Hanmi Financial Corporation

Ladies and gentlemen, welcome to Hanmi Financial Corporation's third 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 for joining us today. With me to discuss Honme Financial's third 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 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 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 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 in our Form 10-K. This afternoon, Hanmi issued a news release outlining our financial results for the third 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 hanmi.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 our 2021 third quarter results. It was another excellent quarter for HOMME. Our results for the third quarter reflect continuous strong growth in loan and lease production, a solid uptake in deposits, improving credit quality, and record earnings. Our consistently improving performance throughout the year highlights the overall strength of the HOMME franchise, our robust loan production platform, and our ability to develop deep relationships with both new and existing customers. Momentum continues to build across the enterprise, and Hanmi remains very well positioned to generate profitable growth as we look ahead to the fourth quarter and into 2022. Our strong operational execution helped drive substantial growth in earnings. We reported net income of $26.6 million, or $0.86 per diluted share, for the third quarter. Net income was a new single-quarter record and increased 20% over the prior quarter and nearly 63% from a year ago. Our third-quarter earnings were driven by significant increase in revenues as well as a $7.2 million recovery of a credit loss expense due to strengthening asset quality. Overall, non-interest expense remained well-controlled with a modest increase due to higher commissions and the strong loan production and higher advertising and promotional expenses. Now, let's move on to loan production and deposit gathering. During the third quarter, our loan production platform was firing on all cylinders with the loan production growing to $500 million in the quarter, breaking the single-quarter record established in the prior quarter when excluding PPP loan origination. We also continue to benefit from an increase in business activity as economies in our key markets emerge from the pandemic. In total, our loan balance grew at a 14% annualized rate during the quarter, ex-PPP. In addition, deposits were up solid 7% annualized from the prior quarter and similar to recent prior periods. Growth was led by non-interest-bearing DDAs which now comprise 44.5% of a total deposit, up from nearly 42% last quarter and nearly 38% from a year ago. Turning next to an update on modified loans and other measures of asset quality, I continue to be encouraged by the performance of our portfolio and the positive trends we are seeing. As of September 30th, Loans modified under the CARES Act declined 83% from the second quarter to end the third quarter at just $12 million. Overall, I am extremely pleased with our credit management activities during the challenging times we encountered throughout the pandemic and our team's ability to effectively weather the crisis. Given that the modified loans have become a minor part of our loan portfolio, we will no longer comment on them in future quarters. The positive trends we are seeing in other measures of asset quality further demonstrate PAMI's comprehensive approach to credit management, our frank and timely assessment of credit grades, and our ability to seek positive resolution through payments and payoffs. Non-performing loans declined by nearly 60% from the second quarter and 74% since the end of 2020. As of September 30th, Non-performing loans were just 44 basis points of total loans. We are also continuing to see loan upgrades as well as payoffs and payments. Balancing these positive and encouraging trends with a caution, our allowance for loan losses remains strong at 1.5% of loans. As we look ahead, I remain very confident in our ability to effectively manage credit quality. With that, I would like to turn the call over to Anthony Kim, our Chief Banking Officer, to discuss the third quarter loan production results and deposit gathering activity. Anthony?