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Edited Transcript of HAFC earnings conference call or presentation 18-Apr-17 8:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Hanmi Financial Corp Earnings Call

Los Angeles Apr 20, 2017 (Thomson StreetEvents) -- Edited Transcript of Hanmi Financial Corp earnings conference call or presentation Tuesday, April 18, 2017 at 8:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bonnie Lee

Hanmi Financial Corporation - SEVP and COO

* C. G. Kum

Hanmi Financial Corporation - President and CEO

* Richard Pimentel

Hanmi Financial Corporation - SVP and Corporate Finance Officer

* Ron Santarosa

Hanmi Financial Corporation - SEVP and CFO

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Conference Call Participants

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* Chris McGratty

KBW - Analyst

* Don Worthington

Raymond James - Analyst

* Matt Hollands

D.A. Davidson - Analyst

* Matt Clark

Piper Jaffray - Analyst

* Bob Ramsey

FBR & Co. - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Hanmi Financial Corporation's First Quarter 2017 Conference Call. As a reminder, today's call is being recorded for replay purposes. (Operator Instructions) I would now like to introduce Mr. Richard Pimentel, Senior Vice President and Corporate Finance Officer. Please go ahead.

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Richard Pimentel, Hanmi Financial Corporation - SVP and Corporate Finance Officer [2]

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Thank you, Matt. And thank you all for joining us today. With me to discuss Hanmi Financial's First Quarter 2017 Earnings are C. G. Kum, our President and Chief Executive Officer; Bonnie Lee, Chief Operating Officer; and Ron Santarosa, Chief Financial Officer. Mr. Kum will begin with an overview of the quarter, and Mr. Santarosa will then provide more details on our operating performance and credit quality. 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 different from those expressed or implied by our forward-looking statements, which involve risks and uncertainties. The speakers on this call claim 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 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 first quarter of 2017, which can be found on our website at hanmi.com.

I will now turn over the call to Mr. Kum.

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C. G. Kum, Hanmi Financial Corporation - President and CEO [3]

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Thank you, Richard. Good afternoon, everyone. Thank you for joining us today to discuss Hanmi's 2017 first quarter performance. Overall, it was another good quarter for Hanmi, marked by growth across our franchise, excellent credit quality and a very strong capital position. Let me take a moment to briefly summarize our key accomplishments.

Net income continues to benefit from the bank's expanding net interest income, driven by solid growth in loans and leases. First quarter net interest margin excluding acquisition accounting held steady compared to the prior quarter and was up 17 basis points from a year ago. Loans and leases receivable increased 10% in the quarter on an annualized basis and were up 19% year-over-year, driven by strong loan production, coupled with the acquired equipment leasing portfolio in the fourth quarter last year. We've been able to achieve this solid growth in loans and leases while maintaining our disciplined underwriting standards and excellent asset quality.

In addition, deposit-gathering activities were exceptionally robust. Thanks to the strength of our retail branch network, money market and savings balances grew 15% during the first quarter. As a result, total deposits are up 17% compared to last year. And importantly, we enhanced our capital position by raising $100 million during the quarter through an underwritten public offering of subordinated notes. Hanmi's regulatory capital ratios remain very strong, and we are well positioned for continued safe growth.

Looking in more detail at our first quarter results, we reported net income of $13.8 million or $0.43 per diluted share. On a linked-quarter basis, net income per share was lower by $0.02 compared to the fourth quarter of 2016, which benefited from significantly higher disposition gains on PCI loans as well as special FHLB dividend of $600,000. Compared to the first quarter last year, net income per share declined by $0.03, primarily due to a $1.8 million income tax benefit recorded in the first quarter last year, along with a significantly higher negative provision for loan loss. That said, I'm pleased to report that we continue to make significant progress in our effort to replace benefits from PCI gains, negative loan loss provisions and onetime tax matters with core sustainable earnings driven by growth in loans and leases. To this end, net interest income before provision for loan losses is up 1% from last quarter and 10% from a year ago.

Looking at loans and leases receivable, our total portfolio grew approximately 10% in the first quarter on an annualized basis and is up more than 19% from a year ago, driven by new loan and lease production of $203 million in the first quarter and $863 million over the past 12 months. In the first quarter, purchase loans included $34 million of single-family residential loans. As we exited the first quarter, our loan and lease pipeline remained quite healthy and supports our expectation of low to mid-teens growth in loans and leases during 2017.

Turning to organic loan production in the first quarter. Production consisted primarily of $116 million of commercial real estate loans, $30 million of SBA loans and $17 million of C&I loans, along with $40 million of commercial equipment leases. In addition, total commercial line of credit commitments were $389 million in the first quarter, up 7% on a year-over-year basis.

On the heels of the 2016 fourth quarter acquisition of the Commercial Equipment Leasing Division, we announced during the first quarter the hiring of experienced lending officers to expand Hanmi's lending capabilities in the California and New York markets. This is the latest example of our ongoing efforts to enhance Hanmi's lending capabilities particularly in the C&I category, by adding talent with proven track records of success and establish customer relationships in key markets. I'm confident that our efforts here will enable us to continue to expand the Hanmi brand and result in new long-term customers.

At the end of the first quarter, loans and leases represented 82% of total assets and 97% of deposits. This compares favorably to loans at 77% of total assets and 95% of deposits a year ago. Our solid loan growth helped to maintain our first quarter net interest margin, excluding acquisition accounting, at 3.85%. This was just a single basis point lower than on a linked-quarter basis. It is worth noting that in the fourth quarter last year, we received a 6 basis point benefit to the net interest margin due to the positive impact of the special FHLB dividend. Excluding this benefit, our net interest margin increased slightly in the first quarter. On a year-over-year basis, net interest margin excluding acquisition accounting is up 17 basis points reflecting the improved mix of earning assets through our successful repositioning of the balance sheet.

I also continue to be very pleased with our deposit franchise, particularly the strength of our retail branch network. Sharply higher money market and savings balances in the quarter helped increase total deposits by 7% compared to the prior quarter and 17% compared to the first quarter last year. Overall, total deposits increased to $4.08 billion, and nonmaturity deposits at the end of the first quarter were more than 70% of total deposits as compared to 63% a year ago. I'd like to mention that our growth in deposits over the past 12 months has fully funded our loan growth and the acquisition of the lease portfolio over the same time period.

Next, I'd like to briefly touch on safety metrics. Credit quality remains excellent across the board, and we are committed to maintaining our disciplined underwriting standards for our loan and lease portfolio. Nonperforming loans, excluding PCI loans, stand at $12.8 million, or 32 basis points of loans, which reflects an 18 basis point improvement from a year ago, and we recorded net new recoveries in the first quarter of $803,000. Our allowance for loan losses remains at 84 basis points of loans.

In terms of underwriting, the weighted average loan to value and debt coverage ratios on new commercial real estate loan originations for the first quarter were quite strong at 55.5% and 1.84x, respectively.

Finally, an important first quarter accomplishment was the successful execution of an underwritten public offering of subordinated notes that raised $100 million of debt capital. The offering was significantly over-subscribed, reflecting investors' confidence in the Hanmi franchise. This further strengthened our total risk-based capital ratio to 16.14%, well ahead of the regulatory threshold of 10% for a well-capitalized institution. Additionally, this regulatory capital will also support our continued safe growth in 2017 and beyond.

With that, I'd like to turn the call over to Ron Santarosa, our Chief Financial Officer, to discuss the first quarter operating results in more detail. Ron?

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Ron Santarosa, Hanmi Financial Corporation - SEVP and CFO [4]

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Thank you, C. G., and good afternoon all.

First quarter net interest income increased approximately 1% or $289,000 to $42.4 million from $42.1 million in the fourth quarter. The increase reflects the expansion of our loan portfolio, partially offset by an increase in interest expense on deposits and borrowings. Quarter-over-quarter, average loans increased 5% to $3.9 billion and the average yield increased 2 basis points to 4.74%. Average money market and savings deposits increased 7.8% and average borrowings increased 54.9%, while the average rate paid increased 6 basis points and 23 basis points, respectively. The increase in deposits, however, drove overnight borrowings down to end the quarter at $50 million compared with $315 million at year-end. Our net interest margin on a taxable-equivalent basis decreased 7 basis points quarter-over-quarter to 3.89% from 3.96%. The decrease in net interest margin for the first quarter compared with the preceding quarter was primarily due to the 2016 fourth quarter special FHLB dividend of $559,000.

Net interest margin was benefited by approximately 6 basis points from this event. Net interest margin adjusted for the effects of acquisition accounting and the special dividend was up 5 basis points from the prior quarter and was up 17 basis points from a year ago. Compared with the 2016 first quarter, net interest income grew 10% and reflects the solid loan growth we've achieved over the past 12 months and the improvement in the mix of interest-earning assets. Year-over-year, average loans increased 22%, with loans at 87% of average interest-earning assets, compared with 81% for the year-ago period.

Turning to noninterest income. We reported a sequential decrease of 11%, primarily due to a $1.4 million decrease in disposition gains on PCI loans, offset by a $700,000 increase in other operating income. The increase in other operating income was primarily related to a $300,000 increase in servicing fee income resulting from lower servicing asset and liability amortization and a $400,000 increase in check up charge fees. PCI loans ended the quarter at $9 million, down 9% from year-end. On a year-over-year basis, noninterest income increased 4% primarily due to a $606,000 increase in gains on sales of SBA loans, a $327,000 increase in other operating income and from $269,000 in gains on sales of securities.

Gains on the sales of the guaranteed portion of SBA loans for the first quarter were $1.5 million on sales of $19.6 million of loans compared with the fourth quarter where gains were $1.8 million on loan sales of $27.8 million. A year ago, gains on sales of SBA loans were $858,000 on $12.4 million of loan sales.

Noninterest expense for the first quarter increased $1.3 million, or 5%, to $27.2 million from $26 million, primarily due to an $858,000 increase in salaries and benefits and a $557,000 decrease in OREO income. First quarter salaries and employee benefits are typically higher in the first quarter due to seasonal impact of elevated payroll tax and employee benefits. As a result of the increase in noninterest expense, as well as lower noninterest income, the efficiency ratio excluding merger and integration costs increased to 55% in the first quarter from 51.8% in the prior quarter and 57.3% a year ago.

As C. G. mentioned, our asset quality continued to improve with nonperforming assets at $17.4 million at the end of the first quarter, or 36 basis points of total assets compared with 40 basis points at the end of the prior quarter and 60 basis points at the end of the same quarter last year.

For the first quarter of 2017, we recorded a negative provision for loan losses of $80,000, which was related to our PCI loans from the 2014 CBI acquisition. For the prior quarter, the provision for loan losses was $151,000.

The effective tax rate for the first quarter was 38.5% compared with 40% for the fourth quarter. In the first quarter last year, the effective tax rate was significantly lower at 29.5% due to a $1.8 million income tax benefit arising from the finalization of amended prior year tax returns.

Finally, our tangible book value reached $16.26 per share, increasing 1.5% from the fourth quarter and 3% from the first quarter last year. Our tangible common equity remains strong at 10.98%, as do all of our regulatory ratios.

With that, I will now turn the call back to C. G.

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C. G. Kum, Hanmi Financial Corporation - President and CEO [5]

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Thank you, Ron. In a highly competitive environment for good quality loans and lower cost core deposits, Hanmi's first quarter performance stands out. With strong growth in conservatively underwritten loans and core deposits, Hanmi is well positioned to expand core earnings capacity and the bottom line. We're off to a good start in 2017 and on track to deliver, once again, highly profitable growth throughout the year. I look forward to sharing our continued progress with you when we report our second quarter results in July. Thank you. Richard?

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Richard Pimentel, Hanmi Financial Corporation - SVP and Corporate Finance Officer [6]

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Matt, let's open up the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Bob Ramsey from FBR.

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Bob Ramsey, FBR & Co. - Analyst [2]

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I wonder if you could talk a little bit about deposit growth. Obviously, it was very strong this quarter. I'm just sort of curious, is there anything unusual or a particular focus that helps enable you guys to demonstrate that growth?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [3]

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Well, as I indicated in my presentation, we have an exceptionally strong retail branch network and very loyal customer base. And so that's really the first place to start. The -- as you may recall, the couple years ago, we intentionally did not look to our branches for deposits because of the surplus liquidity picked up from the CBI transaction. But starting approximately about a year ago, we started to ask our branch managers to be more active in asking for deposits from our customers, and they've been delivering. So I would say fundamentally, it's really the Hanmi brand and the loyalty of our customers that have been instrumental in helping us grow the deposit base.

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Bob Ramsey, FBR & Co. - Analyst [4]

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Okay. And noticed a very modest uptick in deposit cost. Maybe you could talk about what you've seen in terms of deposit pricing out there and whether there are any promotions or anything that contributed to that.

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C. G. Kum, Hanmi Financial Corporation - President and CEO [5]

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Yes, I mean, we're being competitive in terms of deposit pricing. Although when I say competitive, we typically are substantially lower than our peer banks. We have substantial competition, in particularly in the CD space. We have banks nationwide that we're competing against in the markets like Texas and Illinois who are out there putting out 1.4%, 12-month CDs. So we expect that the overall deposit cost will continue to trend upwards. But on a relative basis, I believe that it's going to be less - or lower than our competition or our peer banks.

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Bob Ramsey, FBR & Co. - Analyst [6]

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Okay. Have you seen any shift in deposit pricing after the Fed's March increase? Or just sort of the same gradual maybe rise you were seeing before that?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [7]

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Yes, I would say it's been the same gradual rise. But there are banks that are -- particularly those organizations with the business model that's always been dependent upon CDs for funding, they are doing some pretty ridiculous things. We're seeing some deposit pricing in the 1.4% to 1.5% on 1 year CDs. So the deposit competition's going to continue to be fierce.

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Bob Ramsey, FBR & Co. - Analyst [8]

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Okay. Got it. Shifting gears to talk about net interest margin a little bit. It looked like the purchase accounting contribution was a good deal lower this quarter than last. Is that just sort of normal volatility that can happen in that line, or are we starting to see that burn off, or how should we think about that?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [9]

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I would say both. The contributions from the acquired book is just becoming very small. And there will be some level of, I would say, volatility because of some recoveries that would come out of, I would say, some hard work put out by my employees. So it's a combination of the 2.

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Bob Ramsey, FBR & Co. - Analyst [10]

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Okay. You don't happen to have handy the remaining accretable difference that you guys have left, do you?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [11]

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We...

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Ron Santarosa, Hanmi Financial Corporation - SEVP and CFO [12]

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I don't have that at the ready.

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C. G. Kum, Hanmi Financial Corporation - President and CEO [13]

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I'm sorry?

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Ron Santarosa, Hanmi Financial Corporation - SEVP and CFO [14]

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I don't have that at the ready. I don't have that.

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C. G. Kum, Hanmi Financial Corporation - President and CEO [15]

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Yes. But the book, you've got is $100 million right now, so it's a fairly small book.

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Ron Santarosa, Hanmi Financial Corporation - SEVP and CFO [16]

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Yes, so Bob, what I would point out to, in the table where we show the decomposition of the NIM as it relates to the purchase accounting, you'll notice kind of the steady contribution, if you will, from the time deposit portfolio and the borrowing side or the subordinated debt side. The time deposit side is pretty much over with, so that leaves, in any large way, shape or form, the loan book. And as you can see, over time, the loan book just continues to work its way down. If there are sizable events in the quarter, that number will spike upwards, otherwise, it's going to be a very nominal contribution from this point forward.

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Bob Ramsey, FBR & Co. - Analyst [17]

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Okay, got it. And then sort of thinking about the core margin outlook, I imagine there'd be a few basis points of pressure from the notes offering you guys did this quarter. How should we think about overall margin direction heading into the second quarter and factoring that in?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [18]

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I would say steady.

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Bob Ramsey, FBR & Co. - Analyst [19]

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Okay. So steady, meaning that you will have offset to that few basis points of compression or steady from a few basis points lower?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [20]

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I would say, where we are in the first quarter, I think there's a pretty good chance that we can maintain that through second quarter.

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Operator [21]

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Our next question comes from Matthew Clark from Piper Jaffray.

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Matt Clark, Piper Jaffray - Analyst [22]

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Maybe the first one on -- in the other noninterest income, it looked like increased there to about $1.7 million up from $1 million. I know that line item can bounce around a little bit. Just curious if there was anything unusual or if that's a good run rate to build from.

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Ron Santarosa, Hanmi Financial Corporation - SEVP and CFO [23]

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I would say, Matt, as we mentioned, there's about $400,000 that comes from some upcharge income from check sales. That's probably not going to repeat itself. And then you get a little bit of a swing from the amortization of our servicing assets. Part of it evolves just from, again, most of that from the acquired side, if you will. It depends on how fast some of those acquired loans pay off. And so you saw the slowdown in the first quarter as compared to the fourth quarter of the amortization effects of that. So all of that said, you're probably better at a midpoint idea than the low end or the high end.

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Matt Clark, Piper Jaffray - Analyst [24]

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Okay. Okay, great. And then I guess, how much did that, I guess, swing in the servicing assets account for, just to make sure that we're on the same page.

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Ron Santarosa, Hanmi Financial Corporation - SEVP and CFO [25]

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I want to say I have -- I said about $400,000 for the upcharge, about $300,000 for the net effect on the amortization.

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Matt Clark, Piper Jaffray - Analyst [26]

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Okay. Okay. And then just curious if -- well, before I get to that one, how about on expenses. I know comp was seasonally higher this quarter. I also know you guys have been doing some hiring and I think you opened up a branch. Just curious what the outlook is there for the run rate and some of the activities that you're working on.

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C. G. Kum, Hanmi Financial Corporation - President and CEO [27]

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Well, what we're hoping for is some reduction in the personnel cost. As we have mentioned, there's been an uptick associated with the seasonal charges associated with the personnel cost, and then the branch opening in Illinois. Absent another branch opening, which could happen in the second half of the year, we're hoping that with some continued focus on the noninterest expense management, that, that the number will come down.

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Matt Clark, Piper Jaffray - Analyst [28]

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Okay, great. And then last one maybe for me is on the sub-debt raise and kind of thinking through strategic opportunities out there, whether or not -- I guess, what are your updated thoughts on the M&A prospects for you all?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [29]

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I was a lot more optimistic about a month ago. But there's still sellers out there, potential sellers. And the volatility of the stock market as it relates to the financial institutions, I think, has caught all of us somewhat off guard. And -- but I'm still evaluating opportunities, and we'll see how it goes. But there's still a lot of talking going on in my space. And so I remain hopeful that there could be transactions done in 2017 and beyond.

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Matt Clark, Piper Jaffray - Analyst [30]

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And are you thinking whole banks, or are you thinking other types of business lines?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [31]

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I'd say the preferred route at this point is a whole bank acquisition. Given that we did the equipment leasing acquisition last year, the -- I would say, it's more likely that the next one would be a whole bank acquisition.

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Operator [32]

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Our next question comes from Gary Tenner from D.A. Davidson.

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Matt Hollands, D.A. Davidson - Analyst [33]

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This is Matt on for Gary. But all my questions have been answered, so I'll step back.

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Operator [34]

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(Operator Instructions) And our next question comes from Chris McGratty from KBW.

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Chris McGratty, KBW - Analyst [35]

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Ron, maybe if I could come back to the margin a bit. So if I'm thinking about it, I want to make sure I'm thinking about it right. So the right-hand side of the balance sheet, you've got next quarter, a full quarter's impact of the debt. You've got gradually rising funding costs. Could you speak to where the new origination yields are? I'm trying to get to your stable comment, C.G, but I'm trying to factor in the flattening of the yield curve that's occurred and maybe where new production versus book yields are at that would maybe bridge the gap.

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Bonnie Lee, Hanmi Financial Corporation - SEVP and COO [36]

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Sure, the new production in the first quarter came in at the 4.71%.

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C. G. Kum, Hanmi Financial Corporation - President and CEO [37]

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So Chris, where I was coming from is that, yes, we understand there are pressures that are going to be coming from the sub-debt and also the continued pressure in terms of deposit pricing. Having said that, though, as Bonnie mentioned, I was very encouraged with the pricing of our new loans that are coming in, as Bonnie just mentioned, in excess of 4.70%. And on top of that, we have a fairly modest book of commercial equipment leases, but they're generating somewhere with a 5 handle on it. And so between the 2, we remain hopeful that those 2 components will enable us to maintain the level of net interest margin that we were able to generate for the first quarter.

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Chris McGratty, KBW - Analyst [38]

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Okay. Maybe if I could come back. Looking on your website, it looks like money markets are a little over 1%. Is there more competition -- I'm just trying to get educated here. Is there more competition from money market, C.G, than for CDs at this point of the cycle given your model?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [39]

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I would say, right now, there's more competition for CDs than money markets. I think bankers like me, we would prefer money markets because of the lack of a duration commitment by a bank. And so most -- many of the banks that are, I would say, liquidity starved, are up there basically putting out CDs. So there are greater competition in the CD arena than in money markets, in my opinion.

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Chris McGratty, KBW - Analyst [40]

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Okay. Maybe I could ask a question or 2 on credit. Obviously, your stats look great, but the growth outlook is pretty strong. Wondering if you could comment on the pipeline of recoveries. Obviously, picking a quarter where the provision is going to be positive is tough. But if you're going to hit the mid-teens growth, you're going to have to likely provide. I'm just trying to bridge the gap between the current earnings run rate and maybe 2018 consensus numbers.

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C. G. Kum, Hanmi Financial Corporation - President and CEO [41]

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I would say, based on the trajectory of growth, it's likely that we will provision for loan growth in -- based on loan growth in the second quarter. As to the recoveries, that's been historically pretty lumpy for us, like what happened in the first quarter. And so it's hard for us to predict on a quarter-by-quarter basis the level of recoveries that we would get on previously charged off loans. But if you look at us on kind of an annualized basis, in terms of what happened in 2016 as it relates to non-PCI loans, my expectation is that in 2017, the level of recovery will be fairly similar.

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Chris McGratty, KBW - Analyst [42]

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Okay, okay. And is there -- maybe a last one on credit, is there any concern -- you've got a decent piece of the CRE portfolio that's in retail. Obviously, we're all reading kind of the impact of the retail industry given online. Any signs of stress there or any concerns of what you may not be kind of underwriting to maybe next year or so given the stress?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [43]

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Well, the -- our retail properties do not have the -- any big-box kind of retail tenant or major shopping centers or things of that nature. Retail types of deals tend to be much more, I would say, B and C types of projects. And as far as those categories are concerned, we have not seen any signs of stress as we speak.

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Operator [44]

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Our next question comes from Don Worthington from Raymond James.

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Don Worthington, Raymond James - Analyst [45]

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A couple things. One, obviously, the markets like Texas and Illinois are contributing nicely to the deposit growth. Are they also on the loan side doing kind of what you were expecting there in terms of generating loan growth?

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Bonnie Lee, Hanmi Financial Corporation - SEVP and COO [46]

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So in the first quarter, Texas and Illinois contribute around 13% of the organic loan growth and which is actually higher than the company's share, their share of the company. So as you said, deposits they track right, it mirrors the company.

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Don Worthington, Raymond James - Analyst [47]

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Okay, great. And then in terms of SBA gains, where you kind of see that going forward, maybe rates similar to this quarter.

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C. G. Kum, Hanmi Financial Corporation - President and CEO [48]

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Yes, I'd say our expectation is it's going to pick up in the second quarter. One of the reason I'm very optimistic about -- and I shouldn't say very, but I'm optimistic about 2017, is that historically, the first quarter tends to be a slower quarter in terms of loan generation, including SBA. But we had a pretty good first quarter. So -- and with the pipeline going into the second quarter, it seems that we're going to have a decent second quarter as far as loan generation, and in particular, in the SBA area of concern. The -- as part of the SBA, the premium income level actually went up by almost 20 basis points from fourth quarter of last year to first quarter of this year. And I think that reflects the flattening of the yield curve where the long end has come down a little bit. And so if that's maintained, then we think that the second quarter could be, I would say, more productive for us as far as SBA premium income is concerned.

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Don Worthington, Raymond James - Analyst [49]

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Okay, great. And then lastly, and maybe this is for Ron, the outlook for the tax rate in 2017 given the first quarter number.

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Ron Santarosa, Hanmi Financial Corporation - SEVP and CFO [50]

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We should be between -- somewhere between 39% to 40%, Don.

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Don Worthington, Raymond James - Analyst [51]

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For the full year?

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Ron Santarosa, Hanmi Financial Corporation - SEVP and CFO [52]

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For the full year, right.

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Operator [53]

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Our next question comes from Bob Ramsey from FBR.

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Bob Ramsey, FBR & Co. - Analyst [54]

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Just wanted to follow up on the provision remark. I know you guys said you're pretty close to provisioning for growth. Is it fair to think about as you do that, maybe you'll provision around 1% of net loan growth? Or how should we think about what the provision rate is for the incremental growth?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [55]

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It's hard to say at this point. Some of that is going to be -- some of the provisioning's going to be based on the overall quarter-by-quarter analysis of the adequacy of our ALLL. And frankly, there's still room within the model that we use to absorb growth. I would say, over an extended period, I would say, somewhere in the 50 to 75 basis points is probably reasonable, but I'm not so sure that will be applicable for at least the next couple quarters. I think that might be a little bit high, because as I said, we still have some capacity within our ALLL to absorb some of the loan growth. But there will be some provisioning, I just couldn't tell you at this point until we finalize the quarter at what level we will provision.

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Bob Ramsey, FBR & Co. - Analyst [56]

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Okay. And then in terms of the first quarter, do you have the breakout of what the provision impact was from purchase credit impaired versus nonpurchase credit impaired loans?

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Ron Santarosa, Hanmi Financial Corporation - SEVP and CFO [57]

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In terms of the provision, it was solely related to PCI. So the $80,000 negative, that was solely related to the PCI reserves. So there was no net provision for all the other loans, if you will, largely because of the $800,000-plus recovery related to all of the other loans.

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Bob Ramsey, FBR & Co. - Analyst [58]

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Okay, got it. And then is it fair to say that the loan growth guidance you guys have given so far this year, I think you've said low to mid-double digit growth, is the expectation for the year?

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C. G. Kum, Hanmi Financial Corporation - President and CEO [59]

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Yes, it is.

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Operator [60]

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This does conclude the question-and-answer session. I'd like to turn the floor back over to management for any closing comments.

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Richard Pimentel, Hanmi Financial Corporation - SVP and Corporate Finance Officer [61]

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Thank you for listening to Hanmi Financial's First Quarter 2017 Results Conference Call. We look forward to speaking with you next quarter.

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Operator [62]

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Thank you. This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.