lower utilization rates [64] Question: Pipeline status at the end of the quarter - The loan pipeline remains strong, mirroring the beginning of Q3 [76] Question: Paydowns in the rising interest rate environment - There has been a substantial reduction in paydowns for mortgages and commercial real estate loans due to the rising interest rate environment [79][81]