Hanmi Financial Corporation

Ladies and gentlemen, welcome to HONME Financial Corporation's first quarter 2022 conference call. As a reminder, today's call is being recorded for replay purposes. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I would now like to turn the call over to Larry Clark, Investor Relations for the company. Please go ahead.

Thank you, Alex, and thank you all for joining us today to discuss HONME Financial's first quarter 2022 results. This afternoon, HOMNY issued its earnings release and quarterly supplemental slide presentation to accompany today's call. Both documents are available in the IR section of the company's website. I'm here today with Bonnie Lee, President and Chief Executive Officer of HOMNY Financial Corporation, Anthony Kim, Chief Banking Officer, and Ron Centeroza, Chief Financial Officer. Bonnie Lee will begin today's call with an overview. Anthony Kim will discuss loan and deposit activities. Ron will provide details on our financial performance. And then Bonnie will provide closing comments before we open the call to your questions. Before we begin, I'd like to remind you that today's comments may include forward-looking statements under the federal securities laws. Forward-looking statements are 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 may differ materially from those contemplated by our forward-looking statements, which involve risks and uncertainties. Discussion of the factors that could cause our actual results to differ materially from those forward-looking statements can be found in our SEC filings. including our reports on Forms 10-K and 10-Q. 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. With that, I would now like to turn the call over to Bonnie Lee. Bonnie, please go ahead.

Thank you, Larry. Good afternoon, everyone. Thank you for joining us today to discuss our first quarter 2022 results. Hanmi had a very, very strong start to the year. Focused execution across the board helped us to deliver solid earnings in the first quarter fueled by healthy loan production, net interest margin expansion, excellent credit quality, and disciplined expense management. We continue to develop new client relationships and strengthen ties with existing customers, a hallmark of Hanmi's community banking approach. We reported the first quarter 2022 net income of $20.7 million or $0.68 per diluted share, down from our fourth quarter, but up nicely from $16.7 million or $0.54 per diluted share in the first quarter of 2021. Our first quarter return on average assets was 1.22%, and our return on average stockholders' equity was 12.74%. I am very pleased with the progress we are making on our strategic initiatives. These initiatives include focusing on diversifying our loan portfolio by ramping up the contribution of our residential mortgage business to loan production, increasing our SBA loan production, and expanding our corporate career initiative. We are making solid progress on our residential mortgage platform, which we launched in 2021. Through this platform, we originate and acquire non-qualified residential loans and establish mortgage warehouse lines. This initiative is effectively diversifying our loan portfolio by adding a lower-risk asset class that we can grow profitably for years. In the first quarter, our residential mortgage loans represented 12% of total loan production, well within our stated goal of 10% to 15%. This progress reflects our ability to leverage and expand our community ties. In just over a year, we have achieved impressive scale with this program, with the loan production up by $48 million year-over-year. We continue to expand our SBA lending business, where we originated $42 million in SBA 7A loans in the quarter, exceeding our target. We also continue to gain meaningful traction with our Corporate Career Initiative. We launched this initiative in 2019 to develop and expand relationships with the Korean companies domiciled here in the United States. This portfolio grew 4.7% sequentially from the fourth quarter to $663 million and is up 23% year over year. The success of this initiative is rooted in our bankers' strong relationship throughout their communities. Importantly, as we continue to grow and strengthen our business with the U.S. corporate Korean clients, we're also cultivating corporate client relationships in multiple ethnic communities across our coast-to-coast footprint. Overall, our growth strategies are working. Despite a competitive lending environment, we delivered strong net loan growth of 3.6% in the first quarter. Additionally, total loan production more than doubled from the prior year first quarter when we excluded a year ago second draw PPP loan production. Our strategic growth initiatives, along with a strong momentum across our diverse business lines, fueled our loan and lease growth during the quarter. Our SBA and leasing businesses were solid contributors to this performance, complementing strength in commercial real estate lending and our growing commercial and industrial portfolio. We are also making good progress on our deposit gathering initiatives, particularly as we continue to expand our corporate relationships. These deposits tend to be sticky and are a good source of low-cost liquidity to fund our loan growth. Our DDAs continue to grow in the quarter, and were up 4% from the fourth quarter and 23% year over year. These core deposits now represent just over 46% of a total deposit and help contribute to our very attractive total funding costs. In the first quarter, we grew net interest income by more than 5% when we exclude the impact of the one-time charge for the redeeming our 5.45% subordinated notes. This growth was driven by both the solid increase in loans as well as an expanding net interest margin. We believe that we are positioned well to see further improvement in both of these metrics, given our strong loan pipeline and our asset-sensitive balance sheet. Finally, our credit performance remains excellent, reflecting our focus on high-quality loans and thorough underwriting across credit cycles. Our comprehensive approach to credit management, including our ability to secure payments and payoffs, has led to improved trends in asset quality. Further, we remain confident in our ability to effectively manage credit quality going forward. With that, I'll turn the call over to Anthony Kim, our Chief Banking Officer, to discuss first quarter loan production and deposit gathering in more detail.