Q4 2024 Hanmi Financial Corp Earnings Call
Ladies and gentlemen, welcome to the Hanmi financial corporations fourth quarter and full year 2024 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.
And answer session will follow the formal presentation.
If anyone should require operator assistance. Please press star zero on your telephone keypad.
Speaker Change: I'd like to turn the conference over to Ben Brock, which Investor Relations for the company. Please go ahead.
Ben Brock: Thank you, Matt and thank you all for joining us today to discuss <unk> fourth quarter and.
Ben Brodkowitz: And thank you all for joining us today to discuss HANMI's fourth quarter and full year 2024 results. This afternoon, Hanmi 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 website at hanmi.com.
Speaker Change: Full year 2024 results.
Speaker Change: Afternoon, Hanmi issued its earnings release and quarterly supplemental slide presentation to accompany today's call.
Speaker Change: Both documents are available in the IR section.
Speaker Change: Company's web site at Hanmi Dot com.
Ben Brodkowitz: I'm here today with Bonnie Lee, President and Chief Executive Officer of Hanmi Financial Corporation, Anthony Kim, Chief Banking Officer, and Ron Santarosa, Chief Financial Officer.
Bonnie Lee: Year to date with Bonnie Lee President and Chief Executive Officer of Hanmi Financial Corporation, Anthony Kim Chief Banking Officer, and Ron Santa Rosa Chief Financial Officer.
Ben Brodkowitz: Bonnie will begin today's call with an overview.
Speaker Change: Bonnie will begin todays call with an overview Anthony will discuss loan and deposit activities. Ron will provide details on our financial performance and then Bonnie will provide closing comments before we open the call up to your quite.
Ben Brodkowitz: Anthony will discuss loan and deposit activities.
Ben Brodkowitz: Ron will provide details on our financial performance, and then Bonnie will provide closing comments before we open the call up for your questions.
Speaker Change: Before we begin I'd like to remind you that today's comments may include forward looking statements under the federal Securities laws forward looking statements are based on current plans expectations events and financial industry trends that may affect the company's future operating results and financial position.
Ben Brodkowitz: Before we begin, I'd like to remind you that today's comments may include forward-looking statements under the federal securities laws. Forward-looking statements are based on current plans, expectations, events, and financial industry trends that may affect the company's future operating results and financial position. Our actual results may differ materially from those contemplated by our forward-looking statements, which involve risks and uncertainties.
Speaker Change: Our actual results may differ materially from those contemplated by our forward looking statements, which involve risks and uncertainties.
Ben Brodkowitz: 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 reports 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 our Form 10-Q.
Speaker Change: One of the factors that could cause our actual results to differ materially from those from these forward looking statements can be found in our SEC filings, including our reports on Form 10-K and 10-Q.
Speaker Change: In particular, we direct you to the discussion of certain risk factors affecting our business contained in our earnings release, our investor presentation, and our Form 10-Q.
Ben Brodkowitz: With that, I would now like to turn the call over to Bonnie Lee. Bonnie, please go ahead.
Speaker Change: With that I would now like to turn the call over to Bonnie Lee Bonnie. Please go ahead. Thank you Ben Good afternoon, everyone. Thank you for joining us today to discuss our fourth quarter and full year 'twenty 'twenty four we felt.
Bonnie Lee: Thank you, Ben.
Bonnie Lee: Good afternoon, everyone. Thank you for joining us today to discuss our fourth quarter and four-year 2024 results.
Bonnie Lee: Before we begin, I want to address the devastating fires in the Los Angeles area that began earlier this month. As you know, Los Angeles has been Hanmi's home for over 40 years, and we are deeply saddened by these events and their profound impact on our community. We have been in close contact with our team members and customers. I am pleased to report that fortunately, there has been no direct impact to our employees' homes, nor significant collateral loss or business interruption to our commercial customers.
Speaker Change: Before we begin I want to address the devastating fires games about Sangamo theory out that began earlier this month.
Speaker Change: As you know, but San Jos has been family at home for over 40 years, and we are deeply saddened by these events and the profound impact on our community. We have been in close contact with our team members and personally I am pleased to report.
Speaker Change: Fortunately there has been no direct impacts on our employees homes.
Speaker Change: Significant collateral loss or business interruption type commercial customers we.
Bonnie Lee: We want to thank the firefighters, first responders, and volunteers who have been instrumental in helping those affected. We know the road to the recovery will be a long one, and Hanmi stands by as a trusted resource to provide assistance as the situation continues to evolve.
Speaker Change: We want to thank the fire by nice place responders and volunteers.
Speaker Change: Instrumental and helping those affected.
Speaker Change: We know that they will see that recovery will be a long, one and hanmi and I as a trusted resource to provide assistance.
Speaker Change: The situation continues to evolve.
Bonnie Lee: Now turning to our results. A strong operational execution by our team in the fourth quarter resulted in a successful close to 2024 and provided a solid foundation for continued momentum in 2025. Throughout 2024, we focused on managing the factors within our control as we navigated constantly evolving and dynamic market environment.
Speaker Change: Now 25, we felt strong operational execution by our team in the fourth quarter. It resulted in a successful close to 2024 and provided a solid foundation for continued momentum in 2025.
Speaker Change: <unk> 'twenty 'twenty four we focused on managing the factors within our control as we navigate the constantly evolving and dynamic market environment.
Bonnie Lee: We continued to execute our strategy, leveraging our proven relationship banking model to further grow and diversify our customer base and loan portfolio. We maintained a sharp focus on pertinent credit administration and disciplined expense management, and we made meaningful progress in advancing our Corporate Korea Initiative.
Speaker Change: We continue to execute on strategy leveraging our proven relationship banking model to further grow and diversify our customer base and loan portfolio.
Speaker Change: We maintained a sharp focus and plugged in credit administration, and disciplined expense management, and we made meaningful progress in advancing our corporate Korea and Asia.
Bonnie Lee: Now, let me review some highlights of the past year. Net income for 2024 reached $62.2 million, or $2.05 per diluted share. Our return on average assets were 0.83 percent, and return on average equity was 7.97 percent.
Speaker Change: Now let me review some highlights of the past year net income for 2024 week, $62 2 million or $2.05 per diluted share.
Speaker Change: Turning to average assets were 0.83% and return on average equity was nine 7%, we made significant strides in supplying our loan portfolio and deposit franchise.
Bonnie Lee: We made significant strides in diversifying our loan portfolio and deposit franchise. In line with our diversification strategy, we increased our C&I portfolio by 16%, driven by a strong contribution from our USKC initiative, as well as the acquisition of new relationships throughout our network. We also closely manage our commercial real estate exposure in line with our ongoing efforts to reduce the CRE as a percentage of our portfolio over time. Importantly, growth in our CNI portfolio contributes to the increase in non-interest bearing demand deposits, which I'll come back to in a moment. We sold $88.4 million in residential mortgage loans into the secondary market throughout the year, generating $1.5 million of non-interest income while also strengthening our balance.
Speaker Change: In line with our Giggling certification strategy, we increased our C&I portfolio by 16%.
Speaker Change: Again by a strong contribution from our U S. Casey initiative as well and could you just kind of a newer relationships throughout our network. We also closely manage our commercial real estate exposure in line with our ongoing efforts to reduce the CRE as a percentage of our portfolio over time.
Speaker Change: Growth in our C&I portfolio contributed to the increase in noninterest bearing demand deposits, which I'll come back to in a moment.
Speaker Change: We sold $88 4 million in residential mortgage loans into the secondary market throughout the year generating $1 5 million of non interest income while also strengthening our balance sheet.
Bonnie Lee: Deposits grew by 2.5% in 2024, driven by a 4.6% increase in non-interest bearing deposits, which now account for 32.6% of a total deposit. This strong performance reflects our success in building and nurturing lasting relationships with our customers, who rely on us to provide the quality banking products and services they need.
Speaker Change: Deposits grew by two 5% in 2024, driven by a four 6% increase in non interest bearing deposits, which now account for 32, 6% of total deposits.
Speaker Change: This strong performance reflects our success in building and nurturing lasting relationships with our customers who rely on us to provide the quality banking products and services they need.
Bonnie Lee: In today's highly competitive banking space, our ability to cultivate a holistic customer relationship is an important advantage. As I have highlighted in the past, our Corporate Korea or USKC initiative is one of our core core strategies. Through this initiative, our dedicated bankers build relationships with the U.S. domiciled subsidiaries of the Korean companies, providing them with banking advice, lines of credit, real estate investment loans, SFA loans, and other services. We currently serve businesses in a wide range of industries, including real estate, auto part manufacturing, hospitality, energy, and more. In 2024, we grew our USKC loan portfolio by 23% and now represents 15% of our total loan portfolio, up from 12.3% last year.
Speaker Change: In today's highly competitive banking space.
Speaker Change: Ability to cultivate a holistic customer relationship is pretty important advantage.
Speaker Change: And I have a highlight in the past our comp in Korea or U S. KFC initiative is one of our core growth strategies.
Speaker Change: Through these initiatives, our dedicated bankers to build relationships with a U S. Domiciled. That's theory that these other Korean companies combining them with the ancient spice lines of credit and real estate investment loans.
Speaker Change: Pace loans and other services.
Speaker Change: We currently serve people that says in a wide range of industries, including real estate or pardon manufacturing hospitality and then she and more.
Speaker Change: In 2024, who aren't yet known portfolio by 23% and now represents 15% of our total loan portfolio.
Speaker Change: From 12, 3% last year.
Bonnie Lee: In addition, as I previewed last quarter, we opened the representative office in Seoul, South Korea, which marks a key milestone for Hanmi. Through this office, we will enhance our communication and support for our customers and expand outreach to companies looking into the U.S. market. This office complements our existing career desks in Los Angeles, Orange County, San Diego, and Silicon Valley, and other key cities in New York, New Jersey, Georgia, and Texas. Based on the success of our USKC initiative, we will continue to pursue opportunities to expand into additional target markets.
Speaker Change: In addition, as I previewed last quarter, we opened a representative office in Seoul, South Korea, which marks a key milestone for Hanmi.
Speaker Change: This office will enhance our communication and so important for our customers and you've spent outreach to companies looking into the U S market.
Speaker Change: Since August complements our existing forget that.
Speaker Change: Los Angeles, Orange County, San Diego, and Silicon Valley and other key cities in New York, New Jersey, Georgia and Texas.
Speaker Change: Based on the success of our U S KC and I said it well.
Speaker Change: To pursue opportunities to expand into additional target markets.
Speaker Change: Yeah.
Bonnie Lee: As we diversify and grow our loan portfolio, we maintain our firm commitment to access equality. Our asset quality remains excellent, reflecting our focus on high-quality loans, disciplined underwriting, and vigilant credit administration. Additionally, non-performing assets as a percentage of total assets improved to 0.19%, and allowance for credit losses remains healthy at 1.12%.
Speaker Change: And well diversified loan portfolio, we maintained our commitment to exit.
Speaker Change: Our asset quality remains excellent with collecting our focus on high quality loans disciplined underwriting and credit administration.
Speaker Change: Finally, nonperforming assets as a percentage of total assets improved to 0.19% and allowance for credit losses remains healthy at one point and one 2%.
Speaker Change: In addition to maintaining strong asset quality, we both started enhancing efficiencies and driving growth and profitability.
Bonnie Lee: In addition to maintaining strong asset quality, we focused on enhancing efficiencies and driving growth and profitability. We made meaningful progress in optimizing our branch network, our strategic initiative to evaluate consolidation, relocation, and growth opportunities. In 2024, we consolidated three branches, one in California, two in Texas. These actions contribute to loan and deposit growth and also result in cost savings. Non-interest expenses rose modestly, just 3.5% for the year, as we offset some of the inflationary pressure on salaries and employee benefits with a cost savings and other categories. In 2024, we made investments in digital systems, including a new loan origination system and an online account opening system.
Speaker Change: We made meaningful progress in optimizing our branch network.
Speaker Change: They're teaching initiatives to evaluate consolidation relocation and cost opportunities in 'twenty 'twenty four we consolidated three branches, one in California, and Texas. These actions contribute to loan and deposit growth and also result in cost savings no.
Speaker Change: Non interest expenses rose modestly just three 5% for the year as we understand some of the inflationary pressure in salaries and employee benefits were the cost savings in other categories.
In 2024, we made investments in digital systems, including our new loan origination system and online account opening system.
Speaker Change: We expect that these investments will drive operational efficiencies and improve profitability over time.
Bonnie Lee: We expect that these investments will drive operational efficiencies and improve profitability over time. We continue to retain and attract top talent across the company. Despite a highly competitive market, our employee retention remains strong, and we make key hires across business lines. I attribute our success in attracting and retaining diverse talent to our strong corporate culture and values, which are grounded in integrity, transparency, fairness, and collaboration.
Speaker Change: We continue to retain and attract top talent across the company.
Speaker Change: Despite a highly competitive market our employee retention remains strong and we made key hires across business lines I attribute our success in attracting and retaining diverse talent.
Ed: Strong corporate culture, and values, which are grounded in integrity transparency fairness and collaboration this is Ed.
Bonnie Lee: These attributes have established Hanmi as a bank employer of choice. Finally, our strong financial and capital position allowed us to invest in growth while continuing to reward our shareholders. I am pleased to report that our board approved an 8% increase in our quarterly dividend to $0.27 per share for our next dividend payment in February. This increase underscores our confidence in our growth strategy and our commitment to delivering shareholder value.
Speaker Change: A trigger to reestablish hanmi as a bank employer of choice.
Speaker Change: Finally, our strong financial and capital position allowed us to invest in growth, while we continue to reward our shareholders.
Speaker Change: I am pleased to report that our board approved an 8% increase in our quarterly dividend to <unk> 27 pence per share and for our next dividend payment in February.
Speaker Change: This increase underscores our confidence in our growth strategy and our commitment to delivering shareholder value.
Bonnie Lee: As we look ahead to 2025, we are focused on executing our growth strategy and building upon the momentum we created in 2024. Our top priorities include generating low-to-mid single-digit loan growth with a focus on further expanding our CNI exposure while reducing CRE as a percentage of the portfolio, continuing to sell residential mortgage and SBA loans in the secondary market to strengthen the balance sheet. Hiring additional bankers to expand our C&I business with experience in target verticals and increase our core deposit growth. Maintaining our discipline, credit, administration practices, and excellent excel quality.
Speaker Change: As we look to look ahead to 2025, we are focused on executing our growth strategy and building upon the momentum we created in 2024.
Speaker Change: Our top priorities include generating low to mid single digit loan growth with a focus on further expanding our C&I exposure, while we're just seeing CRE as a percentage of the portfolio.
Speaker Change: <unk>, two salaries national mortgage and SBA loans in the secondary market the strength of the balance sheet.
And what additional bankers to expand our C&I business, what did you experience in targeting protocols and increase our core deposit growth.
Speaker Change: Maintaining our disciplined credit administration practices and excellent quality.
Bonnie Lee: And last, advancing our branch optimization efforts, including the recent closure of a Creatom Plaza branch in Los Angeles and the opening of a new branch in the greater Atlanta region in the near future.
Speaker Change: And last advancing our branch optimization efforts, including the recent closure of our Korea Town Plaza branch in Los Angeles, and the opening of a new branch in the greater Atlanta region in the near future.
Speaker Change: In summary, we are well positioned.
Bonnie Lee: In summary, we are well-positioned to drive growth and deliver value to our shareholders in 2025 and beyond. With our relationship-driven banking model and strategic initiatives, including Corporate Korea, small business lending, and branch optimization, we remain confident that we can deliver sustainable growth by providing excellent products and services to our customers and communities.
Speaker Change: Tried to grow and deliver value to our shareholders in 2025 and beyond.
Speaker Change: With our relationship banking model and strategic initiatives, including corporate Korea, small business lending and branch optimization, we remain confident that we can deliver sustainable growth by providing excellent products and services to our customers and communities.
Anthony Kim: I'll now turn the call over to Anthony Kim, our Chief Banking Officer, to discuss fourth quarter loan production and deposit gathering in more detail. Thank you, Bonnie. And thank you for joining us today.
Speaker Change: Now I'll turn the call over to Anthony Kim our Chief banking officer to discuss fourth quarter loan production and deposit gathering more detail Anthony.
Anthony Kim: Thank you Bonnie and thank you for joining us today.
Anthony Kim: I'll begin by providing additional details on our loan production. Fourth quarter loan production was $339 million down $9 million or 2.5% from the third quarter with a weighted average interest rate of 7.37% compared to 7.92% last quarter. We remain disciplined in our underwriting practices as we seek opportunities that meet our high quality standards in the current rate environment. CRE production was $147 million up from $110 million in the third quarter due mainly to increased production in the industrial sector. We continue to be pleased with the quality of our CRE portfolio. It has a weighted average low-to-value ratio of approximately 48 percent and a weighted average debt service coverage ratio of 2.2 times.
Anthony Kim: Again by providing additional details on our loan production.
Anthony Kim: Fourth quarter loan production was $339 million 9 million or two 5% from the third quarter.
Anthony Kim: The weighted average interest rate of 737% compared to 7.92% last quarter.
Anthony Kim: We remain disciplined in our underwriting practices as we see opportunities that meet our high quality standards in the current rate environment.
Anthony Kim: CRE production was $147 million up from $110 million in the third quarter due mainly to increase production in the industrial sector.
Anthony Kim: We continue to be pleased with the quality of our CRE portfolio. It has a weighted average loan to value ratio of approximately 48% and a weighted.
Anthony Kim: Weighted average debt service coverage ratio of 2.2 times.
Anthony Kim: SBA loan production decreased $2 million in the fourth quarter to $50 million, from $52 million in the third quarter. However, it still exceeded our quarterly target range of $40 to $45 million. The key hires we made to our SBA team have helped us to achieve this consistent production level and to continue generating growth in small businesses in our market. Further illustrating our success in C&I lending, commitments for our commercial lines of credit were $1.18 billion in the fourth quarter, and we're up 9.3% year over year. Outstanding balances increased by 27.3% to $504 million, and utilization improved to 43% from 37% compared to last year.
Anthony Kim: That's fair.
Anthony Kim: <unk> decreased 2 million during the fourth quarter to $50 million from 52 million in the third quarter. However, it is truly city on quarterly target range of $40 million to $45 million.
Anthony Kim: The key hires we made to our SBA team has helped us to achieve these consistent production level.
Anthony Kim: <unk> generated growth in small businesses and all of our markets.
Anthony Kim: Further illustrating our success in C&I lending.
Anthony Kim: For our commercial lines of credit or 118 billion in the fourth quarter and were up nine 3% year over year.
Anthony Kim: Outstanding balances increased by 27, 3% to $540 million and utilization improved to 43% up from 37% compared to last year.
Anthony Kim: C&I production during the fourth quarter was $60 million, a decrease of $45 million, or 43% from the prior quarter, which was particularly high. For the full year, C&I production increased 50% to $275 million. residential and marginal production was $40 million for the fourth quarter. Most of our current lending opportunities continue to be in the purchase market as refinance activity remains subdued. Residential mortgage loans represented 15% of our total portfolio, essentially the same as one year ago. During the fourth quarter, we sold approximately 18 million of residential mortgages from our portfolio and are currently exploring additional portfolio sales contingent on market conditions.
Anthony Kim: Production during the fourth quarter was $60 million, a decrease of $45 million or 43% from the prior quarter, which was particularly high for the full year C&I production increased 15% to 275 million.
Anthony Kim: Residential mortgage loan production was 40 million for the fourth quarter. Most of our current lending opportunities continued to be in the purchase market as refinance activity remains subdued.
Anthony Kim: Residential mortgage loans represented 15% of our total loan portfolio is essentially the same as one year ago.
Anthony Kim: The fourth quarter, we sold approximately 18 million of residential mortgages from our portfolio and are currently exploring additional portfolio sales contingent on market conditions.
Anthony Kim: With respect to corporate Korea, once again, we saw a healthy demand from these customers who accounted for 91 million of total production. Our efforts to expand and grow these relationships are continuing to bear fruit. USKC loan balances were 937 million of 19 million or 2% from the third quarter and represent 15% of our total loan portfolio. Loan production for the full year was commendable in the context of uncertain environment.
Anthony Kim: With respect to corporate Korea. Once again, we saw a healthy demand from these customers who accounted for 91 million of total loan production our efforts to expand and grow these relationships are continuing to bear fruit.
Anthony Kim: U S. P&C loan balances were 937 million up $19 million or 2% from the third quarter and represented 15% of our total loan portfolio.
Anthony Kim: Loan production for the full year it was commendable in the context of unsure.
Anthony Kim: It's a new environment, however, higher payoffs in 'twenty, 'twenty, four which increased 17% year over year resulted in a modest increase in our loan portfolio.
Anthony Kim: However, higher payoffs in 2024, which increased 17% year over year, resulted in a modest increase in our loan portfolio.
Anthony Kim: Next, I'll discuss deposits. In the fourth quarter, deposits were up 0.5% from the previous quarter, although our demand-deposit accounts grew 2.2% or 8.8% annualized. We continue to expand our partnership base with our corporate CREA clients, whose deposits increased 0.1% or $25 million in the quarter. Our team is making progress building new relationships that we believe have the potential for long-term growth. At core end, corporate CREA deposit represented 13% of our total deposits and 16% of our total demand-deposit. The composition of our deposit base remains relatively stable, which reflects the success of our relationship-driven banking model.
Anthony Kim: Next I'll discuss deposits.
Anthony Kim: In the fourth quarter deposits were up.
Anthony Kim: 5% from the previous quarter, although our demand deposit accounts grew two 2% or eight 8% and annualized we continued to expand our partnership base without a corporate credit clients, whose deposits increased 1% or $225 million in the quarter. Our team is making progress.
Anthony Kim: Building new relationships that we believe have the potential for long term growth at quarter end corporate Korea represented 10% over our total deposits and 16% of our total demand deposits.
Anthony Kim: The composition of our deposit base remains relatively stable, which reflects the success of our relationship banking model.
Anthony Kim: I mean, the fourth quarter, our new southern noninterest bearing deposits increased from 32% to 33%.
Anthony Kim: During the fourth quarter, our mix of non-interest bearing deposits increased from 32% to 33%.
Ron Santarosa: And now I'll hand the call over to Ron Santarosa, our Chief Financial Officer, for more details on our fourth quarter financial results. Thank you, Anthony, and good afternoon all. For the fourth quarter, our net interest income increased 6.8% to $53.4 million, and our net interest margin increased 17 basis points to 2.91%. The growth in our net interest income and our net interest margin was principally due to the decline in the average rate paid on interest bearing deposits, which was 3.96%, down 31 basis points from 4.27% for the prior quarter. The 2.2% growth in non-interest bearing deposits contributed favorably to the increase in net interest margin.
Anthony Kim: And now I'll hand, the call over to Rod in Santa Rosa, Our Chief Financial Officer for more details on our fourth quarter financial results.
Rod: Thank you Anthony and good afternoon, all for the fourth quarter, our net interest income increased six 8% to $53 $4 million and our net interest margin increased 17 basis points to 291%.
Rod: The growth in our net interest income and our net interest margin was principally due to the decline in the average rate paid on interest bearing deposits, which was 396% down 31 basis points from 4% to 7% for the prior quarter.
Rod: The two 2% growth in noninterest bearing deposits contributed favorably to the increase in net interest margin.
Ron Santarosa: average loans, as well as the average loan yield for the fourth quarter was largely unchanged from the third quarter. The Fed lowered the federal funds rate twice during the fourth quarter for a total of 50 basis points. We followed suit by lowering the rates offered on our savings and money market accounts, as well as our rates on new time certificates and deposits. For December, the average rate paid on interest bearing deposits was 3.83%, down 12 basis points from November. Looking at January to date, the average rate paid on interest bearing deposits was down 25 basis points from the fourth quarter average of 3.96 percent.
Rod: Average loans as well as the average loan yield for the fourth quarter was largely unchanged from the third quarter.
Rod: The fed lowered the federal funds rate twice during the fourth quarter for a total of 50 basis points, we followed suit by lowering the rates offered on their savings and money market accounts as well as our rates on new time certificates of deposit for.
Rod: For December the average rate paid on interest bearing deposits was 383% down 12 basis points from November.
Rod: Looking at January two page the average rate paid on interest bearing deposits was down 25 basis points from the fourth quarter average of $3 96%.
Ron Santarosa: Turning to our non-interest income, we posted revenues of $7.4 million for the fourth quarter. down $1.1 million from the third quarter. This decline reflects an elevated level of non-interest income in the third quarter, primarily due to the $900,000 gain from the sale and lease back of the branch property. Gains from sales of SBA loans were $1.4 million, with trade premiums of 8.53%, similar to the third quarter on slightly lower sales. Gains on sales of residential mortgages continued for the fourth consecutive quarter and were consistent with the third quarter, although the premiums declined. Non-interest expenses were $34.5 million for the fourth quarter, down 1.6% from the previous quarter, reflecting a $1.6 million gain on the sale of an OREO property.
Rod: Turning to noninterest income, we posted revenues of $7 $4 million for the fourth quarter.
Down $1 $1 billion in the third quarter.
Rod: This decline reflects some elevated level of noninterest income in the third quarter, primarily due to the $900000 gain from the sale and leaseback of the ranch property.
Rod: Gains from sales of SBA loans were $1 $4 million with trade premiums of 853% similar to the third quarter on slightly lower sales.
Speaker Change: James on sales of residential mortgages continue for the fourth consecutive quarter and were consistent with the third quarter, although the premiums declined.
Speaker Change: Noninterest expenses were $34 5 million for the fourth quarter.
Speaker Change: One 6% from the previous quarter, reflecting a $1 $6 million gain on the sale of our REO property.
Ron Santarosa: Absent this gain, non-interest expenses were up 3.1% due to seasonally higher advertising and promotion activities and higher legal fees, both from collections and business activities. In addition, other operating expenses included a $500,000 charge for a guaranteed repair allowance on a previously acquired SBA loan, while the third quarter included a $300,000 reimbursement from a borrower for delected property taxes. Our pre-tax, pre-provision income for the fourth quarter jumped 12.2% from the third quarter from notable growth in our net interest revenues and well-managed non-interest expenses. Credit loss expense for the fourth quarter was $900,000, effectively representing the entirety of our provision for loan losses, as the provision for off-balance sheet items was nil again this quarter.
Speaker Change: Absent this gain noninterest expenses were up three 1% due to seasonally higher advertising and promotional activities and higher legal fees built from collections in business activities.
Speaker Change: In addition, other operating expenses included a $500000 charge for a guarantee repair allowance under previously acquired SBA loan while the third quarter included a $300000 reimbursement from our borrowers.
Speaker Change: The property taxes.
Speaker Change: Our pre tax pre provision income for the fourth quarter jumped to 12, 2% from the third quarter from notable growth in our net interest revenues and well managed noninterest expenses.
Speaker Change: Credit loss expense for the fourth quarter was $900000 effectively representing the entirety of our provision for loan losses as the provision for off balance sheet items was nil again this quarter.
Ron Santarosa: Turning to the allowance for credit losses, we have net loan recoveries of $129,000 for the fourth quarter. when combined with the provision, increase the allowance to $70.1 million or 1.12% of loans. The increase in the allowance from the third quarter reflects an increase in specific allowances, while the allowance for qualitative and quantitative considerations remained largely unchanged. Turning to equity capital, our negative AOCI increased $15.4 million quarter over quarter due to higher interest rates at the end of the fourth quarter. The company repurchased 24,500 shares during the quarter at an average rate of $22.91. 1,230,500 shares remained under the share repurchase program.
Speaker Change: Turning to the allowance for credit losses, we had net loan recoveries of $129000 for the fourth quarter.
Speaker Change: When combined with the provision increase the allowance to $70 $1 million or 112% of loans.
Speaker Change: The increase in the allowance from the third quarter reflects an increase in specific allowance as well.
Speaker Change: The allowance for qualitative and quantitative considerations remained largely unchanged.
Speaker Change: Turning to equity capital or a negative OCI increased $15 $4 million quarter over quarter due to higher interest rates at the end of the fourth quarter.
Speaker Change: The company repurchased 24500 shares during the quarter at an average rate of $22.91 1 million 230500 shares remaining under the share repurchase program.
Ron Santarosa: Tangible book value per share was $23.88 at the end of 2024, and our tangible equity to tangible asset ratio was 9.41%. The company's preliminary common tier one ratio was 12.11%, and the bank's preliminary total capital ratio was 14.43%. Both the company and the bank exceeded minimum regulatory capital ratios, and the bank exceeded the minimum ratios for the well-capitalized category.
Speaker Change: Tangible book value per share was $23 88 at the end of 2024, and our tangible equity to tangible asset ratio was 941% the company's preliminary common tier one.
Bonnie Lee: Ratio was 12, 1% and the bank's preliminary total capital ratio was 14, four 3% both the company and a bank exceeded minimum regulatory capital ratios and the bank exceeded the minimum ratios for the well capitalized category with that ill turn it back to Bonnie. Thank you.
Bonnie Lee: With that, I'm going to turn it back to Bonnie.
Bonnie Lee: Thank you, Ron. As I mentioned, for many years now, we have consistently demonstrated our ability to navigate dynamic market conditions by staying focused on executing our relationship-driven banking strategy. Looking ahead, our priorities include expanding our core deposit base, targeting deposit-rich business verticals, and entering new markets. I want to express my gratitude to the entire Hanmi team for their exceptional efforts over the past year and their dedication to supporting our customers and our communities. We are excited about the opportunities ahead to provide our customers with a personalized, relationship-based banking service and products to help them achieve their financial goals while also delivering value to our shareholders.
Speaker Change: Ron.
Bonnie Lee: Excuse me as I mentioned for many years now we have consistently demonstrated our ability to navigate dynamic market conditions by staying focused on executing our relationship banking strategy.
Speaker Change: Looking ahead our.
Speaker Change: Priorities, including extending our core deposit base targeting deposit rich business verticals and entering new markets I want to express my gratitude to the entire hanmi team for their exceptional efforts over the past year and their dedication to supporting our customers and our communities.
Speaker Change: We are excited about the opportunities ahead to provide our customers with a personalized relationship based banking service and products to help them achieve their financial goals, while also delivering value to our shareholders.
Bonnie Lee: Thank you.
Speaker Change: Thank you, we'll now open the call for questions. Operator, Please open the line up for questions.
Ben Brodkowitz: We'll now open the call for questions.
Ben Brodkowitz: Operator, please open the line up to the questions. Thank you.
Speaker Change: Thank you.
Ben Brodkowitz: We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue.
Speaker Change: 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.
Speaker Change: You May press star two to remove yourself from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Ben Brodkowitz: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please pool for questions.
Moderator: First question here is from Kelly Motta from K B W. Please go ahead.
Speaker Change: Hi, This is Charlie on for Kelly Motta. Thanks for the question.
Unknown Attendee: Hi, this is Charlie on for Kelly Motta. Thanks for the question.
Speaker Change: The pie charts fishing spas competition has been intense among your peers and your margin came in nicely how is the competitive landscape for deposits looking and maybe expectations for that landscape.
Unknown Attendee: Speakers 1 & 2 Deposit competition has been intense among your peers and your margin came in nicely. How is the competitive landscape for deposits looking and maybe expectations for that landscape and general deposit repricing trends into 2025?
Speaker Change: And general deposit repricing trends into 2025.
Speaker Change: Yeah, so within our space.
Unknown Executive: You know, so within our space, deposit competition has been always fierce.
Speaker Change: I think competition has been always scares.
Speaker Change: Yes.
Unknown Executive: Unknown Speaker Having said that though, you know, we try to, within our marketplace, not to be really the pricing leader, you know, we base our, you know, whole strategy on the relationship banking model, right, so and we don't necessarily have to open up or offer up the highest rates in the marketplace and that has been our, you know, continued practice.
Speaker Change: Having said that we would try to Oh.
Speaker Change: Our marketplace are not something that really the pricing leader, we as you know.
Speaker Change: Our whole strategy.
Speaker Change: Our relationship banking model right. So.
Speaker Change:
Speaker Change: And we don't necessarily have to open up.
Speaker Change: Also at.
Speaker Change: The highest states are in the marketplace that has been our.
Speaker Change: Continue our practice.
Speaker Change: Thank you.
Unknown Attendee: Thank you. And I guess sticking with deposits, you guys saw a benefit from repricing CDs lower this quarter.
Speaker Change: And I guess sticking with deposits you guys saw a benefit from repricing Cds lower.
Speaker Change: This quarter, just wondering if you could give us what the rate is for those Cds rolling off versus coming on.
Unknown Executive: Just wondering if you could give us what the rate is for those CDs rolling off versus coming on. Yeah, for this quarter, being first quarter of 2025, we have a total of about 770 million, rolling off at 4.70%. In last quarter, we little less than billion rolled off at 5.04%. We're able to reprice it at 4.02. So we have plenty of room to reprice down.
Speaker Change: Yeah for this quarter.
Speaker Change: Being first quarter of 2025.
Speaker Change: Total of about $770 million.
Rolling off that 470%.
Last quarter, we are little less than billion rolled off at 5.04%, where we're able to reprice that propane Zoe too. So we have a.
Speaker Change: Plenty of room to reprice down.
Speaker Change: Yeah.
Speaker Change: Thank you that's great.
Unknown Attendee: Thank you. That's great.
Unknown Attendee: I guess, and then switching to asset quality, your credit quality is solid, but SBA is something people are watching. Are you seeing anything on the SBA side?
Speaker Change: And then switching to asset quality the credit quality is solid but SBA is something people are watching.
Speaker Change: Are you seeing anything on the SBA side and I missed it in your prepared remarks, but remind us where your overall exposure to S. P. A is in the portfolio.
Unknown Executive: And I miss it in your prepared remarks, but remind us what your overall exposure to SBA is in the portfolio. Thanks.
Speaker Change: Yeah, I mean, our SBA.
Unknown Executive: Yeah, I mean, our FBA portfolio has been Transcripts provided by Transcription Outsourcing, LLC. We have approximately We actually have about $250 million of SBA exposure, and from the $250 million, about $160-$170 million is tied to the real estate.
Speaker Change: It has been.
Speaker Change: Consistently Scott.
Speaker Change: Wow and <unk> and <unk>.
Speaker Change: I can't be there.
Speaker Change: So.
Speaker Change: We have.
Speaker Change: Approximately 100 and.
Speaker Change: I'm, sorry, what's wrong page here it could be.
Speaker Change: Yeah.
Speaker Change: So we actually have about $250 million of.
Speaker Change: Ooh and.
Speaker Change: And from the 250 million about 106 hundred $6 million to $117 million is tied to the real estate.
Speaker Change: Awesome. Thank you guys I'll step back.
Unknown Attendee: Awesome, thank you guys. I'll step back.
Speaker Change: Thank you.
Speaker Change: Our next question is from Matthew Clark from Piper Sandler. Please go ahead.
Speaker Change: Hey, Thank you just to follow up on the S. P. A discussion can you just.
Unknown Executive: Hey, thank you. Just to follow up on the SBA discussion, can you just Give us a sense for your credit box in that business and why you think your portfolio is holding up better than some others that we've seen. Yeah, you know, I've been asked this question a number of times, and I think, you know, I provided the same response. There are a lot of SBA lenders, you know, that produce SBA loans based on the projected cash flow.
Speaker Change:
Speaker Change: Give us a sense for your credit box in that business and why you think.
Speaker Change: You know your portfolio is holding up better than some.
Speaker Change: Some others that we've seen.
Speaker Change: Yeah.
Speaker Change: I've been asked this question a number of times that I think are.
Speaker Change: Combined with the us that's a segue.
Speaker Change: Response.
Speaker Change: There are a lot of our spend and then there is.
Speaker Change: You know the securities based loans based on our projected cash flow.
Unknown Executive: And first is, I think that we emphasize on the past performance as well as the trends, past trends. So I think that's probably one of the differentiators. And also, you know, within the SBA business, there are a lot of SBA lenders that deals with SBA brokers. And most of our deals, you know, we'd like to focus on driving that from our, you know, footprint, and then in our loan production offices versus the brokers.
Speaker Change: And he says I think that we emphasize on.
Speaker Change: Past performance as well as the trends pest trends, so I think that's probably the.
Speaker Change: What are the differentiator and also Oh, we.
Speaker Change: The SBA business there are a lot of our SBA.
Speaker Change: Lenders are.
Speaker Change: It deals with our brokers and our on most of.
Speaker Change: Ardiles.
Speaker Change: We'd like to focus on tracking that from our.
Speaker Change: Footprints.
Speaker Change: And then in our loan production offices persist the brokers.
Unknown Attendee: Great.
Speaker Change: Great.
Unknown Attendee: Unknown Speaker And then just on Here Lone Yield being Pretty resilient given the rate cuts. Anything unusual in that 5.97% loan yield? And if not, can you just remind us how much you have in truly floating loans?
Speaker Change: And then just on.
Speaker Change: Their loan yields are being.
Speaker Change: Pretty resilient given the rate cuts.
Speaker Change: Anything unusual in that $5 97 per cent loan yield.
Speaker Change: And if not can you just remind us how much you have in kind of truly floating loans.
Matt: Sure So Matt.
Unknown Executive: Sure. So Matt, our floaters are fairly small relative to the portfolio. Think about 10% or less. And then we do have a cadre of adjustable rate loans, which are basically the SBA product, which reprice quarterly based on the prime. And then a cadre of adjustables in residential, which are your mix of three ones, five ones, seven ones. And then we have the smaller CRE loans, which are typically fixed for five years will float for the remaining two of their of their lives. So that that blend keeps the rate fairly stable.
Matt: Our floaters are fairly small relative to the portfolio think about a 10% or less.
Matt: And then we do have a cadre of adjustable rate loans, which are basically the SBA product, which repriced quarterly based on the prime and then cadre of.
Matt: Adjustables and residential which are your mix of 31517 ones.
Matt: And then we have the smaller CRA CRE loans, which are.
Matt: It typically fixed for five years, and then Uh huh.
Matt: Oh float for the remaining two of their out.
Of their lives so that blend keeps the rate fairly stable.
Unknown Executive: Um, we tried to illustrate, um, that for you on page 19 of the of the, uh, accompanying slides where we Great.
We tried to illustrate.
Matt: That for you on page 19 of the of the.
Matt: Accompanying slides where we.
Matt: Trend the trend line for the loan yield portfolio relative to the change in the Fed's funds and then relative to the changes in our cost of interest bearing deposits. So.
Matt: Theres, some staying power and net loan yield.
Matt: As we will continue to get the benefit of a declining.
Matt: Declining interest bearing deposit costs.
Matt: Yeah.
Matt: Great and then just back to the CD repricing, how much and how much do you have coming due in the second quarter as well and at what rate.
Unknown Executive: And then just back to the CD repricing, how much in how much do you have coming due in the second quarter as well? And at what rate? I concur, we have another $685 million at 4.42%.
Matt: Second quarter, we have another $685 million at 442%.
Yeah.
Matt: Okay, Great and then lastly, just on the expense run rate.
Unknown Executive: Okay, great. And then lastly, just on the expense run rate, you know, assuming we add back the OREO recovery, what are your thoughts on the run rate and going into 1Q and kind of expense growth in general for the year? So, broadly, our expenses have basically been moving with inflation.
Matt: You know, assuming we add back the Oreo recovery.
What are your thoughts on the run rate and going into <unk> and kind of expense growth in general for the year.
Matt: So.
Matt: Broadly our expenses had been basically been moving with inflation.
Unknown Executive: When you get to quarterly analysis, you'll start to see the seasonality in advertising and promotion, so they'll drop off in the first quarter. You'll see merits come in. They happen in the second quarter. So, aside from, well, you would just seasonality type of ideas, you should just see them generally move with the general level of inflation.
Matt: When you get to quarterly analysis, you'll start to see the.
Matt: The seasonality in advertising and promotion so they'll drop off in the first quarter.
Matt: You'll see merits come in they happen in the second quarter. So aside from well use just seasonality type of ideas you shouldn't you see them generally move with the general level of inflation.
Speaker Change: Okay, great. Thank you.
Unknown Attendee: Okay, great. Thank you.
Yeah.
Speaker Change: The next question is from Gary Tenner from D. A Davidson. Please go ahead.
Speaker Change: Hey, guys I'm on the phone on for Gary Tenner.
Ahmad Hasan: Hey guys, Ahmad Hasan on for Gary Tenor. So loan production was essentially flat this quarter. What are you seeing there?
Speaker Change: The loan production was essentially flat this quarter.
Speaker Change: What are you seeing there is that seasonality and how should we think about growth in the first quarter of the year.
Ahmad Hasan: Is that seasonality? And how should we think about loan growth in the first quarter of the year? Would like the mid-single or low to mid-single digit loan growth you guys guided to, would that be back half bated?
Speaker Change: If you would like a mid single or low to mid single digit growth you guys guided to but that would be back half weighted.
Speaker Change: So important cause.
Ahmad Hasan: So for, you know, considering the environment, our overall production was pretty solid. And, and, you know, it's a similar trend as the prior quarter, third quarter, you know, when when we account for year over year, we didn't notice, as we mentioned in our comment, that this year, we had the payoffs for the annual payoffs, compared to the prior year, it went up 17%.
Speaker Change: Is there anything Batman or overall production was pretty solid and and it's a similar trend as the prior quarter third quarter.
Speaker Change: But when we account for year over year, we didn't notice him as we mentioned in our.
Speaker Change: Comments that this year, we had the payoffs for the annual pay offs.
Speaker Change: We turn to the prior year.
Speaker Change: 17%. So you know and then payoffs or something that's not within our control. So it's not so much about the production, but I think that where the payoffs going to it and.
Ahmad Hasan: So, you know, and then payoffs are something that's not, you know, within our control. So it's not so much about the production, but I think that where the payoffs going to end, again, this year, that, you know, we'll know, you know, what kind of net loan growth, but we are projecting low to mid single digit growth for the year. Right, that makes a lot more sense.
Speaker Change: Again this year.
Speaker Change: Well no you know what kind of net loan growth, but we are projecting low to me.
Speaker Change: Single digit quote.
Speaker Change: For the year.
Speaker Change: Alright that makes a lot more sense.
Ahmad Hasan: And should we expect deposit growth next year to match loan growth, essentially? It'll be a, yeah, it'll be a similar trend.
Speaker Change: And should we expect deposit growth next year to match loan growth essentially.
Speaker Change: You know it'll be a it'll be a similar trend.
Speaker Change: Okay, and then on the capital front.
Ahmad Hasan: Okay, and then on the capital front, you guys mentioned it in the prepared remarks. You guys did some repurchases this quarter. How should we model further repurchases? Should it be a similar trend or more opportunistic depending on the share prices? Yeah, I would say it really depends on how the how the markets are performing in any particular quarter, and what advantages that might present to us.
Speaker Change: You guys mentioned it in our prepared.
Speaker Change: Prepared remarks are you guys just kind of refresh. It is just this quarter how should we model further repurchases if it would be a similar trend or more opportunistic depending on the share prices.
Speaker Change: Yeah, I would say it really depends on how the.
Speaker Change: How the markets are performing in any particular quarter and what advantages that might present to us.
Speaker Change: Sounds good thank you for taking my questions.
Ahmad Hasan: Sounds good.
Unknown Attendee: Thank you for taking my questions.
Unknown Attendee: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question is from Matthew Roden from Jones trading. Please go ahead.
Speaker Change: Hey, guys. Thanks for taking the questions just a couple quick ones for me.
Unknown Attendee: Hey guys, thanks for taking the questions. Just a couple quick ones for me. You know, loan sales, it looks like you guys had the most you've sold in some time. Can you talk about, you know, just the opportunity there, you know, where you're seeing the gain of sale margins and, you know, kind of the expected pace that you're thinking for the next year in terms of loan sales? Well, it all depends on the market condition, but in 2024, we were able to sell a total of $88.4 million, either to investors or other committing banks. The premium ranges from 2% to 2.4-ish percent.
Speaker Change: You know one sales it looks like you guys had the most.
Speaker Change: You've sold in some time can you talk about you know just the opportunity there, yeah, where youre seeing the gain of sale margins and you know kind of the expected pace.
Speaker Change: What you're thinking for the next year in terms of loan sales.
Speaker Change: Well, it's it's all depends on the market condition, but.
Speaker Change: In 2020 in Florida, we're able to sell a total of 88 4 million.
Speaker Change: Either to investor or other Canadian banks.
Speaker Change: D C premium ranges from 2% to 232.
Speaker Change: <unk> formation.
Unknown Executive: So, we continue to explore the opportunity to sell a similar level of sales in 2025.
Speaker Change: So.
Speaker Change: We continue to explore the opportunity to sell them a similar level of sales in 2025.
Speaker Change: Got it thank you.
Unknown Attendee: Got it. Thank you.
Speaker Change: Yeah.
Speaker Change: As a final reminder, if you'd like to ask a question star one.
Speaker Change: If there are no further questions I'd like to turn the floor back to management for any closing comments.
Speaker Change: Thank you for joining our call today and we appreciate your interest at Hanmi and we look forward to sharing our continued progress with you throughout the year. Thank you.
Ben Brodkowitz: Thank you for joining our call today. We appreciate your interest at Hanmi, and we look forward to sharing our continued progress with you throughout the year. Thank you.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.
Speaker Change: Mhm.
Speaker Change: [music].
Speaker Change: Mhm.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Mhm.
Speaker Change: Hum.
Speaker Change:
Speaker Change: [music].