Hanmi Financial Corporation

Ladies and gentlemen, welcome to Harmony Financial Corporation's second quarter 2022 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. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please press star and zero on your telephone keypad. I'd now like to turn the call over to Larry Clark, investor relations for the company. Please go ahead, sir.

Thank you, operator, and thank you all for joining us today to discuss HOMI's second quarter 2022 results. This afternoon, HOMI 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 at HOMI.com. I'm here today with Bonnie Lee, President and Chief Executive Officer of HOMNY Financial Corporation, Anthony Kim, Chief Banking Officer, and Ron Santa Rosa, Chief Financial Officer. Bonnie will begin today's call with an overview. Anthony will discuss loan and deposit activities, and Ron will provide details on our financial performance. And then Bonnie will provide closing comments before we open the call up 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 a 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 second quarter 2022 results. I am very pleased to report that we delivered another quarter of outstanding performance and results for our customers and our shareholders. A performance demonstrating excellent execution in all the facets of our business, from loan production to deposit gathering, from credit management to operations. All of our employees kept their focus on our strategic goals. Net income was $25.1 million, or $0.82 per diluted share, up 21% from our first quarter and 13% from a year ago. As you can see, our net income was solidly higher both sequentially and year over year. Our new loan production for the second quarter was exceptionally strong at $642 million, driving the increase in our loans. Loans grew 6% on a linked quarter basis and 17% from a year ago. And this growth occurred while applying our conservative underwriting standards. Our deposits were up 3% sequentially and 6% year over year, where core demand-deposit relationships drove that growth. The growth in loans favorably shifted our earnings-asset mix, and the growth in our core deposits limited the increase in our overall deposit costs, combining to drive quarter-over-quarter net interest income up by 16% and our net interest margin up by 45 basis points. Notably, we addressed the compensation and incentives for our employees during the second quarter, while maintaining disciplined expense management, leading to a nearly 1% decline in non-interest expense quarter-over-quarter. And importantly, our overall asset quality metrics remain excellent. All in all, these factors enabled us to generate solid earnings for the quarter and to deliver one of Hanmi's strongest of first halves to a year. We continue to make excellent progress on our strategic initiatives to grow and diversify our business. The investments we made over the past several quarters in talent and technology continue to fuel our growth. as was evident in the second quarter. We generated record loan production in our residential mortgage platform and in our equipment finance and our SEA groups. The priority we placed on each of these key business lines is yielding the strong results we were seeking. For example, our residential mortgage business represented 17% of our total loan production, exceeding our ramp-up targets of 10% to 15%. Our SBA group generated record production of $68 million during the quarter, driven by intense focus on our small business relationships. And we continue to gain solid traction with our corporate career initiative, where both loans and deposits grew meaningfully quarter over quarter. The results are clear. Our growth strategies are working. Finally, our overall credit quality continues to be excellent. our delinquencies remain low, our non-accrual loans remain low, and our net charge-offs remain low. Our special mention and classified loans fell 33% from the prior quarter and 42% from a year ago. Our allowance for credit losses, however, remains strong at 1.29% of loans as we stand watchful for the possible effects of the uncertainties that could arise in this environment of a rising interest rate. Altogether, these results reflect our focus on high-quality loans, discipline underwriting across credit cycles, and vigilant credit administration practices. We remain prudent in our approach, and we will not sacrifice credit quality as we grow. With that, I'll turn the call over to Anthony Kemp, our Chief Banking Officer, to discuss the second quarter loan production and deposit gathering in more detail.