Hanmi Financial Corporation (HAFC) Q4 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the Hanmi Financial Corporation's Year-End 2014 Conference Call. As a reminder, today's call is being recorded for replay purposes. [Operator Instructions] I would now like to introduce Ms. Christina Lee, First Vice President of Investor Relations and Corporate Strategy. Please go ahead.

Thank you, Adam, and thank you for all joining us today. With me to discuss Hanmi Financial's full year 2014 highlights are C.G. Kum, our President and Chief Executive Officer; Bonnie Lee, Chief Operating Officer; Michael McCall, Chief Financial Officer. Mr. Kum will begin with an overview of the full year 2014 and Mr. McCall will then provide more details on our operating performance and credit quality. At the conclusion of the prepared remarks, we'll open the session for questions. In today's call, we may include comments and forward-looking statements 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 could be different from those expressed or implied by our forward-looking statements, which involve risks and uncertainties. The speakers on this call claim the protection of the Safe Harbor provisions contained in Securities Litigation Reform Act of 1995. For some factors that may cause our results to differ from our expectations, please refer to our SEC filings, including our most recent Form 10-K and 10-Qs. In particular, we direct you to the discussion in our 10-K of certain risk factors affecting our business. This morning, Hanmi Financial issued a news release outlining our financial results for the full year 2014, which can be found on our website at hanmi.com. I'll now turn the call over to Mr. Kum.

Thank you, Christina. Good afternoon, everyone. We want to thank all of you for joining us today to discuss our 2014 full year results. We also want to thank you for patiently waiting for the scheduling of this call to enable us to record adjustments to our provisional purchase accounting estimates. Michael McCall will shortly discuss the 2014 earnings and the impact of upward adjustment to $14.6 million to provision of buying and purchase gain associated with the acquisition of Central Bancorp, Inc. 2014 was a transformative year for Hanmi highlighted by the closing of Central Bancorp, Inc., purchased on August 31, 2014. With the acquisition complete, we currently have 49 banking offices and 5 loan production offices serving communities in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado and Washington. We ended 2014 with approximately $4.2 billion in assets, $2.8 billion in gross loans and $3.6 billion in deposits. As a result, Hanmi now has the leading deposit market share among Korean-American banks in Illinois and Texas, along with substantial market shares in California and Virginia. Importantly, Hanmi is the first Korean-American bank to add to its core Korean-American customer base by expanding into broader Asian and mainstream communities. Geographic and customer diversification that has resulted from the CBI acquisition enables us to have additional growth levers to pull to continue our growth trajectory. We are quite pleased with our operational achievements of 2014 and are confident that the momentum we carry into 2015 positions us well for future growth. Looking at our 2014 full year results which reflect 8 months of standalone operations of legacy Hanmi and 4 months of combined operations following the completion of the acquisition, we reported net income of $49.8 million or $1.56 per diluted share. Our 2014 net income represents a 24.8% increase over the prior year. Our expanding profitability in 2014 reflects the initial benefits from the CBI acquisition and continuous strong organic growth of Hanmi's loan portfolio which grew 25.7% to $2.7 billion from the prior year. We are pleased to report that the new loan production for legacy Hanmi in 2014, including purchase loans, totaled $725.7 million. We'd also like to mention that C&I line of credit commitments increased 31.1% compared to the prior year. The growth in C&I loans represents our continued emphasis on business banking strategy to diversify our loan portfolio. Overall, the loan pipeline at year-end remains strong. Michael will provide additional details in his remarks. But as part of the integration process, during 2014, we recorded additional merger-related expenses totaling $6.6 million and $7.6 million in professional fees, which included expenses to strengthen our infrastructure and to meet heightened control standards. We maintained solid asset quality in the fourth quarter. Classified loans, excluding purchase credit impaired loans, declined 42% year-over-year. The allowance for loan losses at the end of 2014 was $52.7 million, representing 1.89% to gross loans and 206.44% of NPLs compared to 2.58% of gross loans and 422.42% of NPLs in the prior year. Combining the 2 institutions has been a complex undertaking, particularly with branches from coast-to-coast. However, we are pleased with the progress of the integration. All integration activities are on track and the system convergence is scheduled to be completed this week. As the integration will be completed in the first quarter of 2015, the first quarter financial data will be negatively impacted. However, by the end of the first quarter 2015, we will have complete the closing of the 3 legacy United Central Bank branches and the rightsizing of personnel. From these 2 endeavors, we expect to realize annual savings of approximately $5.6 million. With the hiring of Regional Presidents for Texas and Illinois, we are also poised to implement growth initiatives in our new markets in 2015. With that, I'd like to turn the call over to Michael McCall, our Chief Financial Officer, to discuss the fourth quarter operating results in more detail. Michael?

Thank you, C.G., and good afternoon, everyone. I will discuss our financial results for the full year of 2014 in more detail, and we'll also discuss selective fourth quarter items. As noted in our press release, we are currently in the process of completing our accounting for the acquisition of Central Bancorp, Inc. As of September 30, 2014, Hanmi recorded the acquisition based on provisional acquisition accounting estimates with the expectation that these estimates would be refined during the measurement period. The provisionally recorded acquisition accounting estimates were refined during the fourth quarter related to certain valuation estimates. The total amount of these retrospective adjustments was $8 million, of which $5.0 million related to the resolution of certain tax matters associated with the acquisition and $1.9 million after tax dollars related to loans. Under generally accepted accounting principles, measurement period adjustments are accounted for as retrospective adjustments as of the date of the acquisition and do not require the previously issued September 30, 2014 financial statements to be restated. However, when we report comparative financial information related to the third quarter of 2014, we have to revise the September 30 financial information retrospectively to reflect the adjustment as if they had been recorded as of the acquisition date. Prior to the issuance of this earnings release, we were unable to revise the third and fourth quarter financial information to reflect the retrospective adjustments due to time constraints. We expect to file an 8-K that details our third and fourth quarter results within the next 2 to 3 weeks. As C.G. noted, it is important to mention that for the full year 2014, results included 4 months of combined Hanmi and CBI operations and 8 months of legacy Hanmi operations. We generated $122.7 million in net interest income before provision for loan losses in 2014, which was up from $105.6 million or 16 2 -- 16.2% in 2013. The increase in 2014 was due primarily to loan growth and the acquisition of CBI. We recognized a $6.1 million negative provision for loan losses for the year compared to no provision in 2013. In the fourth quarter, we recorded a $1 million provision for loan losses which related to purchase credit impaired or commonly known as -- referred to as PCI loans, and $0 in provision for loan losses for legacy Hanmi and non-PCI loan portfolios. Net interest income in 2014 was $42.3 million compared to $27.9 million in the prior year. For the full year of 2014, the company recorded a $14.6 million bargain purchase gain associated with the CBI acquisition. Service charges on deposit accounts were $11.4 million for the year, of which $3.4 million related to the fourth quarter. Service charges were $2.9 million in the preceding quarter. For the full year 2014, gains on sales of SBA loans of $3.5 million was down from $8.0 million in 2013. The decline was primarily due to a lower volume of SBA loans sold in 2014. These gains resulted from the sale of $42.4 million of SBA loans in 2014 compared to sales of $94.4 million in 2013. During the fourth quarter, $15.4 million of SBA loans were sold compared to $14.3 million in the preceding quarter. In 2014, we recognized $1.4 million in disposition gains on PCI loans, which was recorded in the fourth quarter. We did not recognize any disposition gains in any prior period. On the expense side, noninterest expense was $98.6 million for 2014 compared to $71.0 million in 2013. The increase related primarily to salaries and employee benefits, merger and integration cost and an increase of professional fees. Salaries and benefits totaled $50.2 million in 2014 compared to $35.1 million in 2013. Merger and integration costs in 2014 totaled $6.6 million compared to $0.7 million in 2013. Professional fees increased to $7.6 million in 2014 compared to $5.3 million in 2013. During the fourth quarter, we recorded $4.8 million in professional fees compared to $1.4 million in the third quarter. The increase primarily was due to the significant costs incurred to strengthen our infrastructure and to meet heightened internal control requirements. For 2014, the provision for income taxes was $22.9 million or 31.5% compared to $22.8 million or 36.4% in 2013. The year-over-year decrease in our tax rate can be attributed to the bargain purchase gain. Excluding this gain and transaction-related costs, the effective tax rate for 2014 would be 39.4%. Moving to the balance sheet. Gross loans, excluding loans held for sale, increased 25.7% to $2.74 billion from $2.18 billion a year ago. Fourth quarter new loans totaled $224.8 million, which includes $20.5 million in loan purchases during the quarter. I'd also like to mention that as of December 31, 2014, legacy Hanmi's commercial line of credit commitments increased 13.3% over the preceding quarter, while the outstanding balance increased by 12.3%. And on a full year basis, legacy Hanmi's commercial line of credit commitments increased 31.1% over 2013 while the outstanding balance increased by 21.1%. On the deposit side. Core deposits were $2.65 billion or 74.4% of deposits, up by $641.0 million or 32.0% compared to a year ago. Year-over-year, our core deposit growth was fueled by 240 -- I'm sorry, $204 million increase in demand deposits, $222.2 million increase in MMD [ph] in dollar accounts and $209.6 million in other time deposits. Our overall deposits were up by $1.04 billion from a year ago. The percentage of noninterest-bearing deposits to total book deposits was down to 28.8% at December 31, 2014, from 32.5% at December 31, 2013. The cost of deposits declined to 0.47% in 2014 from 0.53% in the prior year. Net interest margin was 3.88% for the year, down 6 basis points from the prior year. The slight decline in NIM year-over-year was due primarily to declining market interest rates, which were partially offset by the impact of acquisition accounting adjustments. For the full year of 2014, NIM, excluding the impact of acquisition accounting adjustments, were 3.66%. A reconciliation table for NIM, excluding purchase accounting, can be found in our earnings release issued this morning. Now I'd like to turn the call back to C.G.

Thank you, Michael. In conclusion, I am pleased with our performance throughout the year which resulted in strong loan growth in 2014, consistently solid credit quality and the completion of our merger with CBI that, I believe, will help the economy to the next level of growth and profitability. Coming out of our strong performance in 2014, we carry significant momentum into 2015. These are extraordinarily exciting times for Hanmi, and we look forward to sharing our progress with you again next quarter. Thank you. Christina?

Adam, let's open the call for questions?

[Operator Instructions] Our first question comes from the line of Julianna Balicka with KBW. Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division: I have a couple of questions, and then I'll step back. One, C.G., you had previously -- your previous -- well, first of all, one, how much of the loan growth in this quarter came from L.A. versus coming in from the UCB acquisition? And related to that, when you look in into 2015, what is your current outlook for achievable loan growth? Previously, you had indicated that you'd like to achieve low double digits, 12%. So I want to check in on that number.

Yes. The -- basically, with exception of $1 million, all of the growth that -- in growth in loans for 2014 or, I should say, the fourth quarter, were from the legacy Hanmi side. So our -- the legacy Hanmi loan engine is humming at a pretty good clip. As it relates to prognosticating on the potential loan growth for 2015, I stand by the prior comment that I've made that we believe that we are eminently capable of achieving net loan growth in the low double digits. We came up with 12%, but it could be 11%, 12%, I guess, even 13% meets that criteria. But I'm very optimistic about the loan growth prospects given what the legacy Hanmi team has been able to achieve as well as the potential for additional loan growth coming from our Texas and Illinois regions. Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division: And on that topic, from the UCB franchise, what were the dollars there at year-end of loans? And in terms of looking out in 2015, should we think of that as a portfolio that's got some more runoffs as you resolve loans? Or are you looking at it to start to contribute positively to net loan growth even if not necessarily materially right away?

Yes. I suspect that in 2015, given the leadership that we had in Texas and Illinois, there should be a net increase. Having said that though, we do expect a continued runoff of the legacy UCB portfolio. We had roughly about a 20 -- $264 million total at the end of the year, which represents about a little over $20 million runoff during the fourth quarter. Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then skipping over to expenses. In terms of some of the onetime expenses that were onetime in nature, not necessarily directly M&A related, but indirectly related to franchise strengthening that you do not see recurring next year, could you help quantify for us that dollar amount? And related to that, previously, you had indicated a $25 million run rate of ongoing expenses once all the dust settles and cost savings are taken out. It's something we should look for, since I just want to get an update on that number.

You may have better memory than I do. But I don't recall putting out the $25 million number, to be honest with you. But I see the -- in the first quarter of this year, there would be a large dollar amount of the cost-saving initiatives that will be completed. Having said that though, it's -- we're also going to be incurring some expenses to put some additional personnel in place to generate loans in Texas and Illinois. All things said, I've been consistent in that we believe that by end of this calendar year, that we should be at the -- in terms of efficiency ratio, we should be in the low 50s. And so I think the cost saves and some revenue expense increase associated with the growth initiatives, well, in essence, ultimately lead to, I think, what will be about a low 50s efficiency ratio. Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, so I apologize if I spoke about the $25 million. But back to my first half of my question, in terms of 4Q expenses, could you help us size up the nonrecurring but necessary items that happened this quarter?

Well, it's -- we're not in position to do that at this point. I'd like to say that or defer that until we got the 8-K out, which will detail more of the expenses as well as revenues. But the -- in the fourth quarter, we incurred additional expenses in the professional line item as well as mergers and acquisitions or integration-related line item. Having said that though, what we attempted to do was to kitchen sink, as I call it, the fourth quarter as it relates to expenses that we don't think are going to be recurring. And so at this point, the -- other than the professional expenses of -- I think we had about a little over $2 million increase in the fourth quarter. The other dollars that are not in that particular category that will also go away as we go further out in the integration. But I'll be able to give you some more definitive information after the 8-K is put out there and as we go further out into the first quarter.

Our next question comes from the line of Scott Valentin with FBR Capital Markets. Scott Valentin - FBR Capital Markets & Co., Research Division: Just with regard to the SBA production, just wondering how you're thinking about that going forward. I know you gave some color on the fourth quarter production, but just wondering, maybe mention momentum for the business. Wondering if you're seeing any on the SBA as well?

Yes. In fact, quite a bit of momentum. The production that we -- actually originated towards the latter part of 20 -- the fourth quarter of 2014, actually ended up flopping over into the beginning of 2015. And so we'll see a nice number in terms of gross production for Hanmi as it relates to the SBA. Now we believe that we can we consistently be in the $30 million to $40 million a quarter in terms of gross production. And give -- I'm giving a range because the -- it's all predicated on the economy and the -- and also the rate environment. But I think it's safe to say that given the quality team that we have, we should be in that $30 million to $40 million a year -- okay, just $30 million to $40 million a quarter of run rate in 2015. Scott Valentin - FBR Capital Markets & Co., Research Division: Okay. And it would seek to sell -- sell all that production?

Yes, we don't keep any. Scott Valentin - FBR Capital Markets & Co., Research Division: Okay. And just, Michael, you mentioned the tax rate I think for '14, was 39.4%. Is that a good tax rate to use for '15 as well?

Yes. Well, I actually think -- I would use closer to 42% going forward. Scott Valentin - FBR Capital Markets & Co., Research Division: It was 42%, okay. And then just, like, a question on the margins. I guess there's 2 items now on the margin post the acquisition. One, you have kind of the organic trend in margin, which I assume would probably be flat, maybe some pressure given what rates have done. But then accretable yield obviously going to reflect what the final accounting adjustments are along with I think prepays in the acquired portfolio. But can you talk about maybe: one, the organic margin, and what you see happening there; and two, maybe the duration or like the time you're assuming for the accretable yield?

. I think we're going to see the actual core yields go down slightly in conjunction with market rates. Scott Valentin - FBR Capital Markets & Co., Research Division: Okay. And then on -- I'm sorry.

I was asking Bonnie if she...

On the loan portfolio side for the 4Q production, average interest rate, there'll be -- previous loans was at 4.42%, which was a little bit higher, actually about 24 basis points higher than the 3Q which was 4.18%. And for the book rate on our portfolio, in the third Q, it was about 4.52%. It's a little bit higher in the 4Q, around 4.6%. Scott Valentin - FBR Capital Markets & Co., Research Division: Okay. And that uptick in origination yields between third quarter or fourth quarter, is that reflection more of the mix or is that what you're seeing the market pricing improved?

No, I think we're just a little bit more disciplined in driving the relationship banking strategy.

Our next question comes from the line of Don Worthington with Raymond James. Donald Allen Worthington - Raymond James & Associates, Inc., Research Division: Looks like in the quarter, you had about $9 million of OREO dispositions. Was that all the acquired OREO from a merger?

Most of it was, yes. Donald Allen Worthington - Raymond James & Associates, Inc., Research Division: And was that pretty close to what you added on the books for?

No, through purchasing accounting. Everything was mark-to-market as of August 31. So there were no gains or losses on the sales of OREO in either in September or in the fourth quarter. Donald Allen Worthington - Raymond James & Associates, Inc., Research Division: Okay, so no changes from where you'd marked it down. And then in terms of the loan purchases -- I'm sorry, I missed the number in the quarter, was it like $25 million?

Actually, the loan purchase was $20.5 million. Donald Allen Worthington - Raymond James & Associates, Inc., Research Division: $20.5 million, okay. And then what types of loans were those?

These are mostly single-family residences, with the book interest rate of about 4.81% and the average FICO score of the borrowers are around 752 with average loan size of about 353,000. And these are mostly 30-year term, 7 year -- first 7 year fixed. Donald Allen Worthington - Raymond James & Associates, Inc., Research Division: Okay, great. And then do you happen to have the -- just the average interest-earning assets for the fourth quarter?

I'm not prepared right now to disclose that because as stated earlier, we have to push back our purchase accounting adjustments. We don't think it's going to be a material, but I don't feel comfortable at this point disclosing that.

Our next question comes from the line of Gary Tenner with D.A. Davidson. Gary P. Tenner - D.A. Davidson & Co., Research Division: Just a couple of questions. First, I missed some of the commentary regarding the provision line. Did I hear correctly that none of that was related to the legacy Hanmi portfolio that was all related to purchased portfolio?

Yes, Gary. In the fourth quarter, we recorded a $1.0 million provision for loan loss, all of which related to the PCI loans. So just purchase credit impaired loans. Gary P. Tenner - D.A. Davidson & Co., Research Division: Right. So suggesting that, that what they were brought over -- that the mark that they were brought over with was not enough again to add additional provision against those loans beyond the mark?

Well, Gary, accounting for PCI loans is kind of unique. Basically, at day 1, we estimate the value of the PCI loans based on the estimated cash flows on each individual loan. On a quarterly basis, we assess those estimates. And to the extent that those cash flows either reduce in dollar amount or lengthen in time or a combination of each were required under the accounting literature to recognize an impairment. Gary P. Tenner - D.A. Davidson & Co., Research Division: Okay, and that's always going to flow through that provision line?

Yes, it will. And to the extent that we -- on PCI loans, we -- they are taken out of the PCI category because these are loan paid off. It's transferred to OREO. We have to take them out at their allocated fair value and recognize a disposition gain or loss. And in the fourth quarter, we recognized a disposition gain of $1.4 million. Gary P. Tenner - D.A. Davidson & Co., Research Division: Okay, so they offset... I'm sorry.

Also to the extent that in the future, as we true up the cash flow vis-à-vis the original purchase accounting, and that generates a positive, that doesn't go into the ALLL as a gain, but rather, it basically enhances the equitable yield.

That's correct. Gary P. Tenner - D.A. Davidson & Co., Research Division: Right, okay. And then secondly, just on the securities line. I know you're -- it sounds like you don't -- you are not going to be giving out kind of average balances in the fourth quarter. But just trying to back into it. I couldn't get your number that seems to makes sense. I was wondering if there's any repositioning of the securities portfolio, early fourth quarter, and then maybe replaced later in the quarter. Were there any kind of inter-quarter trends in terms of doing anything to that part of the balance sheet?

Nothing of significance.

Yes, nothing significant.

Our next question comes from the line of Matthew Clark with Sterne Agee. Matthew T. Clark - Sterne Agee & Leach Inc., Research Division: Can you talk a little bit more on the core margin outlook, knowing that you guys acquired 65% of what you acquired from of CBI? Is it really cash and securities? I just want to think through how much expansion we can see not just from that. But obviously, part of that's going to be just the remixing and redeploying that into loans. Just wanted to get your sense for the pace of margin expansion we might see over the next year?

Well, there are going to be 2 components to that. One of which is the pace at which the acquired portfolio pays off or winds itself down. And it's hard for us to determine what that pace is going to be given that what has happened to UCB's portfolio in 2012 and 2013, where all predicated upon their desire to survive, hit some capital goals for the regulatory purposes and in 2013, hit that classified asset number that we imposed as a condition of close. So the payoff level, I think, was somewhat artificially stimulated. So we'll get a better sense of that during this year. On the flip side though, the -- where we have some real opportunities as far as enhancing the bottom line and the net interest margin, is the velocity with which we can convert the liquid assets into loans. And that's where the -- our focus in the new Hanmi territories of Texas and Illinois, in particular, will play a significant role. Quicker we can deploy those lower-yielding liquid assets into loans, the -- that margin will take a noticeable upward swing, if you will. It's premature for us to say how big of an impact it's going to make because we just scratched the surface of production coming from those 2 regions. But I'm optimistic that the margin that you saw at December 31, at a minimum, will be maintained, and it's likely that we could drift upwards. Matthew T. Clark - Sterne Agee & Leach Inc., Research Division: Okay, great. And then I just wanted to clarify comments earlier on -- did you say that on the SBA production, did you say that you were looking to do $40 million or $50 million a quarter or for the year?

So that I'm not misquoted, Matthew, let me be clear. What I said was $30 million to $40 million a quarter. And that range is dependent on the economy and also the rate environment. But I'm comfortable with the quality team that the new leadership in SBA has put together here at Hanmi. That we should be comfortably able to trend the $30 million a quarter, and if we get lucky, maybe northward from that number. Matthew T. Clark - Sterne Agee & Leach Inc., Research Division: And you did $15 million this past quarter, correct?

Correct.

Sales was $15 million -- $15.4 million. But the production was... Matthew T. Clark - Sterne Agee & Leach Inc., Research Division: Oh, sales. I'm sorry. I'm sorry, what was the production then, I'm sorry.

The production was $17.2 million, and we sold the $15.4 million. The guaranteed portion.

[Operator Instructions] Our next question is a follow up from Julianna Balicka with KBW. Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division: I'm sorry, I didn't catch the numbers if you said them earlier. What is the current dollars of the accretive -- of the discount on the fair value loans? And what is the dollar amount of the PCI loans at the year?

Well, we -- I guess, Julianna, we're still trying to do our purchase adjustments. So we can give you a rough estimate.

Hold on a second. We're shuffling paper here, Julianna.

At the end of December, it was about $43 million, net book value for PCI loans. Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division: And the accretable discount?

I don't have that information available right now, Julianna. I'll have to get back to you. Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then in terms of thinking about credit costs going forward. The $1 million was -- for this quarter was related to the PCI loans. But to the extent that you are -- those PCI loans be -- on the legacy loan portfolio, how you're thinking about credit costs versus reserve releases, kind of the trends that you should be able to think about for 2015? Should we think about another year of net-negative provisions? Or I mean, at what point will that benefit to earnings, kind of run its course?

Yes. The provision that we took in the fourth quarter, hopefully, is more of an anomaly. And the reason why I say that is that the cash flow modeling that we did towards the end of the year was much more tighter, more sophisticated, and I believe, more accurate than the one that we did initially. And so if we did a reasonably good job in that regard, there should not be much in the way of variations, at least in the near term. As time passes and circumstances change, obviously, the cash flow modeling will also change. So the long-winded way of saying that the -- we, on a quarter-by-quarter basis, assess all of the factors that relate to the adequate --determining adequacy of the loan loss reserve. We are, right now, just on the legacy basis, 1.89%. And we will continue to evaluate that on a quarter-by-quarter basis. And as the legacy Hanmi portfolio continues to maintain its credit quality, then there's a likelihood that, that could be further release from the ALLL. But that's a quarter-by-quarter decision that we have to -- an analysis that we have to undertake. And you have to determine for yourself what the comparable credit quality, what should be the appropriate level of ALLL coverage ratio.

And also be mindful of what kind of growth in loan, organically or purchase opportunities there that you'll come across to, I think, 2015.

That's a good point. Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then in terms of expenses -- kind of looking at the recurring expenses this quarter as opposed to the nonrecurring, kind of looking at your advertising and promotion and data processing expenses, or is that an end-quarter increase in that? But is that because -- should we think about, like, for next year, you'll be running more advertising promotions to integrate the franchise? And therefore, that should be an elevated number? Or -- and same thing with data processing, as you're a bigger company, you now have more just the processing expenses, et cetera. Or were those 2 also potentially inflated?

I would say that the advertising and marketing expenses will be elevated in 2015, in conjunction with our growth initiative. The -- in addition, we are going -- we're in the process of refreshing our outlook. We're attempting to, at this point, identify a different logo that may be -- that may have a little bit more of a universal appeal. And so once that decision is made, the advertising and marketing, in conjunction with the growth initiatives, will remain at a slightly elevated level. Data processing, because we're a larger organization, I don't see much in the way of savings coming out of that or reduction coming out of that line item in the future.

And Julianna, you have to remember, quarter-over-quarter, third quarter compared to the fourth quarter, we only had 1 month of combined operations in the third quarter versus 3 in the fourth quarter. So you're seeing the full impact of the cost of UCB in the fourth quarter. Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division: Yes. And then final question for me. In terms of deposit growth. I mean, obviously, you have the full quarter of UCB. But could you give us an update on how your cash management initiative is going? You hired a new manager there this year, and to kind of gather core deposits and cash management-related deposit products, et cetera. So kind of a fee and a deposit question there.

Let me start by stating that the -- we did have a runoff or a reduction in our deposit base, almost all of it coming from the former UCB side. And it involves a higher rate CDs. The differential in terms of the cost of deposits on our side versus legacy UCB side is a little over 30 basis points. And so that runoff is not something that we were too particularly worried about. And in fact, over a period of time, we may see some additional shrinkage of the CD portfolio coming from the -- that have come over from the UCB side. Our focus, and we continue to get that good traction on the business banking strategy, which involves cash management and, therefore, the growth in noninterest-bearing DDAs. So I'll let Bonnie speak to the successes in that area.

Sure. I think just looking at the legacy Hanmi overall and the all-deposit products, that we did have an increase. Some of the attrition that we have experienced in the former UCB side, we may see that a little more coming in the future -- in the near future with the closing of -- or consolidation of the branches, one particularly, one branch, which is in New York area. There is a branch that's closer by so we may lose a little bit of a deposit. But as we emphasize in the relationship banking, hopefully in a longer run, that we'll be able to attract more deposits. But just in the legacy deposit arena, mainly in California, we have within our marketplace that are running very high CD rates because of each institution's high goal to -- deposit issues and we're just not matching. And again, we are having a disciplined relationship banking strategy. And some of the deposits that, just CD alone, without any other profitable relationships then we're not matching.

Our friends at the legacy UCB side is getting used to our requirement that when we do loans, we want to see nice core deposits that come with it. And as the new leadership in Texas and Illinois convey the -- that strategy with a little bit more force, the loan growth that we will have will also include the low-cost deposits just like what we have had here, historically, at Hanmi.

Our next question is a follow up from Gary Tenner with D.A. Davidson. Gary P. Tenner - D.A. Davidson & Co., Research Division: Just one more question on the expense side. C.G., you mentioned that the first quarter would be negatively impacted with the systems conversion coming up here. Is that in terms of more -- what would be specific merger-related costs, or is this higher professional fees related that conversion? Or are there other items we should be thinking about?

I would say mostly having to do with the expenses in the 2 categories that I've outlined earlier, the branches, and the rightsizing of personnel because the branch closure is going to happen within the next several weeks. And as part of that, there will be a personnel attrition. And then there's a last round of attrition that's going to take place towards the end of the quarter. Now, there will be some personnel -- excuse me, professional expenses that we will continue to incur through the first quarter. But by and large, most, if not all of the nonrecurring expenditures associated with merger or to enhance the infrastructure to be a larger organization, will go away by the end of the first quarter. Gary P. Tenner - D.A. Davidson & Co., Research Division: Okay, so some -- basically, some severance costs and some costs of closing those branches in the first quarter?

That's correct.

We have no further questions in the queue at this time. Please continue.

Thank you for listening to Hanmi Financial's Full Year 2014 Conference Call. We look forward to speaking to you next quarter.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.