Hanmi Financial Corporation (HAFC)

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Hanmi Financial Corporation (HAFC)

Q3 2008 Earnings Call Transcript

October 23, 2008 4:45 pm ET


Jay Yoo - President and Chief Executive Officer

Brian Cho - Executive Vice President and Chief Financial Officer

John Park - Executive Vice President, Chief Credit Officer


Ella Blister

Elana - Merrill Lynch

Hugh Miller - Sidoti & Company

Brian - KBW

Sean Ryan - Sterne, Agee & Leach



Good afternoon. Welcome to Hanmi Financial Corporation 2008 Third Quarter Results Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). This conference call is being recorded today, October 23, 2008.

This call may contain forward-looking statements, which are made under the SEC's Safe Harbor rules for forward-looking statements. Forward-looking statements relate to the Company's future operations, prospects and businesses, and are identified by words such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," believes," "estimates," "predicts," "potential" or "continue," or the negative of such terms.

Although we believe that the expectations reflected in the forward-looking statements are reasonable based upon our current judgment, we cannot guarantee future results, levels of activity, performance or achievements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statements.

Such statements are subject to risks and uncertainties, many of which are difficult to predict and are generally beyond the control of Hanmi Financial. Accordingly, actual results may differ materially from those expressed and/or implied or projected by the forward-looking information and statements. Hanmi undertakes no obligation to update any forward-looking statements in the future.

For additional information on factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements, please see the Company's filings with the SEC.

Representing the Company today are Jay Yoo, Hanmi's President and Chief Executive Officer; Brian Cho, Executive Vice President and Chief Financial Officer and John Park, Executive Vice President and Chief Credit Officer.

I'll now turn the call over to Mr. Yoo. Please go ahead, sir.

Jay Yoo

Thank you. Good afternoon everyone and thank you for joining us today. When I spoke with you at the end of July, I alluded to the fact that Hanmi, like its peers, faced a number of serious challenges in the months ahead. Little did any of us know just how serious those challenges would be. Nonetheless, we are able to report considerable progress in the third quarter.

Net income was $4.3 million or $0.09 per diluted share compared to non-GAAP net income of $1.8 million or $0.04 per diluted share in the second quarter. The second quarter non-GAAP number you will remember related to the $107 million non-cash goodwill impairment charge that was obtained by the decline in the market value of our common stock. I refer you to the reconciliation table that appears in today's release.

When we last spoke, I noted that we were in the process of addressing two critical areas. One was strengthening and centralizing the loan underwriting and approval processes. The other was the strengthening of existing partnerships and procedures regarding the monitoring of loans. These are really two sides of the same coin and on both counts we have made considerable progress. Here we believe that the best defense is a good offense, a good reason to believe that we are making progress in enhancing asset quality. As John Park, our CCO will explain in more detail, we have seen improvements in both delinquent loans and non-performing loans.

New loan production in the third quarter was modest, in particular due to the weakness in demand that mirrors the weak economy and in part due to our bank debt that is selective in accepting new loan applications.

We won't identify potentially troublesome loans to ensure that they never make it onto our books. Similarly, we are rigorously monitoring existing loans, especially in cases where the review process brings to slight weaknesses, which if not addressed in a timely fashion will jeopardize the status of the loan downstream.

I have said this before, but it is worth repeating. No single factor is more important for the management and the board than improving credit quality. A close second, however, is improving the efficiency of the bank's operations. Here too are making considerable progress. The previously announced reduction in head count has been completed and has effected to result in annual savings of $4 million to $5 million, which will begin to be realized in the first quarter. With approximately 10% fewer employees, we have also consolidated office space and will benefit from a slight reduction in these expenses.

In short, we are leaner and more tightly focused organization than we were just three months ago. With the addition of John Park as CCO in the beginning of September, we finally have first rate senior management team in place; [John] Brian Cho, our Chief Financial Officer; Joon Hyung Lee, our Chief Marketing Officer; John [Hutching] our Chief Risk Officer and Greg Kim, our Chief Administrative Officer.

It remains the case, however, that optimizing operation efficiency is always a work in progress. In particular, credit monitoring and risk management system will be at the top of the list, followed closely by a program to deal the deposit base. The good news is that our own hope in deposit growth loan at the recent financial turmoil appears to have a steady life.

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