Hope Bancorp, Inc.

Good day, and welcome to the Hope Bank Core 2022 Third Quarter Earnings Conference Call. All participants will be in a listen-only mode today. Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded today. I would now like to turn the conference over to Angie Yang, Director of Investor Relations. Please go ahead.

Thank you, Joe. Good morning, everyone, and thank you for joining us for the Hope Bancorp 2022 Third Quarter Investor Conference Call. As usual, we will be using a slide presentation to accompany our discussions this morning. If you have not done so, please visit the presentations page of our Investor Relations website, to download a copy of the presentation. Or if you are listening in through the webcast, you should be able to view the slides from your computer screen as we progress through the presentation. Beginning on slide two, let me begin with a brief statement regarding forward-looking remarks. The call today may contain forward-looking projections regarding the future financial performance of the company and future events. These statements are based on current expectations, estimates, forecasts, projections, and management assumptions about the future performance of the company as well as the businesses and markets in which the company does and is expected to operate. These statements constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. We refer you to the documents the company files periodically with the SEC, as well as the safe harbor statements in our press release issued yesterday. Hope Bancorp assumes no obligation to revise any forward-looking projections that may be made on today's call. The company cautions that the complete financial results to be included in the quarterly report on Form 10-Q for the quarter ended September 30, 2022 could differ materially from the financial results being reported today. In addition, some of the information referenced on this call today are non-GAAP financial measures. Please refer to our 2022 third quarter earnings release for the reconciliation of GAAP to non-GAAP financial measures. Now we have allotted one hour for this call. Presenting from the management side today will be Kevin Kim, Hope Bancorp's Chairman, President, and CEO, and Alex Koh, Senior Executive Vice President and Chief Financial Officer. Peter Koh, Senior Executive Vice President and Chief Operating Officer, is here with us as usual and will be available for the Q&A session. With that, let me turn the call over to Kevin Kim. Kevin?

Thank you, Angie. Good morning, everyone, and thank you for joining us today. Let's begin on slide three with a brief overview of our financial results. We delivered a strong performance in the third quarter, which reflects the improved earnings power of our franchise and ability to perform well in a variety of economic environments. Despite the macroeconomic headwinds of inflationary pressures and concerns about a potential recession, We generated an increase in earnings per share and pre-provision net revenue compared with the prior quarter, with all of our PPNR profitability metrics improving as well. We reported net income of $53.7 million, or 45 cents per share in the third quarter, up from 43 cents in the preceding second quarter, while our pre-provision net revenue increased 12 percent to $82.6 million, a record level for the company. Most importantly, due to strong loan production, margin expansion, enhanced efficiencies, and meaningfully improved asset quality, we are generating profitable growth with our pre-provisioned net revenue return on average assets increasing to 1.79% from 1.65% in the preceding quarter. while our pre-provision net revenue return on average equity increased to 16.26% from 14.66% in the prior quarter. Moving on to slide four. In the third quarter, we funded $1.35 billion in new loans, which was 5% higher than the preceding quarter, a 34% increase over the third quarter of 2021, and another record level for the company. Our strong loan production in the third quarter resulted in 6.5% loan growth quarter over quarter, over 11% year to date. As expected, given the investments we have made to build our corporate banking group, commercial lending was the largest contributor to our overall loan production, accounting for 55% of our total loan fundings in the third quarter. We dispersed a record $747 million in new commercial loans during the third quarter and the average rate of new commercial loans increased 97 basis points over the preceding quarter. Within the corporate banking group, we are getting strong contributions across industries and geographies, resulting in well-diversified loan production. In the third quarter, we had particularly strong contributions from our Texas region, which focuses on general middle market lending, our healthcare group, which joined us in mid-2021, and our teams that focus on financial institutions and telecom industry. In terms of commercial real estate, while we expected to see a softening in demand due to higher interest rates, it did not soften as much as we thought. We had $534 million of commercial real estate loan production in the third quarter, which was down slightly from the preceding second quarter and accounted for 40% of total originations. But the average rate of new CRE loans increased 99 basis points over the preceding second quarter. Overall, we saw increasing trends in loan pricing in all asset classes during the third quarter. Combined with the higher mix of commercial loan production, this resulted in our average rate on total loan production increasing by 111 basis points compared with the preceding second quarter. Moving on to slide five, the investments we have made over the years to build our corporate banking group and establish expertise in new asset classes and vertical markets have resulted in a material transformation of our loan portfolio to a significantly lower risk profile. If we look back to three years ago, at September 30 of 2019, commercial loans represented 22% of our total loan portfolio. As of September 30 of 2022, commercial loans have increased by $2.5 billion, nearly doubling in volume, and now represent 33% of our total portfolio. Our corporate banking group, has been the primary driver of increasing volumes of commercial loan fundings and a continued shift in our client base towards larger, stronger commercial enterprises, as well as a more diversified CNI portfolio. We have also seen a significant transformation of our CRE portfolio during this same time period. Commercial real estate loans accounted for 71% of our total portfolio at September 30 of 2019. Having increased by less than $1 billion over the course of three years, CRE loans as a percentage of total loans declined to 61% as of September 30, 2022. More importantly, we are making good progress in creating a more diversified, lower-risk portfolio. We continue to see solid results from the multifamily lending team we have built, which accounted for 46% of our total CRE loan originations in the quarter. As a result, multifamily continued to grow as a percentage of our total CRE loans, representing 13% as of September 30th, 2022. In contrast, our hotel-motel portfolio at the end of the third quarter represented just 11% of our CRE portfolio. down significantly from 19% three years ago. Now, I will ask Alex to provide additional details on our financial performance for the third quarter. Alex?