Hanmi Financial Corporation

Ladies and gentlemen, welcome to Hanmi Financial Corporation's second quarter 2021 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 Lassa Glasson, Managing Director at Addo Investor Relations. Please go ahead.

Thank you, Operator, and thank you all for joining us today. With me to discuss Honme Financial's second quarter 2021 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 a 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 this call claim the protection of the safe harbor provisions contained in the Securities Litigation Reform Act of 1995. For a list of 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, Honami Financial issued a news release outlining our financial results for the second quarter of 2021, 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 honami.com. I will now turn the call over to Bonnie Lee. Bonnie? BONNIE LEE.

Thank you, Lhasa. Good afternoon, everyone. Thank you for joining us today to discuss HANMI's 2021 second quarter results. HANMI delivered another strong performance in the second quarter, highlighted by a sharp increase in loan and lease production, growth in deposits, improving credit quality, and significant earnings expansion. Our strong operating momentum coupled with a significant pickup in business activity as economies in our markets reopen has HANMI posed to continue driving solid results in the second half of the year. Today, we reported net income for the second quarter of $22.1 million, or $0.72 per diluted share. Net income increased 33 percent from the first quarter and over 140 percent from a year ago. Our second quarter earnings reflect strong revenues and controlled expenses as well as the recovery of a credit loss expense from improving asset quality. Our loan production remained quite robust in the second quarter and was a single quarter record when excluding PPP loan origination. Excluding PPP loans, our loans grew 2.5% from the first quarter. Deposits were also up 2.2% from the prior quarter, and similar to recent past quarters, Growth came from non-interest-bearing DDAs that now represent nearly 42% of our total deposits. Next, I would like to provide an update on our modified portfolio and the encouraging trends we continue to see as we emerge from the pandemic. At June 30th, loans modified under the CARES Act declined 38% from the first quarter to end the second quarter at $72.3 million, representing just 1.5% of loans. We continue to stay in close contact with these borrowers who remain affected by the pandemic to work on mutually beneficial solutions. Moving on to other measures of asset quality and further demonstrating our asset management practices, I am especially pleased to report that we successfully resolved the $12.4 million of Affiliate Tax Credit Loans without any loss to the bank. We have now seen non-accrual loans decline by more than 50% since the end of 2020. Even more encouraging, we are beginning to see loan upgrades, including loans moving from classified to special mention to pass. A year ago, we faced the tremendous uncertainty and the hardships of the pandemic. And while the challenges of the pandemic continue, I believe Hami's commitment to proactive asset management has significantly helped both the borrower and the bank. Balancing these positive and encouraging trends with the prudence, our allowance for loan losses stood at 1.78% of loans excluding PPP. We also continue to have a separate allowance for possible losses and accrued interest receivable for loans currently or previously modified under the CARES Act, now down to 0.7 million. As a result of our conservative allowance, strong capital position, our track record of a successful asset management, I'm confident we are well positioned to manage asset quality as we emerge from the pandemic and the economy continues to reopen. With that, I would like to turn the call over to Anthony Kim, our Chief Banking Officer, to discuss the second quarter loan production results and deposit gathering activities. Anthony?