Q1 2025 Hope Bancorp Inc Earnings Call
and Dr. Phil Presh.
and Kenny Bell mahdoll and Bob Bertraud and the girl with the beard Was that it? the ylum tags The wasp Today's Huskies was born here at Sp Last This is how it is today Robby Tiger
Speaker Change: Good day and welcome to the Hope Bancorp 2025 first quarter earnings conference call. All participants will be in a listen only mode, should you need assistance please signal conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then one on your touch tone phone, and to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Angie Yang. Please go ahead.
Thank you for watching!
Thank you, Chuck.
Speaker Change: Good morning, everyone, and thank you for joining us for the Hope Bank Corp 2025 first quarter investor conference call. As usual, we will be using a slide presentation to accompany our discussion this morning, which is available in the presentations page of our investor relations website.
Speaker Change: Beginning on slide two, let me start with a brief statement regarding forward-looking remarks. The call today contains forward-looking projections regarding the future financial performance of the company and future events.
Speaker Change: Ford-looking statements are not guarantees of future performance. Actual outcomes and results may differ materially. Hope Bancorp assumes no obligation to revise any Ford-looking projections that may be made on today's call.
Speaker Change: In addition, some of the information referenced on this call today are non-GAAP financial measures for a detailed description of the risk factors and a reconciliation of gap to non-GAAP financial measures.
Speaker Change: Please refer to the company's findings with the SEC, as well as the safe harbor statements in our press release issued this morning.
Speaker Change: We also note that our press release and remarks in our call today present preliminary on Audited Financial Information for Territorial Bancorp Inc., which may be subject to change.
Speaker Change: Purchase Accounting Adjustments are preliminary and we estimate deposits and loans, net of fair value adjustments.
Now, we have allotted one hour for this call.
Speaker Change: from the management side today, will be Kevin Kim, Hope Bancorp's Chairman, President and CEO , and Julianna Balicka, our Chief Financial Officer.
Speaker Change: Peter Koh, our Chief Operating Officer, is also here with us as usual and will be available for the Q&A session. With that, let me turn the call over to Kevin Kim. Kevin?
Speaker Change: Thank you, Angie. Good morning, everyone, and thank you for joining us today.
. . . . . . .
Speaker Change: Let's begin on slide three with a brief overview of the quarter.
Speaker Change: For the first quarter of 2025, we earned net income of $21.1 million or 17 cents per diluted common share.
Speaker Change: Excluding notable items, net income for the first quarter of 2025 was $22.9 million or 19 cents per diluted common share. This compares with 20 cents per diluted common share for the fourth quarter of 2024.
Speaker Change: For the first quarter, Net interesting perhaps the provision expense was $96 million up 4% quarter of a quarter from $92 million in the fourth quarter of 2024.
Speaker Change: This reflected a modest decrease in net interest income, which was more than offset by a lower provision for credit losses driven by a sequential improvement in net charge jobs.
Speaker Change: First quarter, non-interest expense, excluding notable items of $81.3 million, increased quarter of a quarter due to the typical first quarter increases in salary and employee benefits
Speaker Change: In the first quarter, we received regulatory approvals for our merger of Territorial Bancorp, which we completed on April 2nd, 2025.
As of the Murth of Close
Speaker Change: Territorial contributed approximately $1.7 billion of stable low cost deposits at a weighted average cost of $1.96% and approximately $1 billion after accounting discounts.
of Red Ventual Mortgage Loans with Pristine As The Quality.
Speaker Change: On slide 4, you can see the details of our strong capper ratios, all of which expanded quarter of a quarter and year over year.
Speaker Change: Our healthy capital levels and ample liquidity provide us a healthy cushion with which to navigate emerging macroeconomic volatility, support prudent balance at growth, and continue to invest in our company.
Speaker Change: Our Board of Directors declared a quarterly common stock dividend of $0.14 per share, payable on May 16th to stockholders of record as of May 2nd 2025.
Speaker Change: Continuing to slide five, we remain focused on strengthening our deposit mix, a key priority as we position our balance for prudent growth.
Speaker Change: At March 31, 2025, our total deposits were $14.5 billion, an increase of 1% from the end of the prior quarter.
Speaker Change: Overall growth in customer deposits, more than offset planned reductions in broker deposits, which decreased to less than 7% of our total deposits as of March 31, 2021-25.
Moving on to Slide 6
Speaker Change: At March 31, 2025, our loans receivable of $13.3 billion were down to percent from the year end of 2024.
Speaker Change: Quarter of a quarter, residential mortgage loans increased 7 percent, offset by a 5 percent decrease in commercial and industrial loans and a 2 percent decrease in commercial rural state loans. Loan production in the first quarter increased 11 percent a year over a year.
Speaker Change: We continue to see elevated paydowns and payoffs in the first quarter.
Speaker Change: Market price and competition and spread, compression, continued to be aggressive and commercial customers are refinancing loans before maturity.
Speaker Change: We also passed on some renewals due to pricing for potential credit concerns and this impacted our net loan growth for the poorer.
Speaker Change: That being said, we remain positive about supporting prudent balance growth and our lone pipelines as strengthening. We continue to invest in people to grow our teams, which is positively impacting production.
Speaker Change: For the more, although we are cautious about the backdrop of macroeconomic volatility and increasing probabilities of a recession, we note positive outlook from our Korean subsidiary sector customaries.
Speaker Change: We have been seeing an acceleration of direct investments in the United States by Korean companies. In part, current geopolitical tensions are accelerating the timing of previously planned investments in manufacturing.
Speaker Change: We believe this should translate into improved loan demand and line utilization, as well as greater opportunities to expand our department relationships.
and Encillary Feed-Based Services.
Speaker Change: As the largest Korean American Bank in the United States, Hope is best positioned to meet the growing lending deposit and banking service needs of this customer segment.
on slide 7 and 8.
Speaker Change: We provide more details on our commercial real estate loans, which are well diversified by property type and granular insights.
Speaker Change: The loan to values remain low with a weighted average of approximately 46% at March 31st, 2025, and the profile of our commercial rule of state portfolio has not changed meaningfully. As the quality remains stable.
Speaker Change: With that, I will ask Julianna to provide additional details on our financial performance for the first quarter. Julianna, thank you, Kevin, and good morning everyone.
Beginning with Slide 9.
Juliana Balicka: Our net interest income totaled $101 million for the first quarter of 2025, down 1% from the immediately preceding fourth quarter.
Speaker Change: This reflects aggregate impact of the federal funds target rate cuts.
Speaker Change: on our floating rate loans, lower average on balances, as well as the first quarter having two fewer days than the fourth quarter of 2024.
Speaker Change: Overall, net interest margin increased by 4 basis points quarter to 2.54% up from 2.50% for the 4th quarter of 2020-4%
Speaker Change: On slide 10, we show you the quarterly trends in our average loan and deposit balances and our weighted average yields and costs. Our cumulative SPOT deposit rate data since the Fed started cutting rates in September 2024 has been 54% for interest-sparing deposits.
Speaker Change: On to slide 11. Our non-interest income was $15.7 million for the first quarter, compared with $15.9 million in the immediately preceding fourth quarter.
Speaker Change: excluding the one-time gain from the sale of our Virginia branches in the 4th quarter are not interesting come for the first quarter was up 5% from 14.9 million.
Speaker Change: Overall, our other income and fees continue to grow, reflecting positive momentum across a number of smaller, not-interesting compliance.
Speaker Change: In the first quarter, we sold $15 million of SDA loans compared with $48 million in the fourth quarter. Gains and sale of SDA loans were $3.1 million in both quarters.
Speaker Change: Moving on to non-interest expense in slide 12, our non-interest expense was $84 million in the first quarter, excluding notable items, non-interest expense was $81 million, down 1% year over year and up 6% quarter over quarter.
Speaker Change: The quarter of a quarter increase in non-interest expense reflected typical first quarter increases in compensation-related line items such as payroll taxes, bonus expense through-ups, invocation accruals.
Speaker Change: This was partially offset by a 33% reduction in earned interest credit expense which reflected lower average balances of related deposits and the Fed funds target rate cuts.
Speaker Change: The year-over-year decrease in non-interest expense excluding notable items reflected at our continued close expense management.
Speaker Change: Now, moving on to slide 13, I will review your acid quality
Speaker Change: Our non-performing assets as of March 31st, 2025, decreased 8% quarter to quarter, representing 49 basis points of total assets.
Non-performing assets were down 21% year-over-year.
Speaker Change: Net charge-offs total $8 million are annualized 25 basis points of average loans for the first quarter, down from $13 million or annualized 38 basis points of average loans in the fourth quarter. Accordingly, we recorded a provision for credit losses of $4.8 million in the first quarter, down sequentially quarter over quarter with the reduction in net charge-offs.
Speaker Change: Our allowance coverage of loans is 1.11% as of March 31st, 2025, unchanged quarter-over-quarter.
Now moving on to 514
Speaker Change: Before I turn the call back to Kevin for closing remarks, let me provide some additional commentary on the territorial merger.
Speaker Change: as of the close of this transaction. Territorial had approximately $87 million in cash and cash [inaudible]
Speaker Change: Invest in securities portfolio was sold alongside the close of the merger at a market value $531 million.
Speaker Change: FHLB borrowing totaled $160 million before marks of which $125 million was paid off and territorial is not performing assets totaled less than $2 million.
Speaker Change: The preliminary discount on territorial loan portfolios $220 million or 17%. This compares with $270 million in January of 25, and the change reflects the change in the 10-year Treasury rate.
Speaker Change: Our updated accretion income expectations for 25 are 14 million, which reflects both the updated discount and updated prepayment expectations.
Speaker Change: As a result of this transaction, we expect our 2025 second-quarter results will include one-time pre-tax acquisition-related expenses of approximately $18 million. With that, let me turn the call back to Kevin.
Kevin Kim: Thank you, Julianna. Moving on to the Outlook on Slide 15.
Kevin Kim: There is a lot of uncertainty around the economy and for the interest rates, but let me provide some brief updates to our outlook for 2025.
Kevin Kim: We continue to expect annual 2025 loan growth at a high single digit percentage rate, all at a lower end of the range than previously.
Kevin Kim: This reflects the positive impact of territorial, as well as organic loan growth in the second half of the year, driven in part by recent and continued hiring plans.
We now expect...
Kevin Kim: Not interesting come growth to be in the high single video percentage range for 2025.
Kevin Kim: This has changed from our prior outlook of low double digit percentage growth. This reflects updated merger of Christian income expectations, the impact of the first quarter results, and updated loan growth expectations.
Kevin Kim: Offsetting our lower net interest income outlook is stronger see income growth. We now expect not interest income to grow in the mid 20th percentage range compared with our previous guidance of mid 10% of the growth.
Kevin Kim: This reflects first quarter results and stronger momentum across a number of RC income lines.
Kevin Kim: Our outlook for non-interest expense is unchanged as low double-digit percentage growth, excluding
Thank you for watching!
Speaker Change: We begin the second quarter by welcoming our new territorial savings team members to the Hope family or the Hope O'Hana as we say in Hawaii.
I would like to thank all our teams.
With that, operator, please open up the call for questions.
Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press star than one on your touch tone phone.
Speaker Change: If you're using a speaker phone, please pick up your handset before pressing the keys. If I anytime your question has been addressed and you would like to withdraw your question, please press store, then too. And at this time we'll pause momentarily to a symbol roster.
Thank you. Have a great day.
Speaker Change: And the first question will come from Chris McGratty with KBW, please go ahead.
Hey, this is Angela, you're on Chris McGratty.
Just started out on that.
Speaker Change: Hi, I'm just starting out on NII. How would the high school digital NII growth outlook change if we get less than the three rate cuts you have assumed? And I guess what is the annual impact to NII for each 25-page point rate cut? Thank you.
. . . . .
Speaker Change: So if we get fewer rate cuts, then what is assumed?
May 25 impact will be relatively new to you.
Speaker Change: You guys are upsetting in our NII impact that the rate cuts on one hand we benefit from being able to cut the positive costs more on the other hand are variable loans to compress. So net net it kind of washes that with somewhat modest downward impact.
. . . . . . .
. . .
Speaker Change: Okay, great. Thank you. And then just switching gears over to
Speaker Change: The Loan Growth Guide. Can you provide, you know, detail on the loan verticals that you're expecting this moderate organic growth from? And then maybe provide any insights into conversations you're having with clients that you do confidence in maintaining the guidance.
. . . . .
Speaker Change: Sorry, could you repeat your question? We had a little bit of a trouble on the eye now.
I'm thinking at the beginning [inaudible]
Speaker Change: Oh, sorry. Yeah, can you provide detail on the loan verticals that you're expecting moderate organic growth from and then maybe provide any insight into conversations that you're having with clients that you do confidence in maintaining your growth guidance.
[inaudible]
Yeah, so Kevin discussed the Korean subsidiary.
conversations that we're having that are a positive component.
We're also seeing some pipelines building nicely.
in our Specialized Commercial Lending Verticals.
Speaker Change: For example, we've had healthcare, for example, project finance, for example, structured finance, there's a number of specialized verticals and we've recently also added team members to those verticals to help grow those pipelines that we've faced.
Okay, great. Thanks, Julianna. I'll step back.
Speaker Change: Again, if you have a question, please press star, then one. Our next question will come from Gary Tenner with DA Davidson. Please go ahead.
Hey guys, I'm Mathew Sonon for Gary Tenner.
Bye for now. Bye.
The driver's of, you alluded to, second half, lone growth.
Speaker Change: in your guidance, and you talked about having new hires and you've already done some work on it. So, I'm talking about like specific segments that we might see on growth on.
Speaker Change: Yeah, as I just told Andrew, you know, where we are seeing good kind of momentum in our pipelines as Kevin discusses in the green subsidiary sectors and also in the specialized CNI teams, which include health care, project finance, structured finance, etc. So that's what's building up in our pipeline.
Speaker Change: All right, thank you for that. And you kind of talked about it earlier in the previous question, but can you remind us the specific name impact of each 25 basis cut all else equal?
Speaker Change: All of the equal age 25 basis point cut in the first year will more or less offset it itself with we won't compress on our loan yields but then we won't be able to bring down deposit costs as much. So net net it washes out and it's slightly with a slight downward.
Speaker Change: shift, but it all kind of depends on execution. And no, I'm not providing you a precise basis
Speaker Change: Alright, and then maybe on credit, you guys maintain pretty good asset quality this quarter. Any specific color there, any points of stress, anything maybe you're looking more closely.
[inaudible]
Speaker Change: I'll show this as Peter so far as the quality has remained stable and...
Speaker Change: We've been very proactive with our portfolio, we're monitoring very closely, so far we think our borrowers are being proactive to mitigate some of the impact, potential impact from terrorists.
Speaker Change: by diversifying supply chains and things like that. So we are closely monitoring as everyone is doing, but so far our asset quality is definitely healthy and stable.
Thank you for watching!
All right. Thank you for taking my questions.
Thank you.
. . . . . .
Speaker Change: This will conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks.
Thank you for watching!
Speaker Change: Thank you. Once again, thank you all for joining us today and we look forward to speaking with you again next quarter. Bye everyone.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
The Atoms
Speaker Change: This film is a derivative work of the Institute for Popular Film Studies. It is not meant to represent the official view of Fourth World Culture. It is an effort to promote cultural diversity and diversity in an effective way. The film is originally cast in 2005, from a st這一 film is totally histerical. It shaping historical events into specific events like the Death Republic Girie, the Supreme Court Justice R roads rom and the war, and total chaos. Complete chaos. The Kyat dancer was brought to life by the in sum and describe ideal oops it wasn't true
the
[music]
[music]