Hanmi Financial Corporation

Ladies and gentlemen, welcome to the Han Mi Financial Corporation's first quarter 2020 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. Following the presentation, the conference will be open for questions. I would now like to introduce Mr. Lassa Glasson, Managing Director at Addo Investor Relations. Please go ahead.

Thank you, Operator, and thank you for joining us all today. With me to discuss Homily Financial's first quarter 2020 earnings are Bonnie Lee, President and Chief Executive Officer, Anthony Kim, Chief Banking Officer, and Ron Santarosa, Chief Financial Officer. Ms. Lee will begin with an overview of the quarter, Mr. Kim will then discuss loan and deposit activities, and Mr. Santarosa will then provide more details on our operating performance. At the conclusion of our prepared remarks, we will open the session for questions. In today's call, we may include comments and forward-looking statements 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 could be different from those expressed or implied by our forward-looking statements, which involve risks and uncertainties. The speakers on the call claim the protection of the safe harbor provisions contained in the Securities Litigation Reform Act of 1995. For some factors that may cause our results to differ from our expectations, please refer to our SEC filings, including our most recent Form 10-K and Form 10-Qs. 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-K. This afternoon, Hanli Financial issued a news release outlining our financial results for the first quarter of 2020, along with a supplemental slide presentation to accompany today's call. Both documents can be found in the Investor Relations section of our website at hanli.com. I will now turn the call over to Bonnie Lee. Bonnie?

Thank you, Lhasa. Good afternoon, everyone. Thank you for joining us today to discuss Hanli's 2020 first quarter results. As the COVID-19 crisis continues, HANMI remains focused on ensuring the health and safety of our employees, customers, partners, and communities we have served for nearly four decades. Importantly, nearly all of HANMI's branches remain open with some modifications to business hours. In addition to complying with all social distancing guidelines, we have sourced and distributed personal protective equipment and other supplies to all branches and install protective barriers for telelines for the benefit of our frontline associates. Through the successful execution of these actions, we have not experienced any significant interruption to our business activities. With respect to our customers, we continue to look for ways to provide support in this time of need. Where appropriate, We are working with borrowers through modifications, deferrals, and other services to help them weather the crisis. We also have been extremely active with SBA's Paycheck Protection Program, and we are working tirelessly to process these loans as quickly as possible. HANMI is reviewing other government-funded relief programs and intends to stand by its customers. While our first quarter performance reflects the significant challenges imposed by this crisis, the following are some of the key financial and operational highlights. Loan production volume through much of the first quarter was strong. However, a substantial number of loans that were in the late stages of approval were withdrawn or delayed by borrowers in the final weeks of the quarter due to economic uncertainties surrounding the pandemic. Nonetheless, first quarter loan production still grew nicely year over year. Net interest income before credit loss provision was relatively in line quarter over quarter, driven by a four basis point improvement in net interest margin. Deposits reflect our effort to reduce higher costing time deposits and we did lower deposit rates in response to the rapid decline in the general level of interest. Notwithstanding lower deposit rates and the uncertainties of the COVID-19 crisis, I am pleased that our depositors continue to place confidence in us with their savings. Hami's credit quality metrics reflect our assessment of vulnerabilities to the crisis at this time and include a specific allowance for uncertainties associated with COVID-19 crisis-related losses. While we invested in Hami Commons stocks During the quarter, under our current authorized $1.5 million share repurchase program, the program was suspended late in the quarter due to the COVID-19 crisis. And finally, despite market conditions, Hanmi remains very well capitalized and has ample liquidity. Our regulatory capital ratios are very strong, and I believe we are well positioned to address these challenging times. Net income in the first quarter was significantly affected by uncertainties associated with the COVID-19 pandemic, for which we established the qualitative provision totaling $7.4 million. As part of the process in establishing this allowance, we assessed the segment of the loan portfolio that we believe are the most vulnerable to the crisis at this time. This includes loans collateralized by hospitality and retail commercial assets as well as our equipment leasing portfolio. The assessment included analyzing individual loan relationships and stressing under different assumed revenue declines for those credits with debt service falling below one-to-one coverage. While we believe the COVID-19 allowance is adequate at this time, our analysis is based on economic conditions Forecast, Loan Composition, and other dynamic factors. This obviously remains a very fluid situation, and we will continue to closely monitor the impact of a crisis on our portfolio. Let's now turn to asset quality. While our overall portfolio remained relatively stable at quarter end, several of the key asset quality metrics were impacted by the three film credit Loans totaling $18.1 million. These loans are collateralized by filling tax credits that are experiencing delays in being certified by government tax authorities. We remain confident that these delays will not result in charge-offs. Nonetheless, non-performing loans decreased to $52.2 million, or 115 basis points of loans. at quarter end compared with the fourth quarter 2019 non-performing loans of 63.8 million or 138 basis points of loans. The decrease in non-performing loans primarily reflects the charge-off of the previously identified travel loan relationship. HANMI continues to maintain a commitment to conservative discipline credit underwriting. For the first quarter 2020, consistent with the asset quality data from prior quarters, the weighted average loan-to-value and debt coverage ratio on new commercial real estate loan originations were 51.9% and 1.8 times respectively. For the entire commercial real estate portfolio, the weighted average loan-to-value and weighted average debt coverage ratio as of the end of the first quarter were 48.3% and 2.0 times respectively. Anthony will provide additional detail and changes to underwriting in light of the COVID-19 crisis. During the first quarter, Hanmi repurchased 135,400 shares at an average price of $16.22 per share for a total investment of approximately $2.2 million under the previously authorized 1.5 million share repurchase program. Today, approximately 1 million shares remain available for repurchase under this current authorization. Shortly following the federal proclamation declaring the COVID-19 outbreak a national emergency, HANMI suspended its share repurchase program and does not anticipate it will consider resumption of share repurchases until the national emergency has been rescinded. Even after the first quarter share repurchases, HMIS tangible common equity ratio remains strong at 9.74% as do all of our regulatory capital ratios. I would now like to provide a quick update on some of the activities we're actively engaged in to help our customers during this time of need. To date, we have approved 1,242 requests for payment modifications. totaling $707 million of loans and leases, which comprises approximately 16% of our total portfolio. In addition, we have also been very active with the Paycheck Protection Program, or P3. Since offering these loans to our customers beginning in early April when the program began, to date, we have originated approximately 1,310 P3 loans totaling an aggregate principal balance of approximately $157 million. With that, I would like to turn the call over to Anthony Kim, our Chief Banking Officer, to discuss the first quarter loan production results and deposit gathering activities. Anthony?