Hope Bancorp, Inc.

Good afternoon and good morning, and welcome to the HopeBank Corp first quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need 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. I would now like to turn the conference over to Angie Yang, Director of Investor Relations. Please go ahead.

Thank you, Gary. Good morning, everyone, and thank you for joining us for the Hope Bancorp 2023 First Quarter Investor Conference Call. As usual, we will be using a slide presentation to accompany our discussion this morning, which is available in the Presentations page of our Investor Relations website. 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 may differ materially from actual results due to certain risks and uncertainties. In addition, some of the information referenced on this call today are non-GAAP financial measures. For a more detailed description of the risk factors and a reconciliation of GAAP to non-GAAP financial measures, please refer to the company's filings 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. 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 David Malone, who stepped in as our Interim Chief Financial Officer earlier this year. Peter Koh, our Chief Operating Officer, is here with us as usual and will be available for the Q&A session. And we also have here with us our new Chief Financial Officer, Juliana Kaliska. 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. Before I begin my presentation, I would just like to say a few words about how pleased we are to have Juliana on board as our new CFO. We have known Juliana since her days as a research analyst covering our predecessor banks, and while we have certainly undergone a transformation as Bank of Hope today, she is fitting right in and is up and running already. Now let's begin on slide three with a brief overview of our quarter. For the first quarter of 2023, our total deposits of $15.8 billion increased 1% quarter over quarter and 9% year over year. Bank of Hope ended the quarter with a strong balance sheet with high levels of capital and available liquidity. The company's total risk-based capital ratio increased to 12.25% at March 31 of 2023, up 28 basis points, quarter over quarter. In response to the banking industry disruption in mid-March, we substantially increased our cash and cash equivalents to $2.2 billion at March 31 of 23, up from $507 million in December 31 of 2022. This increase in unbalanced liquidity reflects Bank of Hope's conservative approach to risk management and was substantially funded through the use of the bank term funding program at a cost of 4.49 percent. The use of the bank term funding program is a positive contributor to net interest income. For the first quarter of 2023, our net income was $39.1 million and our diluted earnings per share were 33 cents. Our return on average tangible equity was 9.9%. Now moving on to slide four for a review of our capital position. We continue to maintain robust capital ratios. All of our regulatory capital ratios are meaningfully above requirements for well-capitalized financial institutions. At March 31 of 23, our common equity tier one ratio was 10.75% of 20 basis points from year end. At quarter end, our company total risk-based capital ratio was 12.25% and our bank level total risk-based capital ratio was 12.06%. A lot of attention has been paid this quarter to pro forma capital. For us, after adjusting for allowance for credit losses and including hypothetical adjustments for investment security marks, all of our capital ratios remain very strong. I would also like to announce that our board of directors has declared a quarterly common stock dividend of 14 cents per share. Moving on to slide five. We closed the quarter with a significantly higher than usual level of cash and cash equivalents on our balance sheet, and we believe this was prudent in light of the heightened financial sector volatility. At March 31, our cash and cash equivalents were $2.2 billion, up from half a billion as of December 31 of 2022. At the end of the first quarter, our available borrowing capacity Together with cash and cash equivalents and unplatched investment securities was $8 billion, equivalent to 50% of our total deposits and well exceeding our uninsured deposit balances. During the first quarter, we repurchased $11 million of our convertible senior notes. We expect to pay off the remaining balance of $207 million in May with our excess cash. Our liquidity and capital positions will continue to remain strong following the payoff. Continuing to slide six, Bank of Hope has a granular deposit base with an average commercial account size of approximately $300,000 and an average consumer account size of approximately $50,000. Over a third of our balances are consumer deposits. Many of our depositors have had long-time relationships with Bank of Hope or its predecessor banks. At March 31, the bank's uninsured deposit ratio improved to 38%, down from 41% at December 31 of 2022. Now moving on to slide seven. In the first quarter, we funded $569 million in new loans, which is lower than the preceding quarters and reflects changing customer demand in a higher interest rate environment. In the first quarter, we had $350 million of commercial and industrial loan production, which represented 61% of our total loan production. The average rate on our new loan production was 7.53% in the first quarter, up 82 basis points quarter over quarter, and up 399 basis points year over year. Moving on to slide eight, as of March 31, our loan portfolio was $15.1 billion, a decrease of 2% quarter over quarter. New loan production in the first quarter was offset by early loan payoffs, maturing commercial real estate loans, as well as a decline in the utilization of warehouse lines of credit. Year over year, total loans increased 7%. Our portfolio is well balanced among the major loan types of commercial real estate, commercial and industrial, owner-occupied commercial real estate, and consumer loans, which are predominantly residential mortgage loans. Our commercial and industrial loan portfolio is well diversified by industry. Moving on to slides 9 and 10 for an overview of our commercial real estate portfolio. Our commercial real estate loans are granular, well diversified by property type, and have low loan-to-values across all segments. The weighted average loan-to-value ratio of our commercial real estate portfolio is 53.3%. The vast majority of our commercial real estate loans are full recourse with personal guarantees. Office commercial real estate is a small segment of 465 $5 million, representing 3% of total loans and with no central business district exposure. Our average commercial real estate loan size is $1.9 million, and as you can see in the chart on slide 10, we have only eight loans over $30 million in size. You can also see that the low loan-to-value ratios are consistent across size segments. Only 1% of our commercial real estate loans have a loan-to-value ratio of over 75%. With that, I will ask David to provide additional details on our financial performance for the first quarter.