Hanmi Financial Corporation (HAFC)

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Hanmi Financial Corporation (HAFC)

Q2 2008 Earnings Call

July 29, 2008 4:45 pm ET


Jay S. Yoo - President and Chief Executive Officer

Brian Cho - Executive Vice President and Chief Financial Officer


James Abbott - FBR

Brett Rabatin - FTN Midwest

Erika Penala - Merrill Lynch

Don Worthington - Howe Barnes and Hoefer

Bill Chen - Barrington Partners



Good afternoon and welcome to the Hanmi Financial Corporation 2008 Second Quarter Results Conference Call. At this all participants are in a listen-only mode, later will conduct a question-and-answer session and instructions will at that time. [Operator Instructions] This conference call is being recorded today, July 29th, 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, anticipate, believes, estimates, predicts, potential or continue or the negative of such terms.

Although we believe that expectations reflected in the forward-looking statements are reasonable based upon the current judgment, we cannot guarantee future results, levels of activity, performance, or achievement. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance and 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 generally beyond the control of the Hanmi Financial. Accordingly, actual results may differ materially from those expressed in, implied or projected by the forward-looking information and statement. 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 those anticipated results or expectations expressed in the forward-looking statements, please see the company’s filings with the SEC. Representing the company today are Jay S. Yoo Hanmi’s President and Chief Executive Officer; and Brian Cho, Executive Vice President and Chief Financial Officer.

I would now like to turn the call over to Mr. Yoo. Please go ahead, sir.

Jay S. Yoo - President and Chief Executive Officer

Thank you, Eric. Good afternoon everyone and thank you for joining us today. With me is Brain Cho our Chief Financial Officer. Today is my first opportunity to speak with you as Hanmi’s New President and Chief Executive Officer. Although I have been with Hanmi less than two months, I have gained a good understanding of the bank and the problems it faces. I have loan debt at Hanmi like with peers, this is a number of serious challenges in the month ahead.

In fact, I had just arrive as Hanmi’s New President and CEO, then (inaudible) bank collapsed. As we can imagine, we had Hanmi like many of our fellow bankers in Southern California have had the adverse customers concerns regarding the soundness of the bank and the safe deal with the party.

I am pleased to say that with few exceptions we have been successful. I think that our position as our country is the largest Korean American bank firmly our capital leverage and liquidity have also been (inaudible). In a less couple of weeks we have assumed no major other changes in the party. Nonetheless it is important that we strengthen the deposit base, our asset value to address this subject. The greater challenge here is mitigating the deterioration in credit quality that we have experienced over the last year or so.

Before turning to the personal credit quality let me acknowledge that second quarter operating reserves were clearly disappointing, including a non cash goodwill impairment charge of 107.4 million we reported a net loss of 105.5 million over $2.40 per share.

As noted in reconciliation table that appears in today’s press release, the non-GAAP basis that is excluding the impairment charge we earned 1.8 million or $0.04 per diluted share. As we pointed out in today’s release the impairment charge is non-cash item that was brought about by the recent decline in the market value of our common stock. We are certainly not happy about it but it is what repeating that it has no effect on the bank’s tender equity or its liquid position and it has no effect on our operations.

The second quarter provision for loan notice was 19.2 million to refresh (inaudible) by provisioning on such losses. (Inaudible) the loan note reserve was $63 million. In order to put those contributing to the disappointing second quarter results was $42.5 million increasing delinquencies. For the $105.8 million at March 31st, to $138.4 million at June 30th, $22.2 million of the $22.5 included in delinquency is related to the link of the C&I secured by private (inaudible) in California. Included in the second provision for credit losses the $3.6 million associate with this loan. Also included in the $32.5 million increase to delinquent CRE loans, totally 4.9 million, one is to our detailed (inaudible) the other is a single tenanted rental property. For those non performing loans attributed for these was 120.2 million a net increase of 23.5 million over the prior quarter.

Included here is 4.2 C&A loan that became delinquent on June 30th, although our loan is not yet 90 past the due it is a large loan so are the payments that we continue to accrue. Therefore we decided to reconsolidate and have added it to the non-performing loan. 51.6 million or 46% of non-performing loans were construction loan. This was initially unchanged from the prior quarter virtually the entire amount is related to the three projects. The largest is a 28 million condominium construction in Northern California followed by a 17 million low income housing loan in Los Angeles.

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