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Hanmi Financial Corp. (NASDAQ:HAFC)

Q4 2008 Earnings Call

January 29, 2008; 1.30 pm ET

Executives

Jay Yoo - President and Chief Executive Officer

Brian Cho - Executive Vice President and Chief Financial Officer

John Park - Executive Vice President, Chief Credit Officer

Analysts

Don Worthington - Howe Barnes Hoefer & Arnett, Inc.

Bill Chen - Barrington Partners

Julianna Balicka - Keefe, Bruyette & Woods

Operator

Good morning and welcome to the Hanmi Financial Corporation 2008 fourth quarter and fiscal year end 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 call may contain forward-looking statements which are made under the SEC’s Safe Harbor rules for forward-looking statements. Forward-looking statements related to the company’s future operations, prospects and business are identified by words such as will, should, could, expect, intends, anticipate, believes, estimates, predicts, potential or continue or the negative such terms.

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

Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and 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 forward-looking statements, please see the company’s filings with the SEC.

Representing the company today are Jay S. Yoo, Hanmi 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 would now turn the call over to Mr. Yoo. Please go ahead, sir.

Jay Yoo

Thank you, Michel. Good morning everyone and thank you for joining us today. In today’s press release we noted that Hanmi Bank, like its competitors, continues to operate in a difficult environment. The challenges we faced in 2008 are reflected in our income statement and the balance sheet. Brain and John will address them in more detail later.

In brief, we reported a fourth quarter loss of $3.8 million or $0.08 per share, largely as a result of a substantial increase in the provision for the credit losses. First quarter 2007, we reported a net loss of $100 million or $2.15 per share, which was the reflection of a non-cash goodwill impairment charge of $102.9 million.

For the full year 2008, we reported a net loss of $102.1 million or $2.23 per share, compared to a net loss of $60.8 million or $1.27 per share in 2007. The 2008 net loss includes a second quarter non-cash goodwill impairment charge of $107.4 million, whereas the 2007 net loss includes our non cash goodwill impairment charge of $102.9 million.

Without the impairment charges, non-GAAP net income for 2008 would have been $5.3 million or $0.12 per diluted share, compared to a non-GAAP net income of $42.1 million or $0.88 per diluted share in 2007. Suffice it to say, all indications are 2009 will be another challenging year as well. During this economic downturn, our focus is on the improvement of our credit quality and the soundness of our business, not on balance sheet growth.

That said, credit monitoring and the risk management continue to be our highest priorities. Since, we last spoke three months ago, we believe that we have made significant progress in identifying and appropriate request by provident loss. Moreover, we have been diligent in provisioning for credit losses where appropriate. Equally important, we are likewise working closely with followers to address and resolve differences in potential provident loans before they become unmanageable.

This is especially true with regard to small businesses, which are being particularly hard hit in the current recession. Second only to credit monitoring and risk management is the liquidity and the need to strengthen our deposit base. Core deposits are the foundation of our business. Accordingly, we are working hard to reestablish Hanmi as Southern California’s preeminent community bank appealing to small and mid-sized businesses. Third, we continue to work on further streamlining our operations to achieve greater operating efficiencies and reduce costs.

Community banking is built on relationships and trust, which go hand-in-hand. Customer relationship and trust have been Hanmi Bank’s management philosophy from day one. However, with the recent rapid growth of the bank, we may have lost sight of its roots on occasion. We must reaffirm our commitment to providing the very best in customer service to regain their confidence. Likewise, we must demonstrate that the credit issues are under control and that the future of the bank is secure. This is our mandate for 2009.

I’ll now turn the call over to Brian, to review our financial highlights.

Brian Cho

Thank you, Mr. Yoo. Good morning, everyone. Let us start with our liquidity issue, a hot topic in the banking industries. In the fourth quarter, the situation was even worse in our niche market due to the fund outflow to Korea. This outflow was triggered by depositor currency speculation over potential future appreciation of the Korean currency.

According to our contingencies funding plan activated in the third quarter, we continued to pay broker deposits as a main source of wholesale funding. The broker deposits therefore increased to $818 million at December 31 from $266 million three months earlier.

With the additional broker deposits, our total deposits increased by roughly 10% to $3.1 billion from $2.8 billion at the third quarter end. We therefore reduced our borrowings from the federal home loan bank by 28% to $422 million at year end from $583 million three months earlier. As a result, the future availability of Federal Home Loan Bank borrowings increased to $261 million as of December 31, 2008 and we are able to low our net loan-to-deposit ratio to 107% from the prior quarter end of 117%.

Our utmost priority in 2009 is to replace these corporate deposits with customer core deposits to the maximum extent. We believe, we can reveal our core deposit foundation this year, through our deposit gathering programs, hopefully with enhanced products and service offerings.

Starting in January, we have already obtained some increase in customer deposits with the stabilization of the Korean currency valuation, and our corporate deposit has now been reduced to $728 million, and the future availability of Federal Home Loan Bank borrowings has been increased to around $340 million. In addition to this FHLB borrowing capacity, we have secured over $1 billion line with the (Inaudible) discount window, and these confidential lines together are sufficient enough to address potential literacy situation in the time of financial turmoil.

On the SSI, we are closely monitoring our lending activities on a daily basis. New loans were strongly discouraged and even renewals were selectively made to priority borrowers only. To reduce the pressure on net interest margins in this low interest rate environment, we are putting utmost attention to maximize pricing on every single credit extension. As a result, at the last year end, total assets and gross loans were $3.87 billion and $3.36 billion respectively, essentially unchanged since the third quarter end.

Now, I will share with you our incomes statement starting with the net interest income and margin. During the fourth quarter, Federal Reserve Board cut the rate three times for a total of 175 basis points. Our average earning until here decreased by 59 basis points to 5.92%. On the other hand, even subsidiary deposit competition in the current economy, we are not able to low as much the interest rate on our deposits. The average fund cost therefore decreased only by 12 basis points to 3.22% in the first quarter. As a result, our margin was compressed by 56 bps to 3.34% from the prior quarter 3.9%.

With a drop in the margins and the negligible balance sheet changes, our fourth quarter net interest income decreased by $5.1 million to $30.4 million as compared with the prior quarter $35.6 million. We expect total margin compression in the first quarter of this year because of the anticipated full impact over the first quarter rate costs. However, with the Fed fund rates now close to zero, we expect to see margin expansion in the latter part of this year, as our highly priced time deposits reprise.

Let’s turn to non-interest income components next. In the fourth quarter, we reported unusually low non-interest income all totaled by orders of the temporary impairment proceeds from our Lehman corporate bonds and our CRA equity investments. Another OTTI loss on the same CRA equity investment again reduced the fourth quarter non-interest income by $490,000 to $7.4 million.

In the full year 2008, our non-interest income decreased to $42.2 million, compared with $40 million in 2007, due mainly to the Fed OTTI losses and the reduction of the loan gain, but depressed the secondary market for SBA loans, potentially decreased our gain on sale of loans to $765,000 in 2008 as compared with $5.5 million for the year 2007.

We expect a meaningful recovery in non-interest income this year, since all securities we got significant valuation with are now we believe corporate results. We also believe our SBA secondary market will be better this year, as Fed's promise of security loan facility, TARP action takes effect in this year.

Non-interest expense was $20.8 million in the fourth quarter compared with $22.2 in the first quarter. This change in our improvement of $11.4 million is largely attributable to our $2.2 million reduction in personnel expenses, which resulted from the third quarter of fed reduction, and have decreased over $440,000 in data processing expenses, partially offset by some increases over other operating expenses.

For the full-year 2008, non-interest expense excluding non-cash goodwill impairment charges slightly decreased to $86.4 million as compared with $87 million in 2007. We expect increases in some expenses due to the current business environment.. However we are confident that the cost of savings coming from our ongoing cost reduction efforts including the downsizing of non-profitable business lines which will more than offset such increase.

I will now turn the call over to John Park, who will consider various metrics in the credit quality and provide an overview of our loan portfolio.

John Park

Thank you, Brain. As I did last quarter, let me turn first to the subject of non-performing loan and delinquent loans. It is apparent that the deteriorating economy contributed to a further deterioration in the long portfolio during the fourth quarter. Non-performing loans were $121.9 million or 3.62% of gross loans at December 31 compared to non-performing loans of $111.9 million or 3.34% of gross loans at September 30.

The breakdown on NTL is as follows: 31% for construction loans, 48% were C&I loans, 7% were CRE loans and 13% SBA loans. Delinquent loans were $128.5 million or 3.82% of gross loans at September 31 compared to delinquent loans of $112.9 million or 3.08% of total gross loans at September 30. The largest contributor here was an $8.5 million loan to a private golf course near San Diego. In addition, one out of state motel loan in the amount of $2.4 million and one commercial property loan in the amount of $2.5 million contributed to this increase.

The fourth quarter provision for loan losses was $25.7 million compared to $13.2 million for the third quarter. The majority of this increase is attributable to the golf course loan I have previously mentioned, a newly identified trading company loan and additional reserve for opening condominium project and other newly identified commercial term loans.

Charge-offs; net of recoveries at December 31 were $19.5 million compared to $11.8 at the end of the third quarter. With the exception of two non-performing CRE loans which I will discuss in a moment, the bulk of fourth quarter charge-off or in a number of loans to small businesses, which continue to be hit hard in this weakening recession. The allowance for the loan losses at December 31 was $75 million or 2.11% of total loan compared to $63.9 million or 1.91% of total loans at December 30.

The largest contributors to fourth quarter charge-off were two non-performing loans which we have spoken in the past. First, it’s a condominium project in Northern California. The project is now complete and whereas we had one time contemplated, allowing the builder to convert it to a rental property pending a recovery in the market. We have now decided that this would not be in a profit position for the bank to take, rather we are looking to sell it and hope to find a buyer within the first or second quarter.

To-date we have charged off $8.9 million against the project, including $6.5 million in the fourth quarter, bringing our cost basis down to approximately $25 million and we have reserved $1 million.

Second is the low income housing project here in Los Angeles which is still tied up in involuntary bankruptcy. Following a $4.8 million charge-off in the fourth quarter our carrying value is now $12 million. Unfortunately because there are a number of entities involved in the bankrupt proceeding, we are unlikely to see a quick resolution.

Another loan of which we have spoken in the past is a C&I loan secured by five car washes in California with a carrying value of approximately $24 million. Following a third quarter restructuring, the loan is no longer delinquent, and with another two months of satisfactory performance it will no longer be classified as non-performing.

2009 is of course very young, but despite the likelihood of further deterioration in the loan portfolio as a whole, our current expectation is that in 2009, the loan loss reserve as a percentage of total loans will not be appreciably higher than the 2.11% experienced in the fourth quarter of 2008.

With a few exceptions our commercial real estate portfolio appears to be holding up resonably well. For example, we recently conducted a stress test on 244 of the larger CRE loans, with a combined loan exposure of approximately $740 million and a current value of collateral of approximately $1.2 billion for a loan-to-value of approximately 60%, but some loans of course have higher LTVs than others.

Nonetheless, we have determined that in a moderate scenario, overall value decreased to $987 million for an LTV of 75%. Only 11 loans would be underwater for a net collateral shortfall of less than $5 million. Moreover, despite continuing weakness in the retail sector in 2008, we believe further in charging off small business loans where such action was called for especially in cases where there was no collateral to support the loans.

Put another way, although we anticipate an increase in delinquencies in 2009, we do not anticipate this increase will play any unrestrained on the future estimated reserve as we feel that we have increased needed reserves in a timely manner. In addition, we continue to work assiduously to accommodate customers' need on occasion for example, negotiating a reduction in monthly payment to help to ensure that they will survive this current downturn.

In summary, the optimism we expressed in the October conference call has been tampered by the further weakening of the economy during the fourth quarter. It is now clear that the recession will not be short lived, that it will almost surely persist through most, if not all of 2009. That being the case, it is likely that a measurable improvement in the credit quality of the loan portfolio will have to wait, and improvement in the economy as a whole. This completes our prepared remarks.

Michel, we are now ready for the Q-and-A.

Question and Answer Session

Operator

(Operator Instruction) and your first question comes from the line of Don Worthington; please proceed.

Don Worthington - Howe Barnes Hoefer & Arnett, Inc.

Thank you, good morning. One question in terms of the increase in brokered deposits, what rate are you paying and what’s the term of those accounts?

Brian Cho

The rate differences are depending on the terms of course, and we have let the maturity from three months to one year around. So, average rate I may say about 2.23 a quarter.

Don Worthington - Howe Barnes Hoefer & Arnett, Inc.

Okay, great and then in terms of access to TARP funds, would you have an update on your application status?

Jay Yoo

Like many other banks that applied, we haven’t yet heard from the treasury regarding the TARP funds. Although, we are hopeful at this point, we simply do not have enough information to gauge the likelihood that our application will be approved. However, at this time we are expecting to receive good news in a few weeks.

Don Worthington - Howe Barnes Hoefer & Arnett, Inc.

Okay, thank you.

Brian Cho

Thank you.

Operator

Your next question comes from the line of Julianna Balicka; please proceed.

Julianna Balicka - Keefe, Bruyette & Woods

Good morning. I wanted to find out, what is the reason behind the decrease in FHLB advances? I see that they went down from $584 million to $422 million.

Brian Cho

I am talking about future availability of the Federal Home Loan Bank line. So, total availability still remains same and our borrowing availability, course of the usage was very heavy at the end of the third quarter. So, our future availability was, I don’t remember the exact number, but around $100 million only. At the end of the year, we reduced our usage of our FHLB borrowing. So, as a result our future availability has been increased to 226, and then in January, we further reduced our usage of FHLB borrowing, so our future availability has again increased to up to $340 million level.

Julianna Balicka - Keefe, Bruyette & Woods

And what kind of funding did you replace this with in January when you reduced the funding?

Jay Yoo

In January as I said, we actually experienced deposit increase.

Julianna Balicka - Keefe, Bruyette & Woods

And on the Oakland condo project, the $6.5 million charge-off, can you refresh my memory and what the remaining book value is on this loan?

John Park

The remaining book balance is $25 million.

Julianna Balicka - Keefe, Bruyette & Woods

And what’s going on in terms of the resolution of that loan?

John Park

We are looking to sell that property. Previously with anticipation of some recovery, the current situation, one time we re-contemplate converting that great rental property, but I don’t think that makes sense for the bank at this time. So, we are looking to sell that hopefully in the first or second quarter of this year.

Julianna Balicka - Keefe, Bruyette & Woods

Very good and then finally I’m sorry if you said this on the call, is there a brokered CD limit that you may take on?

Jay Yoo

Lots of additional limiting caused by regulation, so as soon as the money is available we can play with the broker deposit, but anyway the core deposit is our core foundation of the banking. So, as I said, our priority in 2009 is to replace that broker deposit with our core deposit and we actually experienced deposit increase in this year, starting this year.

Julianna Balicka - Keefe, Bruyette & Woods

Very good, thank you very much.

Operator

(Operator Instructions) and your next question comes from the line of Bill Chen, please proceed.

Bill Chen - Barrington Partners

Right thanks for taking my question. Just to kind of come back to the FHLB question, you guys have been taking the balance of the advance account, correct?

Jay Yoo

Yes,

Bill Chen - Barrington Partners

And so I’m looking at the average interest rates on the constant re-capital and FHLB is showing 2.01%, is that correct?

Jay Yoo

It depends on the terms and gain.

Bill Chen - Barrington Partners

Okay, but on average

Jay Yoo

On average I may say around 2.5%. We have some long-term borrowings of two year, three year time.

Bill Chen - Barrington Partners

When I look at your CDs and other deposits above, they look like they’re all being priced above the FHLB loans, the contanst capital?

Jay Yoo

Yes, that is true

Bill Chen - Barrington Partners

So, if that’s the case why are you paying down the FHLB loans?

Jay Yoo

Well, as I said the core deposit is our basic foundation to the banking business and if we're only concerned about the cost an income statement, you are right, we don’t have to get the deposit from our customer, which is much more expense. But we need core deposit, because our core deposit customers is going to bring in income and also lending opportunities. So, our depositor is our backbone in our business. So, although the cost we have to pay is higher than borrowing, we have to build up our relationship further.

Bill Chen - Barrington Partners

Right. Now it makes sense, but at the same time you’re taking on more brokered CDs, which are not part of your core deposit and you don’t have the same relationship?

Jay Yoo

So, it’s in broker deposit and Federal Home Loan Bank borrowings. Our broker deposit there is no guarantee to money is available forever. Our reporting company, the borrowing is more stable, that’s because we have property project, that’s one reason and the second reason is Federal Home Loan Bank of borrowing is much more flexible. They offer from overnight to ten years. So, that also is available right away.

Bill Chen - Barrington Partners

I’ll make an argument of why you should be taking down more Federal Home Loan Bank advances rather than taking on brokered CDs, but it seems to have been put backwards.

Jay Yoo

No, to secure our future funding plan we tried to secure the Federal Home Loan Bank borrowing line and broker deposit money is now currently available. So when it is available we try using that money and then reserving FHLB borrowings as our contingency lines for the future use.

Bill Chen - Barrington Partners

Alright, so what that indicates is that, at least in the fourth quarter you’re having some liquidity issues I guess?

Brian Cho

Yes, we had liquidity issues, same as other banks. That’s why we activate our contingency funding plan.

Bill Chen - Barrington Partners

Okay and in terms of, how much of balance sheet line of credit whatever the case may be do you have that you can make available to your customers?

Jay Yoo

Well, I don’t remember any number. Total amount of balance guidance was above $300 million. I would say 50 is an even number, but one thing I’m sure is for coming month line, it was reduced between the fourth quarter by $70 million; and from $300 million to $270 million. I don’t remember this actually. I don’t have the break down. Anyway this decreased by $70 million during the first quarter.

Bill Chen - Barrington Partners

Just to make sure I’m being clear, I apologize I might not have been. I’m thinking more of the line of credits and other moneys available to your customers?

Brian Cho

You are talking about un-disbursed commitment?

Bill Chen - Barrington Partners

Exactly, that’s what I’m wanting to know.

Brian Cho

That number has been decreased by $70million.

Jay Yoo

That’s right, yes.

Brian Cho

We are continuing to monitor that portion of that. I do apologize that I don’t have the exact number on hand. I will have that information available at a later time.

Bill Chen - Barrington Partners

Okay, I’ll just follow-up of offline. In terms of the deposits, the non-interest bearing deposits and the money market and NOW deposits, have they just mainly been coming down just because of the situation with the cash moving back to Korea? I feel I should have been talking about…

Brian Cho

That’s one reason and another reason is the same situation in the whole banking industry so far, but depositors lost some confidence in banking system, that’s what happened to in the first quarter.

Bill Chen - Barrington Partners

And that would have hit your non-interest bearing deposits more?

Brian Cho

Yes.

Bill Chen - Barrington Partners

Okay, so that isn't so much customers are leaving your company or people having to drawdown money because they are having issues, personal issues?

Brian Cho

Yes, that’s right. Personal interest in what they are losing for the banking system overall after Lehman bankruptcy.

Bill Chen - Barrington Partners

So, that’s what it is. I guess, the reason I’m asking this is you probably understand a lot of us have been looking for the canary in the coal mine, so to speak and so you do a lot of banking with your customers and so when I start seeing that many deposits leaving the bank, if the reason that the deposits are leaving the bank because they’re having financial issues and it makes us a little bit concerned about the loans of course?

Brian Cho

The main reason of their speculation for currency evaluation; I don’t know if I understand your question correctly. In October, November the Korean currency won has been depreciated a lot, almost by 40%. So, they expect the currency will be that or they send their money for their investment into Korea. So, they are financially interested towards such a outflow.

Bill Chen - Barrington Partners

Right and that make senses for the money market and the NOW deposits, that’s a very good explanation for that, but I’m trying to understand what happened in the non-interest bearing deposits?

Brian Cho

Non-interest bearing is a different one actually. They are directly affected by the recession we experienced. The business is quite low, so the average balance of individual account is a lot lower than before. So, that’s the main reason.

Bill Chen - Barrington Partners

Okay, does that imply that they are having, some of your customers are having financials situations?

Jay Yoo

That’s right, their business is slow.

Bill Chen - Barrington Partners

So, how many of the loans that you’re making especially on a C&I side are to the same customers that have their non-interest bearing deposits, are having these financial issues?

John Park

Well, currently our leading activity is not that active. I have not had that many requests from existing consumers. As indicated by loan volume, there has not been any significant increase in the fourth quarter.

Bill Chen - Barrington Partners

Okay and in terms of the situation how are you guys planning to attract customers, actually I mean customer deposits? Because I’m looking at the situation with your brokered CDs and that $800 million of brokered CDs is basically about 26.6% of your total deposits, and so I’m watching your total risk rate capital ratio approaching that 10% mark, and so you guys need to be bringing in a lot of deposits really quickly and so how do you do that?

Jay Yoo

As I’ve said in January, we already experienced deposit increase. So, basically, a lot of money, about $23 million in December alone was flown out to Korea for currency speculation. So, once the currency stabilizes the money is coming back and in January we almost had $23 million increase in deposits. So in January, $90 million out of $818 million broker deposit, $500 million has matured and we did not renew. So our broker deposit has already reduced to $728 million, okay.

We have a good size of cash surplus position now. So, in February and March, we are waiting for another $200 million broker deposits will mature and with our current hedge position we don’t have to renew those broker deposits, and this continuing deposit increase is going to have further 200 broker deposits to mature after the first quarter.

Bill Chen - Barrington Partners

And it sounds as if your FHLB line and also the lines of Federal might help you

Jay Yoo

That is the contingency line.

Bill Chen - Barrington Partners

And in terms of the golf course, I’m sure you guys are well aware there was a San Diego union trivia article on it?

Brian Cho

Yes.

Bill Chen - Barrington Partners

It’s a south brook gold course, right?

Brian Cho

Yes.

Bill Chen - Barrington Partners

So, how big was the loan to the Southbrook gold course?

Brian Cho

$8.6 million.

Bill Chen - Barrington Partners

It was $8.6 million to Hanmi?

Brian Cho

We made a loan in the amount of current outstanding closure rate $8.6 million.

Bill Chen - Barrington Partners

Okay, this article is suggesting that it’s $18.1 million of the total loan. I’m just trying to figure where that number comes from?

Brian Cho

Where did you get that number?

Bill Chen - Barrington Partners

That’s in our article?

Brian Cho

I did read that article and I think when they did title search, they doubled it. I don’t know how that doubled, but our exposure is $8.6 million. I did read that article also.

Bill Chen - Barrington Partners

Is there any other exposure to other folks that you’re going to have to fight with over that situation?

Jay Yoo

Right now, the latest information I have is, there is a buyer for the golf course. So, as it stands now, I think that will be resolved in the next 60 to 90 days, that’s what I anticipate. I am waiting for the documentation of that sale at this time, but that’s the latest I have on that in the golf course.

Bill Chen - Barrington Partners

Okay, great and in terms of the construction loans, can you guys give any visibility on what’s in there, the land loans, the construction loans, kind of geography, anything that gives us color will be great.

Jay Yoo

All the land loans are in California and as you know, some projects are being delayed, some of our borrowers who acquired this land in anticipation of construction, some of those are being delayed and as the renewals come up we appraise the property and we request for principal reduction and such.

Bill Chen - Barrington Partners

Okay, so they’re not speculator there?

Jay Yoo

No.

Bill Chen - Barrington Partners

May have not gone vertically yet on that?

Jay Yoo

No, not yet.

Bill Chen - Barrington Partners

In terms of the C&I loan, the same thing, could you just give any kind of color whatsoever on that geography; size of the companies, industries anything?

Jay Yoo

Well, our business is concentrated in California. Our state loans through our loan production offices. We do have various loans out of state, but over 80% of our loans are located in California.

Julianna Balicka - Keefe, Bruyette & Woods

Okay, but as you well know, I’m in Los Angeles and there is quite a bit of discrepancy depending on where those loans are, whether it’s West LA versus Riverside Inland Empire. So, are they mainly in the Korean community, West LA?

Brian Cho

It’s in LA County, Orange County. We do not have any of those rate in the Inland Empire.

Bill Chen - Barrington Partners

And anything in terms of industries, any color we can get?

John Park

No, we do have significant loans in the gas station and car wash business and also hotel industry. So, as you know the carwash business has been impacted by current downturn, so we are seeing some weakness in that industry.

Bill Chen - Barrington Partners

Well, I really appreciate your clarity guys. Thank you.

Jay Yoo

Before you go, you asked for under first commitment; that amounted $336 million as of December 31.

Bill Chen - Barrington Partners

Sounds like you guys have more than enough on the line then to deal with that. Great.

Operator

And you next question is a follow-up from the line of Julianna Balicka; please proceed.

Julianna Balicka - Keefe, Bruyette & Woods

Thank you for letting me comeback to the queue. Quick question, your FDIC base insurance assessment rate for next year, what that’s going to be?

Brian Cho

It would be $0.17 for $100.

Julianna Balicka - Keefe, Bruyette & Woods

17 basis points?

Brian Cho

Yes, that’s right.

Julianna Balicka - Keefe, Bruyette & Woods

That’s your base assessment rate?

Brian Cho

Correct, 17 basis.

Julianna Balicka - Keefe, Bruyette & Woods

That’s the new one for 2009 or that’s the old 2008, that’s going to be increasing?

Brian Cho

I’m talking about 2009.

Julianna Balicka - Keefe, Bruyette & Woods

Okay, very good thank you very much.

Operator

And that concludes the question-and-answer session. Now, I’ll turn it back to Mr. Yoo for closing remarks.

Jay Yoo

Thank you, Michel. When we last spoke, it was clear that the credit contraction that dominated the news during that time was beginning to have a negative impact on the economy as a whole. Today we can see that the effects of that contraction have extended far beyond across the credit market. We are now well into what is clearly one of the most severe economic downturns in memory, with a little reason to believe that it will end soon.

As today’s quarter release makes clear, the positive trend in delinquencies and NPL’s that we saw in the third quarter did not hold. Moreover history cutting low interest rate and the fierce competition among Korean and American Banks have put pressure on the core deposits; however although the slowing economy has an effect on our balance sheet and income statement, we believe with that risk inherent in the bank’s loan portfolio is manageable and that liquidity needs can readily be met. Today’s economy environment does indeed present enormous challenges, but they’re challenges that Hanmi is well prepared to meet.

Again, thank you for joining us today. We look forward to speaking with you when we report our first quarter results in April. Thank you everyone and good bye.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.

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Source: Hanmi Financial Corp. Q4 2008 Earnings Call Transcript
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