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| Statement |
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| The small business market is a vibrant long-term opportunity for Hanmi, and we remain optimistic about our ability to tap into this market |
| Hanmi is in a fortunate position to continue tapping into this opportunity, and we believe that our Corporate Korea initiative will attract even more new lending relationships and low-cost deposits as Korea-based companies continue to invest in opening U.S |
| I would also like to thank our outstanding team for their dedication to building strong relationships with our customers by delivering superior customer and banking solutions that help them and help Hanmi grow |
| Our deposit portfolio remains strong with a solid customer relationships and little reliance on broker deposits or wholesale funds |
| Our success in executing this strategic initiative was evident in our second quarter results, where we most notably benefited from strength in our residential mortgage lending business and our Corporate Korea initiative |
| We believe we have a very bright future for continued customer acquisition and deposit and loan opportunities with the existing Corporate Korea customers |
| We are proud of our team's ongoing success in growing this unique and important business segment for us |
| As you heard from Bonnie, our Corporate Korea deposit activity was especially strong in the quarter, up 22% from the last quarter and 64% higher than a year ago |
| We also continue to execute well on our sales and marketing initiatives, which resulted in a substantial amount of new deposit relationships this quarter |
| We attribute these results to our successful relationship banking model and our team's consistent and steady execution of our strategy |
| As we enter the third quarter, we are encouraged to have a strong loan pipeline |
| Our customers are resilient and are adjusting to the new reality of a higher cost funding |
| Our overall asset quality metrics are excellent as nonperforming assets to total assets remained low at 30 basis points |
| I am pleased to report that even with these challenges, Hanmi delivered solid results for the second quarter of 2023 highlighted by healthy deposit growth, continued expansion of our Corporate Korea initiative, disciplined expense management and continued improvement in credit quality |
| We continue to have a highly disciplined and comprehensive approach to underwriting and credit management and the steps we have taken to strengthen our credit administration practices were evident in our strong credit metrics in the second quarter |
| That said, we are encouraged that our C&I pipeline is stronger going into the third quarter than it was early in the second quarter |
| operations was a strong contributor to our second quarter results from both existing and new customers |
| Our new loan production is driving improvements in the diversification of our loan portfolio and our average yield |
| Despite higher mortgage rates, our residential mortgage loan production was strong again this quarter at $100 million, up modestly from the first quarter, reflecting the success of our strategy to diversify our loan portfolio |
| Our residential mortgage production was a strong performer this quarter at $100 million, which is consistent with the last five quarters |
| Looking ahead, we are well positioned to navigate the remainder of the year with a strong base of very loyal customers, a growing pipeline of new opportunities, a healthy balance sheet and liquidity position, solid credit quality, an outstanding team and a strategy that is working |
| We also improved upon our already strong capital levels with a total risk-based capital at 15.1% and tangible common equity ratio of 8.96% |
| We are pleased that even with the rising employees, salaries and benefits, the continued investment in growth, we were able to keep our expenses relatively contained and well managed with no notable change between quarters |
| As Bonnie said, residential mortgage has been and will continue to be an important part of our loan diversification strategy, and we want to be in the best position to serve this market |
| Credit quality remains excellent |
| These results reflect our success in maintaining existing customer relationships and building new ones |
| Time and again, our team has demonstrated that times of a market disruption are some of the best opportunities to partner with the customers to identify evolving needs and to be part of the solution |
| We have spoken to you about our strategic initiatives to position Hanmi to deliver sustained growth and returns over the long term |
| In the second quarter, we grew deposits by 7.4% on an annualized basis as we strengthened our relationships with existing customers and brought in new customers through focused targeting and relationship-building efforts |
| And when you go back to March, where there was still uncertainty with respect to just the banking industry, I would say they were just bulked up just to ensure that should anything adverse occur, we were well positioned to address it |
| Statement |
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| As you all well know, the second quarter was a challenging time for the banking industry with the rising interest rates, ongoing economic uncertainty and the aftermath of the banking industry events in March |
| First, we are seeing softer demand for purchases and refinances, especially in the CRE sector, where rapidly rising interest rates have had a major impact |
| Second quarter loan production was $259 million, down 15% from the first quarter |
| We attribute the second quarter decline in loan production to a couple of factors |
| Let's begin with net interest income where we posted $55.4 million for the second quarter, down $2.4 million or 4.2% sequentially from the first quarter, primarily because of higher interest-bearing deposit expense |
| As we expected and in line with the banking industry, our 2023 loan production remains under pressure due to higher rates and their impact on borrower demand |
| Second quarter SBA loan production was nearly $31 million, down from $35 million in the first quarter |
| Net interest margin also declined for the second quarter 17 basis points to 3.11% |
| C&I funding in the first half of 2023 has been lower relative to past years, which we believe reflects the overall cautious environment |
| Overall, loan production for the second quarter was $259 million, down from $304 million last quarter as we saw lower levels of CRE, C&I and equipment financing loans, partially offset by strength in residential mortgage lending |
| Now turning to noninterest income, which declined $400,000 or 4.8% sequentially from the first quarter, largely because of lower gains from sales of the guaranteed portion of SBA loans |
| As expected, the pace of decline in our net interest margin moderated from the first quarter where we saw margin decline 39 basis points from the prior fourth quarter |
| Of course, that did not materialize |
| Practically, all of our current lending is in the purchase market as refinance activity has dropped off significantly with higher interest rates |
| The volume of loan sales declined 33% to $19.9 million for the second quarter, while the trade premium declined 10 basis points to 7.75% |
| The after-tax realized loss on our securities portfolio is included in our capital position and changes in their market value since the first quarter reduced our capital by $5.6 million |
| Just -- I saw that borrowings came down a significant amount during the quarter |
| However, we have seen the pace of the shift slow from the prior quarters |
| And we expect the noninterest-bearing deposits to either hold or maybe go down slightly from the current 35% |
| The quarterly growth in time deposits, whether from a shift away from existing accounts or from new money nearly came to a halt in the second quarter as the quarterly decline in savings and money market accounts stopped and flipped to an increase for the second quarter |
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