Hope Bancorp(US:HOPE)2024-10-28 18:27Financial Data and Key Metrics Changes - For Q3 2024, the company reported net income of $24.2 million or $0.20 per diluted share, with adjusted net income of $25.2 million and earnings per share of $0.21, primarily impacted by merger-related notable items [9] - Customer deposits grew 11% annualized from June 30, 2024, while loans receivable increased by 2% annualized during the same period [8] - The total capital ratio was 14.8% and the tangible common equity ratio was 10.1% as of September 30, 2024, marking the highest levels since the merger with Wilshire in 2016 [10] Business Line Data and Key Metrics Changes - Loans receivable, excluding loans held for sale, increased by $51 million from June 30, 2024, reflecting higher balances in residential mortgage and commercial loans [14] - Noninterest income rose to $11.8 million for Q3 2024, a 7% increase from the previous quarter, driven by higher gains on the sale of SBA loans [18] Market Data and Key Metrics Changes - Total deposits were stable at $14.7 billion, with a significant reduction in brokered deposits to 7% of the total mix, down from 14% a year prior [12] - The company sold $41 million of SBA loans during the quarter, contributing to the increase in noninterest income [19] Company Strategy and Development Direction - The company aims to grow market share and client relationships while generating profitable growth, supported by strong capital ratios and prudent balance sheet management [11][26] - The management is optimistic about the pending merger with Territorial Bancorp, which is expected to create significant value [31] Management's Comments on Operating Environment and Future Outlook - Management anticipates low single-digit growth in average loans and net interest income for Q4 2024, benefiting from positive loan growth and effective deposit rate management [28] - The company expects stable operating expenses and a consistent reserve coverage ratio of 113 basis points of loans as of September 30, 2024 [30] Other Important Information - The company declared a quarterly common stock dividend of $0.14 per share, payable on November 21, 2024 [11] - Nonperforming assets totaled $104 million, with a moderate net charge-off of $5.7 million for Q3 2024 [21][23] Q&A Session Summary Question: Update on loan portfolio regarding floating and fixed rates - The company reported that 45% of the loan portfolio consists of variable rate loans, with $766 million of fixed rate loans set to reprice in 2025 [33] Question: Deposit pricing strategy post-September rate cut - The company has reduced deposit costs across various accounts, with a beta of approximately 60% on adjusted rates, and average CD costs down to about 4.25% [34][40] Question: Credit quality and nonaccrual loans - Management indicated that the nonaccrual status of a relationship was due to a loan maturity, but the properties are well-secured, and they do not anticipate significant losses [38] Question: Spot yields on investment portfolio - The average spot yield on the investment portfolio was reported at 2.96%, with plans to reposition low-yielding securities [43] Question: Contribution of floating rate loans - The company clarified that the reported 40.5% of variable loans are truly floating, while 31% are hybrid loans [44]