Hope Bancorp(US:HOPE)2022-10-25 19:28Financial Data and Key Metrics Changes - The company reported net income of $53.7 million or $0.45 per share in Q3 2022, up from $0.43 in Q2 2022, with pre-provision net revenue increasing 12% to $82.6 million, a record level for the company [7][6][5] - Pre-provision net revenue return on average assets increased to 1.79% from 1.65% in the prior quarter, while return on average equity increased to 16.26% from 14.66% [7][6][5] Business Line Data and Key Metrics Changes - The company funded $1.35 billion in new loans in Q3 2022, a 5% increase from Q2 2022 and a 34% increase from Q3 2021, with commercial lending accounting for 55% of total loan funding [8][9] - Commercial real estate loan production was $534 million in Q3 2022, slightly down from Q2 2022, but the average rate of new CRE loans increased by 99 basis points [10][9] Market Data and Key Metrics Changes - The company experienced strong contributions from its Texas region and health care group, with a well-diversified loan production across industries and geographies [9][10] - The average rate on total loan production increased by 111 basis points compared to the preceding quarter, reflecting increasing trends in loan pricing across all asset classes [10][9] Company Strategy and Development Direction - The company is focused on a relationship-driven commercial banking model, with commercial loans now representing one-third of the total loan portfolio, reflecting the success of its corporate banking group [28][29] - The company aims to continue diversifying its portfolio and improving asset quality, with a focus on recession-resistant loans [30][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging operating environment but expects to benefit from the shift to a more relationship-focused commercial banking model [28][30] - The company anticipates loan growth to moderate in the near term due to economic uncertainties and rising interest rates, while maintaining a focus on managing deposit costs [31][32] Other Important Information - The company declared a quarterly cash dividend of $0.14 per share, maintaining the same level as the previous quarter [25][26] - The tangible common equity to tangible asset ratio remained strong at 8.09% as of September 30, 2022, despite unrealized losses in the investment security portfolio [24][26] Q&A Session Summary Question: What were the September 30 deposit spot rates for interest-bearing or total? - The total interest-bearing deposit spot rate was 1.84%, and the total deposit spot rate was 1.21% [36] Question: How does management see NIM compression potentially accelerating in the first half of 2023? - Management is not providing guidance for NIM for 2023 due to uncertainties but expects flat or small compression in Q4 [38] Question: Any thoughts on augmenting the total risk-based capital number? - Management believes the current capital ratio is strong and will assess the need for augmentation as they move forward [39] Question: What are the assumptions for deposit beta through the cycle? - Management finds it difficult to provide a 2023 deposit beta due to volatility and recent interest rate hikes [42] Question: What are the plans for managing the loan-to-deposit ratio going forward? - The loan-to-deposit ratio increased due to a large isolated outflow, but management expects it to return to around 96% [45] Question: How does management view inflationary pressures and expense growth for next year? - Management expects non-interest expenses to increase in Q4 and anticipates a higher loan growth for the year at the higher end of the single to low-double digit range [46]