Hanmi Financial Corporation

Ladies and gentlemen, welcome to Hennemey Financial Corporation's second quarter 2024 conference call. As a reminder, today's call is being recorded for replay purposes. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Now, I would like to turn the call over to Ben Brockowitz, Investor Relations for the company. Please go ahead.

Thank you, Joe, and thank you all for joining us today to discuss Harmony's second quarter 2024 results. This afternoon, Harmony 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 Harmony.com. I'm here today with Bonnie Lee, President and Chief Executive Officer of Harmony Financial Corporation, Anthony Kim, Chief Banking Officer, and Ron Santarosa. Chief Financial Officer. Bonnie will begin today's call with an overview. Anthony 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 up for your questions. Before we begin, I would 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 these 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-Q. With that, I would now like to turn the call over to Bonnie Lee. Bonnie, please go ahead.

Thank you, Ben. Good afternoon, everyone. Thank you for joining us today to discuss our second quarter 2024 results. HOMI delivered solid results in the second quarter, notwithstanding a challenging banking environment. Our team continues to execute our strategy well, always staying true to our core relationship banking model, and we remain focused on diversifying and expanding our loan portfolio and deposit franchise. This two-prong approach enabled us to expand our market share further during the second quarter. Here are some highlights of the second quarter. Net income was $14.5 million, or $0.48 per diluted share. Our return on average assets was 0.77%, and then return on average stockholders' equity was 7.5%. New loan production increased by 17% quarter over quarter. Importantly, our asset quality metrics have remained consistently strong. Demand deposits grew 1.4% from the prior quarter and now comprise 31% of total deposits. Non-interest income increased by 4.2% from the first quarter. And finally, non-interest expense declined 3.2%, primarily driven by a decrease in salaries and benefits from seasonally lower employer taxes and capitalized labor costs associated with our investment in a new loan origination system. Looking in more detail at the 17% increase in our new loan production, Of a particular note was the 77% increase in SBA loan production attributable to increased business activity and our investments in talented bankers. Additionally, CNI production increased by 16% on a sequential basis and 62% year-over-year, which contributed to a 3.6% increase in CNI portfolio. While loan production was strong, loans were flat, but compared to the first quarter due to a higher level of payouts and then continued sales of residential mortgage loans. Deposits were relatively stable. On an encouraging note, we grew demand deposit accounts by 5.6% on an annualized basis, and we are seeing margin stabilization. During the second quarter, we grew non-interest income and employed rigorous expense management. Turning to asset quality, we continue to exercise stringent credit management during this quarter. As a result, our asset quality remains excellent, with the current size loans declining by over 17% compared to the first quarter. Additionally, net charge-offs continue to be low at 12 basis points of average loans annualized. For the second consecutive quarter, we sold residential mortgage loans into the secondary market, We also sold SBA loans during the quarter, and both actions supplemented our non-interest income. We anticipate capitalizing an opportunity to sell more residential mortgage loans contingent on market conditions. This will further diversify our revenue base and enhance our balance sheet. I'm also pleased to report that our strategic growth initiatives are bearing fruit. Our COVID Korea initiative continues to perform well and in line with our expectations. with an increasing number of customer referrals. This serves as a strong sign of confidence in our team's capabilities. In the second quarter, corporate career production was slightly higher than the first quarter at 55 million and 58 million in new deposits. Corporate career currently represents approximately 14% of our total loans and 14% of our total deposits. Our estimated loan production reached $55 million, exceeding our quarterly production target of $40 to $45 million. Going forward, we expect production to be more in line with this quarterly target. During the second quarter, we completed the consolidation of three branch locations, which Bonnie and Ron will discuss later. As a reminder, these actions are an integral part of our strategy to maximize growth and generate cost savings. We will continue to evaluate future opportunities to optimize our branch footprints. Finally, as a part of continuing investment in people, process, and technology to support our growth, we completed a more than a year-long effort to implement a new loan origination system. This new system offers well-rounded solution where all of our lending processes now occurred under one platform. The new loan origination system is expected to improve efficiency for underwriting and closing commercial loans and enhance the customer experience through loan origination. I'll now turn the call over to Anthony Kim, our Chief Banking Officer, to discuss the second quarter loan production and deposit activity in more detail. Anthony?