Hanmi Financial Corp (HAFC) 2016 Q2 法說會逐字稿

Ladies and gentlemen, welcome to the Hanmi Financial Corporation's Second Quarter 2016 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 Ms. Christina Lee, First Vice President of Investor Relations and Corporate Strategy. Please go ahead.

Thank you, operator, and thank you all for joining us today. With me to discuss Hanmi Financial's second quarter 2016 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 the protection of the Safe Harbor provisions contained in Securities Litigation Reform Act of 1995. For some factors that may cause our results to differ from our expectations, please refer to our SEC filings, including our most recent Form 10-K and 10-Qs. In particular, we direct you to the discussion in our 10-K of certain risk factors affecting our business.

This morning, Hanmi Financial issued a news release outlining our financial results for the second quarter of 2016, which can be found on our website at Hanmi.com.

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

Thank you, Christina. Good afternoon, everyone. Thank you for joining us today to discuss our 2016 second-quarter results.

It was another excellent quarter for Hanmi, highlighted by solid earnings, strong loan production, expanding net interest margin and successful deposit gathering activities. Let me take a moment to briefly summarize our key accomplishments. Net income increased year over year as continued strong loan growth more than offset a modest increase in expenses.

Our ongoing success in repositioning the balance sheet to deploy liquidity into higher-yielding loans is reflected in our higher net interest margin. Importantly, loan production remained strong. Second quarter, new organic loan production jumped 27% from the prior quarter and 28% from a year ago.

Given our consistently strong loan production over the past year, loans receivable were up 4.3% from the first quarter and 20% from a year ago. Maintaining our strong credit quality is a top priority, and we have achieved this loan growth while maintaining disciplined underwriting standards, and not at the expense of increased risk.

And even though expenses were marginally higher, improvements in revenue from the significant growth in earning assets helped improve Hanmi's efficiency ratio by 79 basis points in the quarter.

And finally, as evidence of the deposit gathering prowess of our retail branch network, money market and savings balances increased 10% in the quarter while DDAs increased by 1.5%.

Looking in more detail at our second-quarter results, we reported net income of $14.1 million, or $0.44 per diluted share, an increase of 1.2% from the second quarter last year. On a linked quarter basis, net income increased 4% -- excuse me, net income decreased 4% compared to the first quarter of 2016, primarily as a result of several non-recurring benefits to noninterest expense in the first quarter that Ron will discuss in more detail in a moment, along with a $1.8 million income tax benefit recorded in the first quarter this year arising from the finalization of 2014 amended income tax returns. I am pleased to note, however, on a linked quarter basis the pre-tax, pre-provision income increased 10.4%.

Continued loan growth and our success over the last year in repositioning the balance sheet by deploying securities acquired from the Central Bancorp, Inc. acquisition into higher yielding loans continues to benefit Hanmi's financial performance. At the end of the second quarter, loans represented 78% of total assets and 96% of deposits. This compares favorably to loans at 73% of total assets and 84% of deposits a year ago.

The improved mix of earning assets has helped to expand second quarter net interest margin to 4.02% or 16 basis points higher than the previous quarter and 36 basis points higher than the second quarter last year after excluding the effect of acquisition accounting. And importantly, as a result of the improvements in revenue from the growth in earning assets, the efficiency ratio improved to 56.46% in the second quarter from 57.25% in the prior quarter, and 60.52% from the second quarter last year.

In total, loans receivable were up more than 4% quarter over quarter and 20% year over year driven by new loan production for the quarter of $332 million. Second-quarter new loan production was comprised of $265 million of organically generated loans and $67 million of purchased loans comprised of $51 million of scheduled single family mortgage portfolio and a small CRE portfolio purchase to partially offset the $36 million payoff in this category.

Looking ahead to the third quarter, our loan pipeline remains healthy. During the second quarter, we experienced strong growth in our legacy Hanmi markets in California. We also benefited from record contributions from our lending operations in Texas and Illinois, which together comprised 21% of Hanmi's organic new loan production in the second quarter.

The strong growth we are experiencing in Texas and Illinois is very encouraging, and we expect momentum in these markets to continue in the second half of the year as we leverage our strong branch network in these states.

Loan production in the second quarter consisted primarily of $197 million of commercial real estate loans, $47 million of SBA loans, and $19 million of C&I loans. The strong SBA production in the quarter reflects the seasonality of this line of business and included $40 million of 7a loans. In addition, I'd like to note that C&I loan production increased 25% compared to the prior quarter and reflects our continued focus on business banking to diversify our portfolio.

Total commercial line of credit commitments increased to $367 million(corrected by company after the call) in the second quarter, up 26% on a year over year basis. Total deposits in the second quarter increased 2.6% in the quarter, which highlights the strength of our retail and branch network as a source of funding.

During the second quarter, money market and savings balances increased 10% and noninterest-bearing demand deposits increased 1.5% compared to the prior quarter. In a challenging environment, we were able to maintain for the second quarter the cost of deposits at 43 basis points.

Overall, total deposits stand at $3.6 billion, and non-interest-bearing demand deposits now comprise 33.1% of total deposits, up from 30.9% a year ago.

And finally, we remain keenly focused on credit quality. Loan to value ratios on new commercial real estate loan originations for the second quarter averaged 54.3%. Nonperforming loans, excluding PCI loans, dropped to $12.3 million, or 0.36% of loans, which reflects a 14 basis point improvement from the prior quarter and we recorded negative provisions in both the first and second quarters of 2016.

Our allowance for loan losses now stands at 1.15% of loans at the end of the second quarter. Our focus on disciplined underwriting and credit quality continues to be a top priority at Hanmi.

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

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

Second quarter net interest income increased 3.7% or $1.4 million to $40.0 million from $38.6 million for the first quarter due to loan growth and loan prepayment penalties. Quarter-over-quarter, average loans increased 4% to $3.3 billion and represent 82% of average interest-earning assets.

Loan prepayment penalties increased $835,000, principally from the pay-off of one large loan.

Second quarter net interest margin, on a taxable equivalent basis, also increased to 4.02% from 3.98%. Importantly, net interest margin, after excluding acquisition accounting, increased 16 basis points reflecting the growth in loans as well as the effect of loan prepayment penalties.

Compared with the 2015 second quarter, net interest income was up 7.8% from $37.1 million and net interest margin increased 5 basis points from 3.97%. These year-over-year increases reflect the 17% increase in average loans and the jump in the mix of interest-earning assets where a year ago, loans were only 76% of average interest-earning assets. Again, net interest margin after excluding acquisition accounting, increased 36 basis points from the growth in loans and the change in the mix of interest-earning assets.

Year-to-date, net interest income improved 5.4% to $78.6 million from $74.6 million for the first six months of 2015 and net interest margin was 4.00% compared with 3.93% for the year-ago period.

Turning to noninterest income, we reported a sequential increase principally because of higher gains from SBA and PCI loan sales. On a year-over-year basis, noninterest income decreased principally from security transactions. That is there were no security transactions in either quarter of 2016 while the second quarter of last year included gains of $1.9 million. In addition there were lower gains from PCI loans. Gains on the sales of the guaranteed portion of SBA loans for the second quarter were $1.8 million on sales of $20.2 million of loans compared with the first quarter where gains were $858,000 on loan sales of $12.4 million.

A year ago, gain on sales of SBA loans for the 2015 second quarter were $1.6 million on $19.3 million of sales. Disposition gains on PCI loans for the second quarter were $2.0 million as PCI loans declined $4.8 million from the first quarter primarily due to sales. Disposition gains were $659,000 for the first quarter as PCI resolutions or dispositions were negligible.

A year ago, disposition gains were $2.5 million as PCI loans declined $7.2 million from resolutions or dispositions. Noninterest expense increased 6.9% or $1.8 million to $27.9 million from $26.1 million for the first quarter principally because the first quarter expenses in certain categories were unusually low.

Advertising and promotion expense increased as we delayed spending associated with our new tagline campaign related to the new Hanmi logo. Also, occupancy and equipment expense increased because of a first quarter property tax refund and an early termination of a building lease.

In addition, other operating expenses increased because of first quarter reductions in SBA allowances. Importantly, the second-quarter efficiency ratio improved to 56.46% from 57.2% for the first quarter.

For the first half of 2016, noninterest expense fell 7.7% or $4.5 million to $53.9 million from $58.4 million for the same period last year primarily due to reductions in expenses related to the August 2014 acquisition and 2015 first quarter conversion of Central Bancorp as well as lower personnel and premises costs from branch consolidations completed in third quarter of 2015.

Excluding merger and integration costs, the first half efficiency ratio improved to 56.84% from 58.71% a year ago. Mindful of careful management of noninterest expense, we will complete two branch office consolidations in the third quarter.

The effective tax rate for the second quarter was 38.5% , up from 29.5% for the first quarter because the first quarter income tax expense included a $1.8 million benefit arising from the finalization of the 2014 amended tax returns. The effective tax rate for the first half of 2015 was 34.2%, down from 40.7% a year ago principally because of tax-exempt interest on municipal securities and the tax benefit previously mentioned.

Last, our taxable -- our tangible book value reached $0.1623 per share, increasing 5.5% since the end of last year, and 10.2% from the end of the year-ago second quarter. Our tangible common equity ratio remains strong at 11.79%, as do all of our regulatory ratios.

Now, I will turn the call back to C. G.

Thank you, Ron. We've had a good first half of 2016, driven by continued top line revenue enhancement as we transition the acquired book from the CBI transaction to core book.

In addition, Hanmi's loan production capabilities combined with our ability to sustain a strong net interest margin in a difficult environment will enable us to continue to outperform our peers. I am grateful for all the hard work of our dedicated employees across the country, and continued support of our shareholders. I look forward to sharing our continued progress with you again next quarter. Thank you.

Christina?

Operator, let's open the call for questions.

(Operator Instructions) Chris McGratty, KBW.

Ron, maybe to start on the prepayment penalty income, I think you said it was up $835,000 sequentially, which to me looks like about half the reason for the core margin expansion. Do you have the absolute level of prepayment penalty income, what the base was?

The absolute prepayment penalty was approximately $1 million and the basis point effect of prepayments on the second quarter was about 9 basis points.

Okay. I guess looking ahead, obviously that number can bounce around, and so can the accretable. Given what's happened to the yield curve, can you maybe opine about what you expect for margin trends in the back half?

This is C. G. First of all, you mentioned accretable. The prepayment, as you may know, only relates to the legacy Hanmi book of loans that we have. In a flat yield curve environment, like ours, there is a risk that all banks have, that there could be more prepayments, depending on the -- I would say the efforts of some of the big banks like Wells and B of A, who have had historically a tendency to drift down to our space, the community banks and regional banks, with rates and terms that we typically do not want to compete against.

So, that's a risk that we have.

However, having said that, we've been in this kind of an environment for a bit, and notwithstanding some of those potential threats, we've been -- our production has been very good, very strong, and also the rate that we are able to obtain on our new loans is slightly north of 4.4%.

So, while that risk does exist, it seems that we are more than holding our own at this point.

Okay, great. Maybe we could switch to the PCI gains, which obviously are inherently volatile. Could you maybe remind us the size of the portfolio that is still in kind of wind-down mode, and what you might expect for future gains in the coming quarters?

First of all, in the future gains, it's hard to speak to that, because we are at the mercy of the resolutions for the payout of successful workouts. I believe the PCI total is about $17 million or so.

No, it's about (multiple speakers) $15 million (multiple speakers)

Okay.

And against the $15 million, we have about a $5 million loss allowance (multiple speakers). So our net carry is about $10 million.

Right.

Okay, so it sounds like there could be -- it's tough to predict exactly when, but there should be some level of additional gains in some subsequent quarters.

Maybe just switching to the expenses, lastly, in your prepared remarks I think you said that you're planning to close a couple branches. Last quarter I believe you talked about potentially some more announcements in the coming months.

Is this what you were alluding to, a couple -- one or two branches here or there? Or is this setting the stage for additional consolidation down the road?

Well, at this point, we have two branches that are scheduled to close, I think, any day now. We've been going through the regulatory time period, and I think any day now those two branches will close. That will generate about, on an annualized basis, about $1 million a year.

We don't have any plans at this time to close any more branches. But it's a process that is ongoing, as we continue to evaluate the performance and the strategic opportunities, the benefits of some of these branches. We may or may not make any more of those branch closure decisions. But at this point in time, there is nothing else in the cards.

Okay, that's helpful. And then, C. G., on the expense run rate going forward, once you come through, you said $1 million a year. But with the expenses ticking up from unusually low first quarter, I guess can you help us with a run rate on the expense line?

Yes, I think the unofficial guidance that I provided in the past is that we are expecting a quarterly run rate somewhere between mid $26 million to high $26 million. So, if you average out the first two quarters, we are pretty close to that. And so, that's probably a good estimate from which to work off of.

Great, thanks for taking my questions.

Bob Ramsey, FBR.

I was hoping maybe you could talk a little bit about the SBA business. There was a pretty notable increase in the balance of loans held for sale. How much of that is related to the SBA business? And what does the pipeline look like for sale activity in the back half of the year?

Well, the loans held for sale line item is all SBA. As part of our business model we don't generate loans for sale.

I'd say for the second half of the year, I would say, if you were to just extrapolate or extend the second-quarter performance for the second half of the year, that's probably a good way of prognosticating what our second-half performance could be.

Okay, and that is in terms of volume. I take it margin, you think, will be relatively stable over the second quarter as well?

When you say margin, are you referring to the premium income?

The gain on sale on the SBA loan business income and good margin.

I think so. Although we've had a slight drop in terms of the premium level from -- I think it was like 9.9% to about 9.7% in the second quarter, but I think in the rate environment that we are in, the high 9s is reasonable to expect in the second half.

Okay, great. Then, I guess we sort of touched on net interest margin and it's a little bit difficult to predict prepayments and accretion. But outside of those two factors, how are you guys thinking about the core margin trends in this rate environment?

We've been able to sustain our core margin and actually been able to improve on that over the last couple of quarters. I think that's a reasonable expectation for the second half of the year. It will be challenging, but we still have some room left as far as some of the high-cost CDs from the CBI transaction that are scheduled to roll off in the second half of the year, combined with our -- this franchise has a fantastic ability to generate low-cost deposits. It's allowing us to -- actually frankly it's allowing me to have some more confidence that the core margin that we are able to sustain ex the prepayment penalty benefit that we received in the second quarter, I think it's pretty reasonable. I am beginning to feel a lot better about that.

Okay, great. Maybe you could talk a little bit about commercial real estate. It obviously is a pretty key piece of your business. There has been a lot of talk out there about regulators giving increased scrutiny to companies that do a lot of commercial real estate lending.

Just kind of curious what interaction you have had with regulators on the subject and maybe what you are seeing in your markets, maybe that others do, that give you pause or thoughts more generally.

We have not had any interactions with the regulators about our CRE, concentration, generation or anything relating to our commercial real estate portfolio. I have not gotten any kind of inquiries or questions or phone calls from the regulators, which is the good news. In fact, if you don't hear from them, that means I don't have anything to worry about, at least for the short term.

And so, the -- we do have some level of CRE concentration and it's quite likely that we will be pushing across that 300% threshold either early third quarter or certainly sometime in the second quarter or second half of the year. The -- from the environmental side, one of the things that we are very mindful of is the -- some of the Class A commercial real estate properties in all the markets that we operate in, but particularly in Southern California and Northern California, the cap rates that are being assigned are just ridiculous.

So, generally speaking, we shy away from Class A real estate financing and specifically multifamily. Once again, the values that are generated from the low cap rate environment that we are in. It's just very difficult to rationalize as far as our underwriting is concerned. So we shy away from those.

But within the core markets, the core products that we deal with which are primarily B and C types of commercial real estate properties, we are still able to generate a good coupon with, I would say, a very reasonable rate of loan-to-value. As an example for all of the second quarter commercial real estate originations, weighted average loan-to-value was 54% and weighted average debt coverage ratio was 1.96%. So, that tells me that with the quality vendors that we have, quality clients that we have, we can generate good loan growth without compromising asset quality.

Okay, great. Thank you very much.

Matthew Clark, Piper Jaffray.

First one, just the first one for me was on thinking through how much more you might be able to remix the balance sheet. I know we talked about other parts of the core margin outlook, but just trying to get a sense for how much the securities portfolio, how much more could come down, and what your targeted range of liquidity and security is, relative to assets.

Well, generally speaking, we like to have the securities as a percentage of total assets in the 10% to 15% range. So, depending on the rate environment and the income opportunities that it will fluctuate that within that narrow band. As far as remixing is concerned, I think we are pretty close to the end of the process. With the leveraging that we've been able to accomplish on the balance sheet, we think that we are pretty close to being there.

The only other opportunity that is there is to transition more of our CDs. And I am referring specifically to the ones that we picked up from the CBI transaction and replaced them with the, I would say, more of the money market savings and preferably also DDAs.

Got it. Okay, and then, Ron, just on the tax rate housekeeping item, kind of -- I think you have talked about 38%, going forward a little bit higher this quarter. Just wondered if 38% was still the right number.

Matt, this is Ron. Yes, I think 38%, 38.5% -- it will kind of bounce in that. The overall rate for the year should be somewhere close to 36%. So it depends on how the quarters behave. But I would say 38.5% is probably a good number for now.

Okay, and then just on reserve coverage, I know it's just probably a number that just falls out at the end of the day. But just thinking about your reserve coverage on loans, down another 9 basis points this quarter, I would assume there is still some room to go, but just curious how much might be left. And your pipeline to recovery might still be there, too.

Well, yes, my suspicion -- as you said, this is a quarter-by-quarter analytical process that we undertake to determine the adequacy of the loan-loss reserve. So as we sit and talk right now I don't have a number for you.

But my sense is that given the continued improvement in our asset quality, and given the methodology that we employ, one of which is kind of a look back period looking back into the dark years and with those quarters dropping off the -- my sense is that we might have an extra quarter of negative provisioning still left. I am not sure more than that, but I would say as we sit and talk right now, I think there is a likelihood of another quarter of negative provisioning. But beyond that, I just don't know.

Thank you.

Tim Coffey, FIG Partners.

It's been a long day. So, the prepared remarks talked about 21% of 2Q loan production coming from Texas and Illinois. I was wondering if you can kind of talk about what you are seeing in terms of deposit growth in those two states.

The deposit growth -- that's not a significant part of what they're doing in terms of net growth. What they are charged to do is transition as much as possible the CD portfolios that are in those two markets and convert them into money market savings and DDAs.

So in terms of absolute net growth, as far as that is concerned, that hasn't happened. But what's been happening nicely is that we are able -- we seem to be able to retain some of those CDs at a rate that is more palatable to us, which is market. And so, as an example, in the third quarter, we have about $52 million of CDs that are supposed to roll off in Texas and Illinois with a growth rate of about -- I think it is about 180 basis points -- excuse me about 170 basis points. And when you mark that to -- adjust that for the acquisition accounting, that's about a 110 to 115 basis point net charge to us. Our replacement CDs is around 80 basis points, if that.

And so if we can just, dollar for dollar, replace those CDs that are rolling off and replace them with our market CDs, immediately we gain 30 to 35 basis points. And furthermore, if we can transition them into an even lower cost deposit product, we are better off obviously.

Thanks for the color on that. And then looking at what you have left in the PCI loan bucket, are you actively marketing any of those loans? Or are they rolling off as they roll off?

Yes, no, we are not selling off any loans. They are rolling off through workout, workout successes, primarily.

Okay, okay, and then as far as where we see in the big merger in your market in Southern California, are you seeing any benefits from that as that deal appears to be close to closing?

Well yes, I mean, we have -- we are seeing some benefits in terms of that situation is focused on getting the two companies together is creating some consternation with the employee base and the customers. So, in particular, we've had a couple of situations where the customers have come to us because they were not able to get the attention of the parties -- the right parties at the other organization.

And so, they decided to come to us.

In any large acquisition/merger like this, you just -- you are going to have that. That is just a natural part of byproduct of two companies that are trying to get together. And so, we will see what happens in the future. But, it's just a natural byproduct of an M&A situation like that.

Right, okay, those are my questions, thanks.

Don Worthington, Raymond James.

In light of the strong loan growth in the quarter, are you thinking for the full -year you may get a little bit better than the low double-digit loan growth you are expecting? Or would you expect some slowdown off of the second quarter into the second half?

To clarify, I have said over the last year or two that we as a company should be able to generate low double-digit growth year in and year out through various different parts of the economic cycle. I did not infer that, in 2016, the expectation was low double digits. I would say it's more reasonable to expect, given the success that we have generated in the first half, and given the momentum that we have going into the second half, I think the mid-double-digit is a reasonable expectation for 2016.

Okay, great. That's good clarification there. And then was there anything in particular that drove the payoffs in the quarter, were you just seeing borrowers refi elsewhere, or just paying down due to liquidity events or anything of that nature that drove the payoffs?

This is Bonnie. The amount of payoffs during the quarter, we had two large payoffs, one relationship, multiple loans, a total of $36.5 million that was -- it's our longtime customer. However, the offer that he has gotten from a regional bank was price set long-term 10-year fixed at around 2%, and the much relaxed underwriting credit requirements in terms of loan-to-value and the collateral requirement. So the customer had communicated that to us earlier on, so we advised the customer that we are not going to be able to refinance.

And another loan was actually a hotel property loan, $10 million, and a similar situation. And much longer, long-term fixed-rate, and much lower pricing, and as well as the collateral requirements that are being offered by -- is actually a hotel lender. So we communicated that earlier on as well, and then we were not going to be able to refinance. So those credit relationships were about $46.5 million out of the total.

But of that -- of the two relationships, the first one for $36.5 million was gas station secured. And so, I did not shed any tears about losing that deal, because we have strategically since my arrival have been trying to right size that gas station portfolio here at Hanmi.

Okay, great, thanks. That's great color. That's all I thought. I've got.

(Operator Instructions) Gary Tenner, D.A. Davidson.

My question has been largely answered, but I will just ask you to provide some detail, C. G., on the purchased loans in the quarter and progress in the healthcare business as well.

Sure. First of all, on the healthcare business, that division continues to perform beyond our initial expectations, and both on the loan and depository side. As far as depository is concerned, they basically generate zero interest-bearing DDAs, which is fantastic.

And I will let Bonnie talk about what the exact numbers are, because I can't remember what they are, to be honest with you. But the -- I'm sorry, what was the other question?

Purchased loans.

Yes, the purchased loans.

The first one was the regularly scheduled one, and in fact because the amount that we purchased in the first quarter was slightly below expectation, they allowed us to make it up by increasing it to $51 million in the second quarter.

So we were -- we have an unofficial understanding with this other company that we are going to get about $40 million a quarter. And I think, if my memory serves me, the first quarter was about $30 million or so. So they basically made that up in the second quarter.

Once again, it's a low loan-to-value, relatively higher coupon, and these properties are all in our markets. The second one is for about $15 million or so and it's a small $15 million multi-family portfolio based in Illinois. And you may ask why.

Well, there is a small thing called CRA where the regulators expect us to be lending out at some level the dollars of deposits that we take in a given market and lending out in the form of loans, if you will. And so, in preparation for our 2017 examination, we just wanted to -- we are proactively making sure that the organic and through inorganic means that we show the regulators that we understand CRA and that we are doing our best to comply with their expectations.

Great, and that regularly scheduled $40 million a quarter, that is single-family, correct?

Yes.

Okay. And one last question on the loan production. The $66.5 million of loan purchases in the quarter,that is captured in the $265 million total production, yes? Or is that a separate number?

No, that is a separate number. We (multiple speakers) announced organic production of $265 million (multiple speakers) and the purchases in addition to the $265 million. (multiple speakers)

Okay, wanted to confirm.

So going back to your question on the progress on our healthcare, second Q the single department produced about $22 million. For the year-to-date the department generated over close to $65 million by outstanding and then, by commitment, about $73 million. That represents a 14% contribution through the year-to-date production.

Okay, that's very helpful. And then one last question if I could. C. G., if you could give us some sort of update or just your thoughts in terms of M&A environment for Hanmi.

Well, we are not lacking potential partners, let me just say that. We have -- I -- we've been approached. I have not actually solicited anyone. But I have been solicited quite a bit by the investment banking community as far as a potential partner or partners are concerned.

We are evaluating. We have and will continue to evaluate all of these opportunities; and when they make sense, we will move forward. But up until just recently, the bank valuation market has created some challenges for a potential acquirer like ourselves. But the market has gotten better and we think that we will be active under the right set of circumstances in that particular field in the second half of the year.

Great, thanks very much.

Thank you. At this time, we have no further questions. I will turn the call back over to Christina Lee for closing comments.

Thank you for listening to Hanmi Financial's second-quarter conference call. We look forward to speaking to you next quarter.

Thank you. Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.