Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net income for the second quarter was $14.5 million, or $0.48 per diluted share.
- New loan production increased by 17% quarter over quarter.
- Noninterest income increased by 4.2% from the first quarter.
- Non-interest expense declined 3.2%, primarily driven by a decrease in salaries and benefits.
- The Corporate Korea Initiative continues to perform well, contributing significantly to loan and deposit growth.
Negative Points
- Net interest income for the second quarter was down 4% from the first quarter.
- The cost of interest-bearing deposits increased by 11 basis points, leading to a 9 basis point decline in net interest margin.
- Loan balances were flat compared to the first quarter due to higher levels of payoffs.
- Residential mortgage loan production was down 43% from the previous quarter.
- Non-performing assets increased by $5 million, primarily due to one commercial loan.
Q & A Highlights
Q: Loan growth was up 17%, but balances were flat. What drove higher payoffs or paydowns, and what are your expectations for loan growth?
A: Payoffs were higher than average, driven by competitors offering aggressive terms. Assuming payoffs stay within the average range, we expect low to mid-single digit loan growth annually. - Bonita Lee, President, CEO, Director
Q: There was a $6 million increase in non-performing loans (NPLs) and other real estate owned (OREO). Can you provide details on these credits and any impact on loan yields?
A: The increase in NPAs was mainly due to one commercial loan in foreclosure, with sufficient equity to avoid loss. Loan yields were slightly down due to higher-yielding loans being paid off. - Bonita Lee, President, CEO, Director
Q: Are deposit rates peaking, and what was the period-end deposit spot rate?
A: We believe deposit rates are peaking, with only a 2 basis point increase in July. The average rate for CDs was 4.81% and for interest-bearing deposits was 4.28% at the end of June. - Romolo Santarosa, CFO, Senior EVP
Q: Will you continue stock buybacks given the recent positive stock movement?
A: The Board reviews capital actions quarterly. While share repurchases were attractive previously, the recent stock price increase may reduce the level of buybacks. - Romolo Santarosa, CFO, Senior EVP
Q: Can you provide details on loan maturities and repricing, and how you plan to use maturing funds?
A: We have about $130 million per quarter in fixed-rate loan maturities. We will use these funds to either fund growth or free up higher-cost funding, depending on market conditions. - Romolo Santarosa, CFO, Senior EVP
Q: What is your target loan-to-deposit ratio, and will you continue loan sales to manage this ratio?
A: Ideally, we target a loan-to-deposit ratio below 95%. We will continue loan sales, particularly in the residential portfolio, to manage the balance sheet. - Bonita Lee, President, CEO, Director
Q: Can you elaborate on retaining servicing rights for sold loans?
A: We explored and executed servicing retained for the recent portfolio sale, providing another revenue source beneficial for the long term. - Anthony Kim, EVP, Chief Banking Officer
Q: What is the core expense run rate, and are there any ongoing cost-saving initiatives?
A: The second-quarter non-interest expenses were $35.3 million, which is a good run rate for the rest of the year. We continue to optimize our branch network and manage costs. - Romolo Santarosa, CFO, Senior EVP
Q: How does your CRE concentration impact your growth strategy?
A: Our CRE concentration ratio has declined over the years. We aim for a balanced loan portfolio and do not have a directive to drive the ratio below 300%. - Romolo Santarosa, CFO, Senior EVP
Q: Can you explain the recent branch closures and future plans?
A: We closed three branches in Q2 as part of ongoing branch optimization. We also plan to open a new branch in the Atlanta metropolitan area later this year. - Bonita Lee, President, CEO, Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
