Q4 2021 Hanmi Financial Corp Earnings Call
Ladies and gentlemen, and welcome to the Hanmi financial corporations fourth quarter 2021 conference call. As a reminder, today's call is being recorded for replay purposes. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on.
Your telephone keypad I would now like to turn the call over to Moura Conlon Investor Relations for Hanmi financial. Please go ahead.
Thank you Kyle and thank you all for joining us today to discuss Hanmi Financial's fourth quarter and full year 2021 results.
This afternoon <unk> issued its earnings release and quarterly supplemental slide presentation to accompany today's call. Both documents are available in the IR section of the company's web site at Hanmi Dot com.
Here today with Bonnie Lee President and Chief Executive Officer of Hanmi Financial Corporation, Anthony Kim Chief Banking Officer, and Ron Santa Rosa Chief Financial Officer.
Connie Lee will begin today's call with an overview of Hanmi is 2021 accomplishments Anthony Kim will discuss loan and deposit activities, Ron Santa Rosa will provide details on our financial performance and then Bonnie Lee will provide closing comments before we open the call up to your questions.
Before we begin I would like to remind you that today's comments may include forward looking statements under the federal Securities laws.
<unk> looking statements are based on current plans expectations events and financial industry trends that may affect the company's future operating results and financial performance.
Our actual results may differ materially from those contemplated by our forward looking statements, which involve risks and uncertainties.
A discussion of the factors that could cause our actual results to differ materially from these forward looking statements can be found in our SEC filings, including our report on Form 10-K , and 10-Q in particular, we direct you to the discussion of certain risk factors affecting our business contained in our earnings release.
Our investor presentation and in our Form 10-K with that I would now like to turn the call over to Bonnie Lee Bonnie. Please go ahead. Thank.
Thank you Laura good afternoon, everyone. Thank you for joining us today to discuss our 2021 fourth quarter and year end results 2021 was a very eventful year with a continuation of a global pandemic.
Critical and boy show, a volatility and shifting economic macros.
Each of these factors presented challenges as well as opportunities for Hanmi and our team executed exceptionally well.
During the year, we are focused on meeting the banking needs of the multi Anthony communities, we serve across our market guided by our strategic growth plan.
<unk> expanded our product and services offerings, we grew and diversified our loan and deposit portfolios and by working closely with our customers. We further strengthen our portfolio.
Are there any metrics there.
As a result of our consistent execution throughout 2021, which if they were strong results meeting and even exceeding the objectives, we laid out a year ago.
Today, we are better positioned than ever to meet the evolving needs of of tomorrow's customer, while continuing to be a trusted partner to customers with bank with us for nearly 40 years. This foundation will enable us to deliver sustained growth and profitability over the long term.
As I outlined at the beginning of last year, we focused on several strategic growth initiatives in 2021.
These included growing our residential mortgage platform investing in our digital banking platform, extending our corporate Korea initiative, and adding to our talented team of relationship managers.
I'm pleased to report our success on all right.
Let me share a few details.
First 2021 marked the first full year of production from our residential mortgage platform.
Through this platform, we are reaching a nonqualified residential loans and mortgage warehouse lines.
This business is an effective way to diversify our loan portfolio by adding a lower risk asset class that we can grow profitably profitability for years to come.
And we are pleased to report that our residential mortgage production ramp meaningfully in 2021, reaching 11% of our total loan production for the year.
Second we made meaningful investments in talent and technology to ensure we meet our customers' digital banking needs.
<unk> patients.
Our digital platform enables us to efficiently scale services for both existing and new customers across our markets and business lines.
Amy we're improving the customer experience, providing more convenient and seamless interactions.
Third we made substantial progress in growing our corporate credit initiative, which represented 14% of our total loan production in 2021.
We launched this initiative in 2019, so debello and expanded relationships with a Korean companies almost all in the United States.
We have a dedicated team of bankers in this business who will provide our.
Clients with our lines of credit and real estate investment lending equipment financing asset based lending and other services.
Delivery service in both Korean and English bridging language device unique companies and major California market as well as the key metropolitan areas, such as New York, New Jersey, Georgia, Alabama and Texas.
It is important to note as we increased lending with our corporate Korea customers. We are also developing new deposit relationships that tend to be sticky.
These relationships provide hanmi with the substantial bulk caused liquidity to fund both short and long term growth.
To that end fourth quarter deposits increased 10% year over year noninterest bearing DDA increased 36% for the year and now account for 44, 5% of total deposits up from 36% a year earlier.
This strategic growth initiatives, along with a strong momentum across our diverse business lines yield growth in our loan and lease production in 2020 , one, culminating with a record $625 1 million in production for the fourth quarter.
Our multi lending and leasing businesses were solid contributors to this performance.
Implementing strength in our commercial real estate and commercial and industrial lending businesses are.
Our record loan production trends in 2021 demonstrate that our growth strategies are working.
Hanmi strategic footprint in major markets across the country places us in many of the most populous diverse and economically vibrant markets and we are pleased that as we have continued to grow and expand our footprint and production product portfolio, we have been able to successfully attract.
Top talent with a growth mindset.
In 2021, we added a dozen.
Senior relationship managers across our markets. So we are well positioned to serve more customers.
Economy continues to gain momentum in 2022.
Finally, our comprehensive approach quite an approach to our credit management, including our ability to secure payments and payoffs as well as our relationship banking model led to improved trends in asset quality last year.
Nonperforming loans declined 84% year over year and at the end of 'twenty, one accounted for just 26 basis points.
Points over total loans.
<unk> 16.0 million dollar recovery of a credit loss expense in the fourth quarter included a $9 1 million recovery from our first quarter 2020 loan charge offs.
While we anticipate additional recoveries in this relationship over time, we expect future recoveries to be smaller in magnitude.
Our allowance for loan losses is a strong at 141% up long and we are confident in our ability to effectively manage credit quality going forward.
As I said earlier solid execution across our platform and markets enable us to deliver strong earnings for the year.
We reported a full year 2021, net income of $98 7 million or $3.22 per diluted share.
Up from $42 2 million or $1.38 per diluted share in 2020.
These results demonstrate the earnings power and the ongoing potential of our bank.
Looking ahead, we are well positioned for another successful year in 2022.
So their libre growth profitability and shareholder returns in 2022 and beyond we will focus on executing against the following strategic priorities this year rent.
Ramping up our successful residential mortgage business contributed 10% of a 2022 and post production.
Further diversifying our loan portfolio by first increasing multifamily and SBA loans and second by expanding our corporate Korea initiative with the goal of generating 10% of our total loan.
Growing percentage of our deposits from dish okay.
Increasing our focus on corporate clients to drive meaningful gross loans.
Both source of stable low cost deposits.
And thinking out and evaluating opportunities into new high growth and the project, which verticals that need relationship banking partners like come with.
With that I'll turn the call over to Anthony Kim Our Chief banking officer to discuss fourth quarter loan production and deposit gathering in more detail.
Yeah.
Thank you Bonnie.
Let's start off with some additional color on our loan and lease production.
We grew our fourth quarter production volume, 25% from the prior quarter to a record $625 million or almost double our fourth quarter production a year ago.
We generated sequential quarterly growth in all major loan categories, but a notable strength in commercial real estate and residential.
Residential mortgages.
Record loan production loans receivable balance for the fourth quarter was 511 5 billion up 6% from the prior quarter.
<unk> moderated to 152 million for the fourth quarter from 292 million for the prior.
Water.
Excluding PPP loans, our loans receivable balance grew six 4% quarter over quarter, and 12, 3% year over a year.
Commercial real estate production loans to clients with a mixed use industrial and warehouse properties helped drive quarter over quarter improvement.
Our new relationship managers, and our long tenured bankers continues to generate new business and their collective efforts resulted in a healthy pipeline as we enter 2022 as.
As Bonnie noted our residential mortgage platform is making meaningful contributions to our results.
Owning for 11% of total originations ballooning PPP loans for the year.
And 14% for the fourth quarter.
Lending activity under the platform for the fourth quarter included 85 million.
Mortgages, along with 50 million <unk>.
Lines.
Our fourth quarter commercial and industrial loan production increased 2% sequentially amendments.
Amendments on the commercial lines of credit increased by 90 billion or 10% from the prior quarter to 773 billion. However balances on these lines were relatively stable, resulting in a fourth quarter utilization rate of 39%.
44% for the third quarter.
Loans and leases originated in the fourth quarter had a weighted average rate of 391% in line with the product or.
Although payoff activity moderated in the fourth quarter the average rate on payoffs.
2% increased 84 basis points from the third quarter.
Let me say that now.
Considerable progress we've made are incorporated Korea initiative.
We now have a corporate Korea test in seven strategically located branches across our footprint.
Bonnie explained more than 14% of our total 2021 loan production, excluding PPP loans.
Our corporate Korea initiative.
Notably he kept off 2021.
Absolutely strong fashion contributing more than 18% or a record fourth quarter loan production.
This helped us to comfortably beat our double digit total loan production growth goal for 2021.
At year end, the corporate Korea represented 12% of our total loans and 6% of total audits with unexpected customer base. We anticipate continued growth from this important initiative in 2022.
We remain committed to disciplined underwriting as evidenced by our weighted average loan to value and weighted average debt service coverage ratios or our commercial real estate loan portfolio of 49, 2% and one nine times respectively.
Fourth quarter.
Both metrics were essentially unchanged throughout 2021.
As we have said many times further diversifying our loan portfolio by industry geography loan type remains a priority.
At year end earlier loans represented about 15% of our loan portfolio a decline of more than 1% from the previous quarter and 16% since the end of 'twenty 'twenty.
Importantly, we have only one hospitality loan on non accrual totaling 132000, and it is collateralized by property and eventual location, Texas.
Total deposits were <unk> seven 9 billion at the end of fourth quarter up 1% from the preceding quarter and 99, 7% from year end 2020.
Fourth quarter deposit growth was driven primarily by a $6 6 million increase in money market and savings deposits and 26 million increase in non interest bearing demand deposits.
These increases were partially offset by a $42 million decrease in time deposits.
Bonnie noted earlier.
<unk> represented 44, 5% of our total deposits at the end of 'twenty, one up from 36% at year end 2020.
The substantial improvement in our deposit franchise positions us well for the expected rise in the federal funds rate later this year with that I'll turn the call over to Ron <unk>, our chief financial.
Officer for more details on our fourth quarter financial results.
Thank you Anthony.
Our fourth quarter net interest income decreased 1% from the prior quarter to $49 5 million and our net interest margin decreased 11 basis points to 296% interest income on PPP loans was only $100000 for the fourth quarter down from one six.
For the prior quarter.
Adjusting for the effects of PPP loans, our net interest margin contracted four basis points sequentially as the benefit of lower cost interest bearing deposits was more than offset by a lower yield on interest earning assets. However, our net interest income again, excluding the effects of <unk>.
<unk> increased 2% sequentially due primarily to a higher volume of interest, earning assets and the benefit of lower cost interest bearing deposits.
An important takeaway here is that we now have more than replaced our transient PPP loan portfolio with our own loans originated from our relationship based banking teams.
Illustrate.
Loans at year end 2020 were $4 five 8 billion when excluding the $296 million.
Two months time for.
For 2021 loans reached <unk>, one 5 billion and PPP loans were only $3 million at yearend. Accordingly for 2021, we increased loans by $564 million or 12%.
Another important takeaway is the improving mix of interest earning assets arising from the decline in excess liquidity.
To illustrate this you will see that for the fourth quarter, our average interest bearing deposits and other banks declined 8% sequentially to $802 $9 million. However, this lower yielding liquid assets and 2021 year at $564 $7 million.
<unk>, 30% below the average for the fourth quarter.
The shift away from lower yielding liquid earning assets into higher yielding loans combined with a $100 billion, 545% notes redeemable at the end of the 2022 first quarter should benefit our net interest income and net interest margin in future quarters.
Our growth in noninterest bearing demand accounts moderated to 1% quarter over quarter, while quarterly average balances grew 5% sequentially to $2 $5 6 billion.
Interest bearing deposits increased 1% or $38 million, while their cost decreased two basis points quarter over quarter to 28 basis points for the fourth quarter.
Our fourth quarter noninterest income decreased to $9 3 million from $12 5 million for the third quarter, primarily due to a $2 1 million dollar decrease in gains on the sale of SBA loans and the volume of SBA loans sold in the fourth quarter decreased 24% to.
$36 $6 million, while trade premiums also declined to $10 nine 8% the fourth quarter compared with 11, eight 5% for the third quarter.
Notably while service charges fees and other income declined sequentially such fees increased seven 5% from the year ago quarter, driven by the change in our fee schedules mentioned on our last call. We expect these changes along with management practices over the deposit account service charges activity continued to bear.
Our noninterest income in future quarters.
Noninterest expense decreased to $31 $6 billion for the fourth quarter from $32 5 million for the prior quarter.
Primarily due to a one $1 million decline in other operating expenses largely from lower insurance premiums.
Salaries and benefit expense remained about the same quarter to quarter, reflecting commissions and incentives and higher loan production.
Our efficiency ratio increased to $53 eight 1% for the fourth quarter from 52.0% to 1% for the prior quarter due primarily to lower interest income on PPP loans and lower fee income due to the decrease in gains on sales of SBA loans.
We posted a credit loss expense recovery of $16 million for the fourth quarter, which included a $9 $1 million recovery from a first quarter 2020 loan charge off.
Breaking this down further we posted a $13 $4 million negative provision for loan losses.
$2 $3 million negative provision for off balance sheet items, and a $300000 negative provision for the allowance for losses on accrued interest receivable for current or previously modified loans.
With the precipitous decline in modified loans and a lack of any meaningful adverse credit charges for these loans the $300000 negative provision brought to an end this particular allowance.
Our allowance for credit losses was 141% or $72 $6 million S E and F yearend, while the allowance for losses on off balance sheet items was $2 6 billion.
We believe our allowance for credit losses adequately reflects various economic forecasts as well as the continued near term uncertainty caused by the lingering effects of the pandemic. We continue to closely monitor and evaluate the evolving environment and we will update our loss methodology accordingly.
Income tax expense for the fourth quarter included a $2 $7 million benefit from the reduction of our deferred tax asset valuation allowance.
Fate at operating loss carryforwards, because of recent changes in state income tax regulations and extended their expiration dates our effective tax rate for 2021 inclusive of this benefit was 27, 2% while for 2020, our effective tax rate was 29, 1%.
Finally, our return on average assets and our return on average equity for the fourth quarter were 193% and 28, 9% respectively for.
For the full year, our return on average assets was 151% and our return on average equity of 16, 7%.
And finally, our tangible book value increased to $20 79 per share at the end of the fourth quarter and our tangible common equity ratio remains strong at 92, 3% with that I'll turn it back to Bonnie thank.
Thank you Ron I am very pleased with our loan production trends.
Asset quality metrics and earnings performance on what I.
I would like to thank entire Hanmi family.
And your dedication and hard work in making our ASP.
Hanmi was founded 40 years ago to serve the Underbanked minority immigrant meeting in Los Angeles.
We started a multi ethnic communities across nine states.
Spending array of products and services.
While we are part of our path, we are even more excited about our future.
We are a community bank at least long term corporate value is drive by investing in the communities.
That means in a response.
It's about corpus and serving the best interest of all our <unk>.
Stakeholders.
To support this we issued our inaugural environmental social and governance report in 2021.
Highlight hanmi commitments, our stakeholders and to hold ourselves accountable for aiding financial inclusion while carefully managing risk it.
You can find the report on our Investor Relations website, and I encourage you to check it out.
With that we will open the call for your questions.
Operator, please open the lines.
<unk>.
At this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys one.
Moment, please while we poll for questions.
Our first question is from Matthew Clark with Piper Sandler. Please proceed with your question.
Hey, good afternoon.
Good afternoon.
Yes.
Maybe a question for Ron to start.
It looks like you have some.
Tailwind from the strong loan growth on an end of period basis relative to the averages should drive I would think some favorable remix and your earning assets and maybe also some lift in the NIM.
If you're willing to maybe take a stab at your thoughts around the kind of the near term NIM outlook.
Sure as you observed a few.
Loans on a spot basis for about 5% higher than the fourth quarter average.
And of course, that's a much larger contributor too.
Two our net interest income and our and our.
NIM, so I would anticipate it will be in what I would characterize again is kind of the low threes.
Before introducing any any fed action that might occur in 2022.
Okay.
Great.
And then.
Maybe shifting.
Well I'll stick with loans pay off you know slowed pretty.
Pretty dramatically this quarter.
Can.
Can you speak to what was driving that and what your expectations are for payoffs going forward I know, they're hard to hard to forecast but.
Just curious if that's unusually low or not.
Okay.
Excluding PPP.
Last quarter payoff.
Payoff level.
In third quarter.
The fourth quarter, it's eight nine so actually in fourth quarter payout is not.
Well, it could be lower but not significantly lower.
And we do expect.
A similar level of payout in 2022.
Okay. Thank you.
And on expenses.
Ron.
I think there was.
Some modest.
I guess it was credit related kind of expenses in there but.
Looked like a pretty clean run rate what are your thoughts around expense growth this year with wage inflation.
Inflation and all the other kind of investment needs you might have internally.
So I think we are as perhaps anxious as is everyone else understand where interest rates will go and then just the general.
Demand for our for labor and the cost of that labor.
That said I think you know.
I would envision maybe starting the year at about this $32 million per quarter run rate.
And then.
Then I guess the choices, what kind of inflationary factor too to apply to that.
And it could be anywhere from you know what.
Let's say three to seven of seven on the outside relative to being weighted more for wages three on the inside if wages and things of that sort.
Hum.
Don't come in as strong.
Our 2021 .
Expense rate is.
Is it doesn't include higher levels of <unk>.
Incentive pay commission pay relative to loan production so.
I'm not sure I'm.
I'm looking at Anthony I'm not sure if he is going to set another record year for 2022.
But there could be some.
Relief in that number if production.
Were to come in at about the same or maybe a little bit less so those would be some of the factors I would think about as I said look to our expense run rate.
Okay and then.
The tax rate a little low this quarter or should we continue to use 30%.
For the outlook.
I think 29% might be better in.
In 2022.
Okay.
And then lastly on buybacks did you guys buy back any stock this quarter I didn't see them at least.
Very small amount at that.
Or are we at the top of the quarter, So about 24000 shares.
And if the price back then was probably about $20 a share.
Okay, great. Thank you.
Our next question is from Gary Tanner with D. A Davidson. Please proceed with your question.
Thanks, Good afternoon.
Just a follow up on the buyback question to start just kind of false expectations around.
Active you might be in the buyback now that you've.
Obviously had a very strong quarter book tangible book.
Where do you.
I think the level of activity might be early in 'twenty or early 'twenty two excuse me.
So.
Given the volatility that we've all seen here over the last couple of days.
My my hope, which would be a guess.
I guess counter to a buyback is that we would see a return to normalcy and the share price continues to be relatively attractive.
In the marketplace. However, if we continue to be in these stoled rooms, where we can see some great volatility I can see entering into the marketplace to acquire something that are at a pretty low multiple to tangible book.
Okay.
Okay. Thanks, and then in terms of SBA you know what.
The outlook for 2022 Ah you know do you have any kind of budget levels of production and sell but that would be helpful.
What about going into the year.
Sure.
Here I think last a couple of owners we range from $25 30 to 35.
Our 10 quarters of about 40 million.
Boeing forward in 2022.
I think that we are comfortable with.
I think the range of about 35 to 40.
And can you keep them.
Okay.
Thank you and then last question on my end I actually just on the service charge income line Rondi I pointed out in your prepared remarks that it declined although still well above year over year number and if I recall correctly, you had changed some of your kind.
Kind of fee levels earlier in 2021 that'll drive that line item a bit higher have you seen any change in customer behavior. As a result that kind of negatively impacted the fourth quarter or just less activity.
Just generally what was the difference there.
Yeah. So it would be more I would I would just too.
Business customer activity so nothing.
<unk> in that.
So I look at that what we posted for the fourth quarter.
Download for that line, but just kind of look at the aggregate for everything outside of gain on sale for SBA that that's probably a pretty good picture of where.
Our life might be in 2022.
But with perhaps growth coming from some of the.
The business growth that we might get from certain depositors and and the activities that they might get so I feel pretty good about that.
<unk> contribution.
Okay. Thank you and then just last question for me on Slide 10, you break out the personal versus business deposit mix at the end of the year. Just wondering if you have the comparable number from your prior.
I don't have a specific number geared but it would probably be a little bit more.
Even.
50 50.
So the the <unk>.
The increasing of business is more from some of the efforts that we described earlier, which is kind of taking root here in 2021.
Okay. Thank you.
Yeah.
Yeah.
Our next question is from Kelly Motta with K B W. Please proceed with your question.
Hi, Thank you. Thanks, so much for the question Ron maybe a question for you I believe in your prepared remarks, you mentioned.
Potentially redeeming.
Some notes at the end of.
<unk> 22 is this something we should.
Built into our models or is it still something you're twang with me he loves to next year.
Well, we havent made the final decision, but given the outlook for where interest rates may be.
And given our.
Our capital position.
Is that there's probably a likely.
Outcome.
I don't see the need in the current marketplace, where.
Sub debt could be three and a half to $3 75 continue at $5 45.
Even though with prices down to LIBOR.
Got it and then would there I appreciate it.
He kind of commentary you gave around NIM, just wondering with rate hikes.
Now likely on the horizon.
Talking about how your balance sheet performed and are you now with the first couple of pace given that you know that deposit base, but quite a bit different than it did go again last cycle.
So so weak quarterly we do Hum.
Our net interest income simulation when we disclose those shocks in our our 10 Qs 10, Ks and so.
We've been in the 5% to 6%.
Range over a 12 month horizon, given a 100 basis point shock.
So if I were to break that down into.
How life might behave over.
90 day periods.
The inclination that we have now looking back at the last.
Cycle that we went through what we started raising rates.
We noticed that the first 50 basis points coming off of zero rate interest policy that was pretty much a non effect on the.
On our deposits we've been through really no movement.
We did capture.
That's 50 notion relative to our loan book.
And we can debate, whether it's 100% over.
90% or.
So I would expect given the excess liquidity that most institutions have.
We are likely to behave in that way, but.
But we have to see when we get there wanted to if you remember the last rate cycle as we went past the first 50.
They are the markets.
Became very anxious that rates were going to continue to move up rapidly and so a number of institutions were Mike.
My words bidding up the price to capture today at lower cost than what you might get in.
In the next 90 days or so that came about rather quickly as we moved into that next group. So debate has really started to to run up faster than nor.
Normal our beta over that whole cycle was about 30%.
Yes.
Got it. Thank you. Thank you I appreciate all the color Ron.
Our next question is from Jason Stewart with Jones trading. Please proceed with your question.
Yeah.
Alright, Thanks for the question nice quarter on the origination side I was hoping you could give us a little bit more color on the commercial real estate origination I think he mentioned mixed Houston industrial strength that those tend to be the smaller parts of the portfolio.
Any color on the on the rest of the segment in terms of what drove growth there.
Other than mix to use an industrial warehouse being produced.
About 30, and $334 million of multifamily, which will be our focus for 2000 22022.
Okay.
Okay and then the 33 16 of that is warehouse is that correct.
No I was talking about multifamily.
Warehouse line is tied to the mortgage.
Okay. So that's reported in the 86 million segment.
Alright.
Gotcha, and then when you're thinking about non QM loans, how do you think about the duration of those and remind us the overall size of the portfolio that you're targeting there.
Yeah.
Based on my experience.
With the historical numbers.
C C.
<unk>.
Two years.
Probably averaged about three and a half years.
<unk>.
And then.
What about with the interest rate environment.
We don't expect demand is going to decrease.
<unk> market is still out there so we expect to see.
Constantly met.
Great and then just remind us if you don't mind the overall size of.
The non QM portfolio that you're targeting.
Okay.
As Bonnie noted are we're targeting 10% to 15% of the production coming from the mortgage and non QM.
Consists of.
80% to 90% of the production.
Got it okay. Thanks for taking the questions.
Our next question is from Tim Coffey with Janney. Please proceed with your question.
Great. Thanks afternoon, everybody.
Bonnie I had a question on kind of the the loan growth for this year can you describe some of the headwinds that would prevent you from duplicating what you did this past year.
Sure So I mean.
2020 , one was a great year much better than we anticipated at the beginning.
Last year.
So we built up momentum and we have the platform we have the.
Our relationship managers, we identified target markets.
We are.
No.
Fairly confident going into <unk>.
2022, however, we still have the environment call. It the environment, where we still have to supply chain issues and then they buy challenges and whatnot. So.
Conservatively I think that we are projecting.
Our mid to high digit.
Hum.
No single digit loan growth.
So you can tell.
I was out there just what everybody else does.
Community banks are experiencing so.
So other than that I think.
Right.
Okay.
Okay great.
I was wondering on the commercial lines of credit I'm, if you had the utilization rates.
Yes this quarter.
It was 39%.
Two a 44% last quarter and we averaged anywhere anywhere between.
35% to 45.
Okay do you don't have the a year ago.
Utilization rate deal.
Our fourth quarter 2020 utilization was up 42, 7%.
Okay. Okay. Thank you Bonnie and then Ron kind of some of the loans your cash and equivalents spot rate spot number was lower than the average do you feel comfortable bell comfortable with the deposits that they're going to be sticky and that you could start to invest some of that cash into securities as you've already.
You know I have been doing in the fourth quarter.
So on the deposit side I would say, yes, we explore the composition of our deposits.
The type of the reasons et cetera.
Monthly.
At our management Alco. So we do think that there is some some staying power there.
So going then to the investment side of that.
I bought my first thought is we'd like to see the excess liquidity go too.
True loans, rather than to the securities portfolio.
So we will add to the securities portfolio, but it shouldn't be much much larger than about let's say a $1 billion just to round.
So we're looking more towards the.
The higher yielding loan.
Growth rather than let's say.
Middle yielding our security portfolio.
Okay, Okay, and yeah, I'm suspecting that based on your commentary that that'd be a measured approach than if you dig into the securities portfolio.
Correct.
Great Okay.
Those are my questions. Thank you very much.
Sure.
We have reached the end of the question and answer session and I will now turn the call over to Bonnie Lee for closing remarks.
Thank you for participating in our call today. We appreciate your interest in Hanmi and look forward to sharing our continued progress with you throughout the year.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
[music].