Ladies and gentlemen, welcome to the Hanmi Financial Corporation’s Fourth Quarter and Full Year 2019 Conference Call. As a reminder, today’s call is being recorded for replay purposes. At this time, all participants are in a listen-only mode. Following the presentation, the conference will be opened for questions. I would now like to introduce Mr. Lasse Glassen, Managing Director at Addo Investor Relations. Please go ahead.

Thank you, operator, and thank you all for joining us today. With me to discuss Hanmi Financial’s fourth quarter and full year 2019 earnings are Bonnie Lee, President and Chief Executive Officer, Anthony Kim, Chief Banking Officer and Ron Santarosa, Chief Financial Officer. Ms. Lee will begin with an overview of the quarter and Mr. Kim will discuss loan and deposit activities and Mr. Santarosa will then provide more details on our operating performance. At the conclusion of the prepared remarks, we will 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 differed 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 the 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 Forms 10-K and Form 10-Q. In particular, we direct you to the discussion in our Form 10-K of certain risk factors affecting our business. This afternoon, Hanmi Financial issued a news release outlining our financial results for the fourth quarter and full year 2019, which can be found on our website at hanmi.com. I will now turn the call over to Bonnie Lee. Bonnie?

Thank you, Lasse. Good afternoon, everyone. Thank you for joining us today to discuss Hanmi’s 2019 fourth quarter and full year results. While Hanmi’s fourth quarter included some extraordinary items that impacted our financial results in the period I believe our underlying performance was solid and we continued to benefit from our strategic focus on a higher yielding asset and lower deposit cost. The following are some of the key financial and operational highlight from this past quarter and full year. Loan and lease production was at the highest levels since 2015 helping to more than offset extremely elevated levels of loan payouts in the quarter and resulting in fourth quarter growth in loans and leases receivable of 3.6% on an annualized basis. Net interest income before the loan and lease loss provision was relatively consistent quarter-over-quarter about a higher loss provision stemming from the previously disclosed troubled loan relationship along with some non-recording expenses impacted fourth quarter net income. Deposit gathering activities remain strong as we achieved 8.3% increase in non-interest bearing deposit for the full year. Throughout the year, we benefited from a favorable mix of lower time deposit and growth in non-interest bearing demand deposit reflecting our effort to increase core deposit relationship. The lower cost of deposit help to mitigate pressure on net interest margin which declined just four basis points during the quarter. We also invested in Hanmi common stock during the quarter under our current authorized 1.5 million shares repurchase program notwithstanding the one troubled loan relationship. Overall credit quality metric remains stable. And finally, the bank remains very well capitalized. Hanmi’s regulatory capital ratios remain very strong and we’re well positioned continued to growing in a safe and sound manner. Looking in more detail at our fourth quarter results; we reported net income…

Thank you, Bonnie. I will discuss loan and lease production and deposit gathering activities and then turn it over Ron Santarosa for additional details on our fourth quarter financial results. During the quarter, loan and lease production totaled $381.4 million which increased 75% over the prior quarter and nearly 55% from the fourth quarter in 2018. However, due to elevated levels of payoffs as well as higher amortization during the quarter our portfolio of loans and leases expanded by just 3.6% on an annualized basis and the portfolio grew modestly for the full year. Production in the fourth quarter was up year-over-year in every major category of loans and leases. Production activity through 2019 reflected our shifting emphasis towards higher yielding categories with a strong asset quality such as C&I loan as well as equipment leases while we reduced our exposure to lower yielding asset classes such as single family residential loans. In line with our longer term objective to diversify our loan and lease portfolio C&I loans comprised 70.0% of our portfolio at the end of 2019 compared with 70.8% at the end of 2018 and 76.5% three years ago. Fourth quarter production consisted primarily of $185.1 million of commercial real estate loans, $33.60 million of SBA loans and $95.3 million of C&I loans. We also originated $65.5 million of commercial equipment leases of note [ph]. C&I loan originations in the fourth quarter were nearly 87% higher than the previous quarter while equipment lease production remained consistently strong throughout the year. Newly generated loans and leases for the quarter had a weighted average yield of 5.08%, down 45 basis points from the previous quarters’ weighted average yield on new production of a 5.53%. However, average loan and lease yields for the portfolio of a 4.97% was down just 11 basis points quarter-over-quarter as the average yields on new loans and lease production in the third quarter exceeded the average yields on loans that paid off in the quarter by seven basis points. Looking ahead in the first quarter of 2020, our pipeline remains healthy and supports the annual growth objective range in the low-to-mid-single-digit that Bonnie noted in her comments. Moving onto deposit, we continue to operate in a highly Asian-American banking landscape for deposit gathering activities. Total deposits of $4.70 billion increased nearly 1% during the fourth quarter on an annualized basis but declined 1% from a year ago. For the full year, we benefited from a favorable shift in deposit mix that included an 8.3% increase in non-interest bearing demand deposits along with 13.6% reduction in higher cost time deposit. As a result of fourth quarter loan production and deposit gathering activities, our loan to deposit ratio for the fourth quarter was 98% compared with 97% in the fourth quarter last year. I’d now like to turn the call over to Ron Santarosa, our Chief Financial Officer. Ron?

Thank you, Anthony and good afternoon, all. Starting with net interest income, we posted $43.9 million down slightly from $44.1 million for the prior quarter due mostly to 2.9% decrease an income from loans and leases receivable on lower average yields for the portfolio. Overall yields decreased during the quarter reflecting the decline in the general level of interest rates from early in the quarter and mix was slightly lower average loan and lease balances led to a 2.4% sequential decrease in interest income. Partially offsetting the decrease in net [ph] interest income was 7.5% decrease in total interest expense to $16.8 million mostly driven by 8.1% decrease in interest on deposits. Net interest margin for the quarter was 3.32% down four basis points from 3.36% in the third quarter. The average yield on interest earnings assets fell by 15 basis points to 4.59% with a commensurate 15 basis point decrease in cost for interest bearing liabilities to 1.89%. The cost of deposit fell 12 basis points to 1.25% due to a decline of higher rate time deposits and an increase in lower costing money market and savings deposits. Time deposits now make up 33% of total deposits down from 35% of the linked quarter. This mixed shift in our interest bearing deposits from time deposits into money market and savings were the main drivers of the decrease in interest on deposits. Looking at non-interest income, we had a 2.2% decrease from the third quarter to $6.7 million. Income from service charges onto positive accounts and trade finance and other service charges and fees increased by 2.8% and 6.8% respectively however this was offset by a decrease in gains from the sales of SBA loans following 15.2% to $1.5 million. SBA loan sales volume increased to $25.1 million in the quarter from $24.3 million however trade premiums fell during the fourth quarter averaging 7.6% down from 9.15% for the prior quarter. Non-interest expenses increased by $1.5 million to $34.1 million from the third quarter driven mostly by the $1.7 million impairment loss which Bonnie mentioned earlier. In addition, the provision for off balance sheet items increased $646,000 from an increase in outstanding commitments as well as an increase in estimated loss factors. Last, the 2019 third quarter included charges were in SBA guarantee repair that’s not present in the fourth quarter. For the 4.5% increase a non-interest expense this quarter combined with a decline in revenue caused our efficiency ratio to increase to 67.31% from 64.0% in the linked quarter. Return on average assets for the fourth quarter decreased to 0.22% from 0.90%. Last quarter while return on average equity experienced a similar sequential decrease to 2.15% from 8.67%. Our tangible book value at year end declined by $0.15 to $17.90 and our tangible common equity ratio was strong at 9.98%. With that, I’ll turn it back to Bonnie.

Thank you, Ron. While some extra ordinary items impacted our profitability in the quarter. Hanmi delivered a solid overall performance to wrap up 2019. As we look ahead to 2020 given our strong deposit franchise and loan and lease pipeline, I’m confident in our ability to deliver profitable growth throughout the year. I look forward to sharing our continued progress with you when we report our first quarter 2020 results in April.

Operator that concludes our prepared remarks. We would now like to open the line for questions.

[Operator Instructions] our first question is from Gary Tenner, D.A. Davidson & Co. Please proceed with your question.

I had a couple questions on credit. In terms of the large credit, the increase in the specific reserve and the current valuation which I think is $22.5 million when was the most prior appraisal to the updated one that you mentioned in the press release?

So, we obtained the most recent one within the last a month or so, the prior one was within the last second half of the last year.

Gary, this is Ron. So, the real estate side of life that was a year ago second quarter. On the personal property, we had one of course at inception. We had one in the second quarter which gave right question about how we shouldn’t do it etc. so we commissioned another one here at as we go into the fourth quarter.

Got it, thank you. And then I’m curious about the provision over and above the specific provision for that credit could be around $4 million on basically [ph] $40 million of net loan growth sequentially. So you’re talking about what drove that, I mean there was the increasing classified loans to weighted to another construction credit, but maybe just more broadly about the magnitude of the provision increase over and above the large credit issue [ph].

As you noted classified loans did increase and as we go through our quarterly analysis to determine the allowance. We look at trends, we look at concentrations, we look at recent experiences and with that, we’ve increased our estimated loss factors. So that’s part of the reasons for the increase and of course the other side of the equations, we just have a higher levels of loans and we had in the past period.

Okay, thanks and if I could just ask one last question here. Any projections or outlook with regard to CECL in terms of the day one adjustment?

Not at this time, we’re working with our auditors and advisors. So we’ll be prepared for that idea when we publish our 10-K, I think March 1 and March 2.

Okay, thank you.

Our next question is from Matthew Clark, Piper Jaffray. Please proceed with your question. Q –Matthew Clark: Just wanted to get the rate on new production and the rate on the loans that are paid off I think you mentioned the differential is seven basis points so I was just [indiscernible] deal.

Gary this is Ron. So I think I have 508 in my mind but our average production was 501 would have been the average rate on the loans that payout.

New loan came in, in the quarter at 5.08% and then payout rate was 5.0%. The new loan was 5.08% and then payout was 5.01%.

Because I think we have talked about before, Matthew and whether with you or with others we cannot predict and have been fortunate or fortuitous in the average rate of the loans that have been paying off. So far for most of 2019, we’ve been in a net accretive mode when you look at the portfolio that was one of the elements of why our net interest margin was able to kind of stay within a fairly narrow corridor. Q –Matthew Clark: Okay and then prepayment income this quarter within the margin.

$700,000. Q –Matthew Clark: Okay and then, I think last quarter you talked about $1 million of – that might come out of run rate and expense related to the reporting delay CECL, legal, FDIC credit assessment maybe some occupancy and equipment. Can you update us there and whether or not that came out or whether or not that’s still in there of some portion?

So we did see the decline in professional and data processing and as I’ll say the other category, then there were some offsets to those ideas that came about. We have a seasonal increase of spend in some of our marketing and we had some increase in our salaries and benefits. So the FDIC insurance notion [ph] is pretty well flat quarter-to-quarter. We did get the third quarter had a charge in it relating to an SBA guarantee repair for than owned SBA loan. So we did see the reduction, but as we tried to point out then we had the increase because of the – the increase in the off balance sheet provision stemming again from just larger unused commitments as well as the increased loss factors which are consistent with the other part of the allowance and the impairment loss on the properties. Q –Matthew Clark: Okay and then, I guess how much on the way of reserves that you set aside for that loan that migrated in the classified $11 million credit?

That would be, no specific allowance so that’s just-.

I think it’s about $0.5 million.

General allowance.

Yes. Q –Matthew Clark: Okay and then the tax rate outlook, a little higher this quarter but [indiscernible].

Yes, I think for 2020, we may be able to post kind of mid-29s but if I would use the thumb measure, I would probably would use 30 and then look for it to turn it drift down slightly. Q –Matthew Clark: Okay, thank you.

Our next question is from Timothy Coffey, Janney Montgomery Scott. Please proceed with your question. Q –Timothy Coffey: Looking at in terms of your loan growth outlook, does that include the payout that we thought like low on the fourth quarter or kind of what we thought throughout the rest of 2019?

So in terms of payout which is hard to predict, but I think just looking at 2019 I think the average payout in a given quarter ranges from anywhere from 100 to obviously $200 million in the whole Q [ph] which is elevated from overall average payouts in the 2018 period. So there’s still I think the message is that, our production is holding up fairly nicely. So assuming just the average payout about 100, $130 million we think that we can grow to single to mid-digit loan growth. Q –Timothy Coffey: Okay, thanks Bonnie. And then how does that kind of impact the trends within your margin given that there is that kind of slow turn in the deposit portfolio that could you tailwinds through year end and in terms of lower deposit cost that not necessarily in the beginning of the year.

So on the deposit cost again, if you think of our time deposits most of those mature approximately 25% of the quarter give or take 5%. So we should see a little bit more reduction in the first quarter albeit at a lower rate and by the time we get to second quarter, we’ve probably have now stepped into or legged into the rate environment we’re currently experiencing. On the loan side, a large of the shift away from the residential into the higher yielding equivalency in C&I has occurred. So we would continue to see some decline in the resi, but probably not as much as we experienced in 2019, so that said I would think we would continue to see margin kind of play within this corridor or 330’s and as long as there is fed stays where I think fed will be staying or most people expect that to stay and borrowing headline news and unusual prepay will that I think is how we could probably think about 2020. Q –Timothy Coffey: Okay, thanks for the clarification Ron. Those were all my questions.

Our next question is from Kelly Motta, Keefe, Bruyette & Woods Incorporated. Please proceed with your question. Q –Kelly Motta: Maybe staying on the margin and kind of balance sheet a bit. It looks like cash flow is elevated this quarter. I’m wondering what the dynamics were going on there and if, you expect to kind of get more back to the level you’re at in third quarter.

Yes, so production by month can sometimes be uneven and so the cash balances that you’ve saw at least on an average basis for that most of the production happened as we went into December with not much for October, November and so that will vary from quarter-to-quarter. Q –Kelly Motta: Got it and securities kind of building off this level and growing with the overall balance sheet, is that the right way to think about it.

Yes, so most of securities we represent kind of regular ratable growth, where the cash is, I would call that overnight that will fluctuate depending on where we are with cash inflows from the portfolio versus fundings. Q –Kelly Motta: Great. Turning back to expenses. I saw that the compensation line went up a bit this quarter I was wondering we’re adding people, if you’re adding talent if it’s back office or if you’re adding to the frontline and that’s kind of supporting your strong production you had, I think.

We have an ongoing talent recruitment process, so no we did bring it in some of the relationship manager type of employees that may have contributed. Q –Kelly Motta: Thank you.

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

Thank you for listening to Hanmi Financials fourth quarter and full year 2019 results conference call. We look forward to speaking with you again and in the quarter results of next quarter.

Thank you. Ladies and gentlemen. This does conclude today’s teleconference. You may disconnect your lines at this time and thank you for your participation.