Hope Bancorp Inc (HOPE) 2008 Q4 法說會逐字稿

Good morning. Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter 2008 Nara Bancorp earnings conference call. During today's presentation, all parties will be in a a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, Friday, January 30th, of 2009.

I would now like to turn the conference over to Tony Rossi of the Financial Relations Board. Please go ahead, sir.

Thank you operator. Good morning everyone, and thank you for joining us for the Nara Bancorp fourth quarter 2008 conference call. Joining us this morning from management are Ms. Min Kim, Chief Executive Officer, and Mr. Alvin Kang, Chief Financial Officer.

Before we begin, I would like to make a brief statement regarding forward-looking remarks. The call today may contain forward-looking projections regarding future events and the future financial performance of the Company. We wish to caution you that such statements are just predictions, and actual results may differ materially, as a result of risks and uncertainties that pertain to the Company's business.

We refer to the documents that Company files periodically with the SEC, specifically the Company's most recent 10-Q and Annual Report on Form 10-K, as well as the Safe Harbor statement in the press release issued earlier today. These documents contain important risk factors that could cause actual results to differ materially from forward-looking statements. Nara Bancorp assumes no obligation to revise any forward-looking projections that may be made on today's call.

With that, I would like to turn the call over to Ms. Min Kim. Ms. Kim?

Thank you, Tony. Good morning and thank you for joining us today. I am going to provide a brief overview of the fourth quarter of 2008, and then I will turn the call over to Al Kang, our Chief Financial Officer, who will review our financial results. Following Al's remarks, I will conclude with a discussion of our outlook for 2009.

During the fourth quarter, general economic conditions took a significant downturn. This placed substantial stress on borrowers, particularly in our commercial real estate portfolio. The most significant deterioration came in car wash, hotel and motel loans. As we indicated last quarter, we performed a comprehensive portfolio review, and identified approximately $66 million in credits that warranted closer monitoring.

As a result of this heightened monitoring, we were able to quickly identify the additional stress placed on these borrowers, when the economy weakened even further in the fourth quarter. From this group of $66 million in credits, approximately $20 million was downgraded in the fourth quarter, $11.6 million was moved to delinquent status, and $4 million was charged off. We have also stepped up our monitoring of all loans, in the areas that are under the most stress, such as car washes, and hotels and motels.

We are being very proactive in dealing with these borrowers that are still current, but showing signs of stress, so that we can mitigate potential losses. In addition, our expanded special asset group is working very closely, with the credits that are already in our non-performing assets inventory. At least once every six months, we are paying updated appraisals or brokers price opinions on all non-performing commercial real estate loans, to ensure that our valuation reflects current market conditions.

As a result of the information we gathered through our increased credit monitoring efforts, we were able to be very aggressive, in recognizing losses and recording immediate charge-offs in the fourth quarter. We also substantially increased our reserve levels, by taking a provision well in excess of net charge-offs. While these collective actions resulted in a net loss for the fourth quarter, we believe our strong allowance level, which now stands at 2.07% of total loans, should help us stay ahead of other credit losses that materialize. Al will talk more about our asset quality trends later in the call.

Given the challenging conditions, our focus is firmly on maintaining the strength of our balance sheet. During the fourth quarter, we raised $67 million in capital through the TARP program. With our strong capital and reserve ratio, we believe we are well-positioned to manage through a prolonged economic slowdown.

At this point, I am going to turn the call over to Al, who will review additional financial results for the fourth quarter. Al?

Thank you, Min. Let me start with our net interest margin.

On a GAAP basis our net interest margin was 3.71% in the fourth quarter of 2008, compared to 4.02% last quarter, a decline of 31 basis points. The decline in net interest margin is attributable to the 175 basis point in interest rate cuts by the Fed during the fourth quarter. This had the effect of reducing our yield on interest earning assets by 40 basis points during the quarter, while our costs of funds increased by 2 basis points, primarily due to the highly competitive market for deposits.

50% of our loan portfolio is comprised of fixed rate loans, with a weighted average yield of 7.62% at December 31, 2008. This mitigated the adverse effects of the rate cuts on our adjustable rate portfolio, whereby the yield declined to 4.65% at December 31st, 2008, from 6.04% at September 30, 2008. Our non-interest income was $2.1 million in the fourth quarter, which was a decline of 66% from the same period last year. The decline was due to a decrease in sales of SBA and other loans.

As we have indicated in prior quarters, we have tightened our underwriting criteria in the SBA lending business, and given the weak economy, fewer businesses have been able to meet our requirements for cash flow and working capital. This has reduced our loan originations and therefore our volumes of loans sold as well.

Our SBA loan originations were $8.0 million during the fourth quarter, down from $24.9 million in the same period last year. We did not sell any SBA loans during the fourth quarter of 2008, while we sold $24.9 million in the same period last year. As a result, our net gains on sale of SBA loans declined by approximately $500,000 this year. We also had a gain of $1.1 million from the sale of commercial real estate loans in the fourth quarter of 2007, that contributed to the year-over-year decline in non-interest income.

We had two other items that reduced our non-interest income in the fourth quarter of 2008. First, we had a $1 million loss recognized on the sale of a mixed use property that was in OREO, and secondly, we had a loss of $834,000, due to a decrease in the net mark-to-market valuation of interest rate swaps. Our non-interest expense declined by 1% from the prior year. The decline was primarily due to lower salaries and benefits expense, as bonus accruals were lower this year, and we also had some attrition in the Company, such that our FTE comp has decreased to 366 at year-end 2008, from 404 at year-end 2007.

Moving to the balance sheet, our gross loans were $2.10 billion at December 31st, 2008, essentially unchanged from September 30, 2008. New loan production was $81 million in the fourth quarter of 2008, compared to $106 million in the third quarter of 2008. Our loan production was impacted by our goal to fund loans from core deposit growth, as well as our stricter underwriting criteria in the loan approval process.

Our total deposits were $1.94 billion at December 31st, 2008, a slight decline from the $1.95 billion at September 30, 2008. The decline is due to our intentional decision to reduce our balances of jumbo CDs, which decreased by $99 million during the quarter. We were able to partially offset this by increasing core deposits by $23 million. This growth in core deposits was achieved despite the significant outflow of deposits by customers transferring money to Korea to take advantage of the weakening of the Korean Won, and higher deposit rates paid by South Korean banks. Based on our analysis of wire transfer trends, we estimate that the net impact of these transfers was approximately $60 million.

Turning to asset quality, we recorded $12.4 million in net charge-offs during the fourth quarter. More than half of the charge-offs were associated with three credits. The first was a charge-off of $3.9 million from a $7 million commercial line of credit, which is secured by land. The Borrower filed Chapter 11 bankruptcy during the fourth quarter, and we wrote this down to the net realizable value of the collateral. We had recorded a reserve of $4 million against this loan in the third quarter.

The second was a charge-off of $1.7 million from a $3.0 million commercial line of credit, that had been placed on non-accrual status earlier in 2008. We formalized a workout plan with the borrower and wrote down the value of the loan, based on the forbearance and workout terms. And the third was related to the sale of $2.6 million nonperforming commercial real estate loan. We sold the loan for $1.0 million, and charged off the remaining $1.6 million. The loan was in the process of non-judicial foreclosure.

The remaining charge-offs in the fourth quarter consisted of loans to retail businesses, averaging approximately $101,000 per loan. Our non-performing loans were $37.6 million, or 1.79% of total loans at December 31, 2008. This compares to $30.5 million, or 1.45% of total loans at September 30, 2008.

The most significant addition to non-performing loans during the quarter was one borrowing relationship totaling $11.3 million, that is secured by first and second trust deeds, on two golf courses located in Northern California. We established a specific allowance in the amount of $1.9 million for this relationship, upon learning from the borrower that his financial conditions had significantly deteriorated during the fourth quarter.

Our total delinquencies representing loans 30 days or more past due, increased to $51.2 million at December 31, 2008, from $43.8 million at September 30, 2008. The increase is attributable to commercial real estate loans, as delinquencies in our C&I portfolio actually declined slightly during the quarter. We believe delinquencies will remain elevated, given the continuing deterioration in the economy. And a decline in the C&I portfolio is not necessarily indicative of an improving trend at this point.

Our provision for loan losses was $28.0 million in the fourth quarter. This provision reflects the higher level of charge-offs this quarter, and the additional specific and general reserves recorded to reflect the increased credit deterioration. As a result of the provision for credit losses being well in excess of net charge-offs, we substantially increased our reserve levels.

At December 31st, 2008, our allowance for loan losses was 2.07% of gross loans receivable, compared to 1.33% at September 30, 2008. The allowance coverage to non-performing loans was 116%, compared to 91% at September 30, 2008. This allowance also provides substantial coverage against currently performing loans, that may deteriorate in the future.

Excluding the specific allowance for impaired loans, the allowance coverage on non-impaired loans was $28.1 million, or 1.41% at December 31, 2008, compared to $15.8 million, or 0.77% at September 30, 2008. Of the $28.1 million at December 31, 2008, quantitatively determined the reserves on non-impaired loans was $8.4 million, or 30% of the total, and qualitatively determined reserves was $19.8 million, or 70% of the total. So qualitative reserves are more than two times our quantitative reserves.

Now I will turn the call back to Min. Min?

Thanks Al. We are going to refrain from providing earnings guidance for 2009 until the economy stabilizes, credit costs will continue to be difficult to predict with accuracy, and therefore providing earnings guidance ceases to hold much value. However, we would like to give you a general sense of our expectations in a few key areas.

We expect credit costs to remain elevated, however, with an allowance level exceeding 2% of total loans, we believe that the portfolio will have to experience substantial additional deterioration, for our provision for credit losses to again be at the level we had in the fourth quarter. We expect that our net interest margin will remain compressed, due to the historically low interest rates, and the intense competition for deposits.

Historically, it takes about two quarters of stable interest rates, before our deposit lag catches up, and we start to see some expansion in our margins. We expect loan growth to be minimal in 2009. This is due to continued caution on the part of the borrowers, as well as our own goal to ensure that any new loan growth is funded with core deposits.

Our expense level should increase modestly, due primarily to higher FDIC Insurance premiums, occupancy costs relating to new branches, and the additional costs we are incurring as we deal with problem credits. We are also taking steps to redeploy resources into more profitable areas of the Company. We will be closing all but two of our loan production offices, and reducing the scale of our SBA lending operations.

At the same time, we will be expanding our East Coast franchise, with opening of three new branches in 2009. We believe these new branches will be a good source of core deposits. We fully expect that 2009 will be another challenging year, and we are best served by maintaining a very aggressive approach to preserving the strength of our balance sheet, even if it has a negative near term impact on profitability.

Our primary focus will be on growing core deposits, and maintaining strong liquidity, taking an aggressive posture in resolving problem assets, and providing for credit losses, and keeping the bank well capitalized. We believe that this balance sheet first approach, and our prudent investments in our branch networks, will position us well, to generate profitable growth when economic conditions become more favorable.

Now we will be happy to take any questions you might have. Operator, would you please open up the call?

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions). One moment, please, for our first question. Our first question is from the line of Brett Rabatin with Sterne Agee. Please go ahead.

Good morning.

Good morning, Brett.

Wanted to first ask, I am curious, you mentioned the third net charge-off was related to a commercial real estate loan, that sounded like it went through bankruptcy. Can you give a little more color on what kind of property it was, or why the loan went through distress?

Well, it was a commercial line of credit secured by vacant land in Southern California, and he had multiple other lending relationships, and he was forced to file Chapter 11, because one of the creditors forced him to pay down or pay off existing credit relationships, and so we hurried, we transferred that loan to non-accrual status, and we had a new appraisal done, and based on the new appraisal, we charged off $4 million, so that is the color.

So it was essentially a commercial line of credit though, but it was secured by land. And I don't think you guys have much, but how much left do you have in the land portfolio?

In the land portfolio?

Correct.

Our total construction and land portfolio is about 30 million, let's see. About $30 million, and the land only is $20 million. Does it include construction?

So is the 20 inclusive?

Inclusive, construction and the land development.

Okay. And then wanted to ask just given where the competitive rates are on deposits, I was curious if you weren't going to be a little more aggressive with utilizing some overnight borrowings, and some other Fed sources of funding, given the vast difference between rates, to help the margin going forward? Do you have a ceiling on your loan to deposit ratio that you are comfortable with?

Well, we are trying to achieve a loan to deposit ratio at or below 100, so we need to do that by growing retail deposits, however, we do make use of wholesale funding, and that in fact, as the cost of wholesale money is quite a bit cheaper than retail.

Yes.

We do make significant use of that, and we look at our cash flow on a daily basis, and we look at maturities of CDs, and broker deposits, and FHLB advances, and we do try to stay short, to gain the advantage on the rates. But on an overall basis, we really want to address the loan to deposit ratio, by decreasing non-core funding and increasing core funding.

Okay. And then back on asset quality, I want to make sure I understood correctly, the increases in the various components, and the appraisals, and whatnot, and the processes you were going through this quarter. Were the increases particularly in the substandard piece, was that a function, actually of the special mention as well, was that a function more of updated appraisals, or was that a function more of clients calling and telling you they had increased vacancies, or what and this is probably a combination of things, but can you give us some more color on the process that let those loans move to watch list all the way to substandard?

Sure. Well, let me give you more details on how the numbers have been changed, from third quarter to fourth quarter on the criticized and classified assets.

Okay.

First of all, on our CRA loans, there has been about a $30 million additional increase on our quarter watch list, and on the C&I side, about $12 million additional increases from previous quarters. And overall, the reason for increases of watch list and classified loans, it was more of the proactive, our approach to identifying potential problem assets, and as I mentioned, we have been enacting our monitoring process, to identify any potential stress on our portfolio.

So as soon as we see any signs of stress on any individual borrowers, based on number of the delinquent loans, we quickly visit the borrower, and we get the updated financial statements to evaluate their debt service coverage, so that if they are below 1.2%, even 1.1%, then we identify it as potential problem assets, and we downgrade it from cash, to special mention ,or such. So the main reason for increase of our criticized loans during fourth quarter, is because more on our part to identify our problem loans at the early stage.

Okay. Maybe we can follow-up a little bit offline on that. Thanks for all of the color.

Thank you.

Next question is from the line of Aaron Deer with Sandler O'Neill. Please go ahead.

Good morning, Min, good morning, Al.

Hi, Aaron.

Good morning.

Another question on the margin. I was wondering do you have any FHLB borrowings that are going to reprice lower over the next quarter or two, and any specific color that you can give on your expectations for the margin here heading into the first quarter?

Aaron you are breaking up a little bit, can you speak a little louder? Repeat that question, please.

Yes. Just wondering, with the FHLB borrowings that you have, can you tell me what might be in there that is going to reprice lower over the next quarter or two, and what your general expectations are for the margin heading into the first quarter?

Yes. The FHLB borrowings are primarily long-term, but we do have about $50 million maturing in 2009, but most of that comes in the second half of the year, and probably more in the fourth quarter, so we are not going to see at least for the next six months any change or substantial change in the FHLB costs.

In terms of your other question was expectations?

Right.

On margin?

Right.

Repeat the second part again?

Just wondered what your thoughts are on the margin here heading into the first quarter?

Yes. Well, I think that we are going to see continued compression during the first quarter. We still have some quarterly adjustable rate loans that reprice, which took effect in the first part of this quarter. And we do have deposits repricing during the year. I can give you what that amount is.

We have in our CD portfolio, about roughly $200 million repricing in each of the first two quarters, and these carry weighted average interest rates of between 360 to 390. So we will see some benefit of that repricing. But I think on an overall basis our estimate of the margin compression is probably 25 to 35 basis points.

Okay. That is helpful. And then just I guess a curiosity. The swap mark that you took in the quarter, I would have expected any swaps that you have in place to be protecting you from lower rates, but obviously there was a negative mark. Can you tell me what happened there?

This was a fixed [base rate received variable] swap that we entered into at the beginning of 2007. So the interest rate environment was very different at that point, and it was a $50 million notional amount. We wanted to enter into that swap to extend the duration of our liabilities at the time.

So with the fall in rates, the dramatic fall in rates, we are getting hit by that valuation mark. But it matures at the end of 2009, so that valuation loss is going to come back to income during 2009. But because it is receipt stays variable, we are actually paying on the swap, so the additional interest expense will be offset by the credit, as the valuation mark comes back in the income. But the swap is doing what it was intended to do, which was to fix our costs.

Sure. Okay. That makes sense. And then if I may, just one last one. Where are the two LPOs that are going to remain open?

Dallas and Atlanta.

Okay. Thank you very much.

Thank you. Our next question is from the line of James Abbott with FBR Capital Markets. Please go ahead.

Yes, hi, good morning, and thanks again for all the extra color that you give on the detail there. Couple of quick questions. On the reserve to loan ratio, as we forecast in our model, and obviously we don't have all of the loan by loan detail in your model, but are you looking for a loss coverage ratio? So in other words, reserves as a percentage of annualized net charge-offs, reserves to non-performing loans? What sort of ratio do you spend the most time thinking about. when you are constructing your reserve balance?

James, you are so predictable.

(laughter). We knew you were going to ask the question.

Our reserve to net charge-offs for the year was 1.69 and 1.7, and if you looked at annualized fourth quarter, then it doesn't look very good at 0.87. So we do look at that.

I guess you and others think this magical multiple is somewhere between 2 and 3, and I think if we can maintain charge-offs at a reasonable level, and continue to provision higher than that, then we should be approaching higher levels of reserves to charge-offs. So we do look at that.

We also look at the reserves to non-performing loans. I guess kind of the magic percent there is at least 100%. We are at 116. We were at 91% at September 30. So we are gradually building that up. And then the reserves to total loans were at 2.07.

I guess in the old days, 1% you were considered pretty good, but maybe the magic number for that is 2% or better, and I guess if you have some of the larger shops are really focusing on 2.5%. So we take a look at all of these ratios, but it is not really ratio-driven. It really is based on what the numbers, our particular numbers are telling us when we do our loss migration analysis, and we analyze the qualitative factors.

How aggressive have you, what is your outlook for unemployment? How bad do you think this gets? The answer to that question I suppose gives an indication to us of how aggressive your loss content assumptions are.

Well, we are not so sophisticated that we could figure out the change in our allowance, based on the change in unemployment. But I think our expectation that the recession is going to be longer and deeper than people expect. So we are taking a fairly conservative view of the economy. And we are just planning for that.

We are hoping for better but we are planning for --, and the way that we addressed the economy, and some of the other factors that you are talking about is really on the qualitative side. We increased our qualitative reserves pretty substantially from about 12.7 to about 19.7, so a pretty significant increase. And that is what we see.

And when you look at our quantitative versus qualitative, we have about two times the qualitative reserves over quantitative reserves. So we look at this each of the nine factors very closely on a quarterly basis, and increase the reserves or decrease accordingly.

Okay. Well, that is helpful. I mean, we do have CEOs of major publicly traded banks that are looking for 7.5 or 8% unemployment nationwide, and others that are looking for 10, or close to 10. So that is helpful to try to understand that.

Second question is on the commercial real estate loans. I am sure you have reappraised some of your commercial property in the last three or six months. What sort of changes in valuation are you seeing on commercial properties? I realize that there are different geographies and every property is different, but if you could generalize, maybe a change in cap rate that might be common to see, or what? Any color you can give there would be helpful?

Well, our current practice is that we place a new appraisal on all of our non-performing real estate loans, and from our experience, it all depends on the location and the type of the property, and at the time of the appraisal that we initially made at the time of the loan origination, I would say it is still, the valuation has been decreased over about what, 20 to 30%, and that is the scenario. And we have seen some properties, it has devaluated more than 50% or 60%. So it all depends on the type of the property and the location.

Now, are these true commercial real estate investor properties, where there are tenants, and paying rent, or are you including construction in that?

Well, we have not had any experience on reappraisal on the construction. We don't have construction loans on our non-performing assets.

Okay.

So it is more of single tenant property, and motel, hotel, car wash, those are the typical properties that we do, we have been reappraised.

Okay. And just a final follow-up on that, is the original loan to values on those loans are probably, maybe you can help me out, 60 to 65%, perhaps?

Typically, below, yes, anywhere from 60 to 70%.

Okay. So you would probably experience a loss then if something defaults at this point, given those types of valuations decreases? Have you looked through the portfolio to see how many commercial real estate loans are maturing in '09, and quantified the expected loss on that, or do you have an outlook on that?

Well, I don't have the numbers which will be maturing '09. However, we do perform quarterly stress testing on our commercial real estate loans, and we use three different factors. We use debt service coverage, loan to value, and FICO score. We have been changing our methodology to reflect more current market situation, and so on. So we do monitor quarterly basis on our CRE stress.

Okay. That is very helpful. Thank you again for your time.

Thank you. Our next question is from the line of Erika Penala with Banc of America Merrill Lynch. Please go ahead.

Good morning. My first question is a follow-up to Brett's question. When you did the review of your portfolio, when the issues arose in income producing CRE, was it more an issue of the 22 to 30% decline in value that you mentioned, or was rent also an issue, rent rolls also an issue?

Well, it depends on the type of the property. For owner occupied property, it is because the valuation has been decreased because of their decrease in sales, sales and the net cash flow of the business. And if it is a multiple retail stream mall, it is because of the vacancy factor, again that drives to cash flow, and that will tie to the cap ratio of the property. So I think it depends on the property. But most of our valuation is driven more on the ongoing sales comparison, and that is solely based on their income level.

Okay. And I guess your propensity to refinance, if the rent rolls are still fine, but the value has dropped at maturity, are you willing to refinance at an LTV that is higher than what you are typically comfortable with?

Well, I think it all depends on the cash flow, their ability to service the debt, and in that case we are not only relying on the cash flow from the property, but overall cash flow of the borrower, individual borrower. So it depends on what kind of level of the cash flow the individual borrower has had, to be able to support cash flow.

Okay. And I know you mentioned in your prepared remarks that you are worried about car wash and lodging credits. From a rent roll perspective in terms of future stress, I mean, is it fair to say that it is retail that you are most worried about going forward in '09, or is there anything else that you are also worried about?

Generally, service related businesses and also retail, and those are the primary industries that we are very concerned about, because their business revenue has been impacted more than any other type of industry.

Finally, Al, I just wanted to make sure that I caught what you mentioned about the guidance correctly. Are you looking for a 25 to 35 bips of NIM compression over the next four quarters? Or is that just the Q1?

No, the first quarter.

When do you expect the trend, in terms of transferring deposits to South Korea to start calming down?

Well, when the Won exchange rate changes. It has kind of leveled off, but if the Won strengthens, we think we will see that money come back in. So I think you just watch that. That will probably trigger some return of money.

The other thing is that some of the money was transferred, because Korea is paying substantially higher on CD rates, between 6 and 7%. So if they have locked in a one year CD, then we are not going to see the money for a year.

Okay. And also, when you are looking to your '09 budget, when do you think you will start seeing a recovery in terms of SBA activity?

Well, it is hard to predict, and we don't expect to have any substantial increase in SBA production in 2009, so we think that it will be very minimal.

Okay. Thank you for taking my call.

Okay.

Thank you. Our next question is from the line of Lana Chan with BMO Capital Markets. Please go ahead.

Hi, good morning. I wanted to know just how much do you have related to the service industries and retail of your portfolio, then?

Let's see. We have a total C&I portfolio in the amount of $600 million, and loans to service industry total $105 million, 105, and owner occupied, Lana, did you ask owner occupied?

Retail.

Oh, just retail?

Yes.

Retail is $236 million.

Okay.

Out of $598 million.

Okay. And are you seeing any weakness in the loan portfolios coming outside of California?

Weaknesses? Yes. It isn't only limited to the California market. We are seeing stress on overall United States.

So even in some of the weakness is coming from New York as well? New Jersey?

New York and New Jersey, their nonperforming and delinquency is much better than overall banks. It is because they do have a high concentration of supermarket industries, so in this environment, the supermarket industry is having actually better revenue and income. So because of the concentration in our New York market, they tend to be doing better than Southern California or other states.

Okay. I just wanted to see, are you closing some of the loan production offices because of credit deterioration in those markets, or is it more of a cost issue?

Well, it is because we don't expect to see any increase in the loan production through those locations. So to focus more on the efficiency and operating strategy, we decide to close down those operations until the market comes back, and if we see more increase in the loan activities in those markets.

Okay. And my last question is more of a bigger picture question then. Given your experience in lending, do you think that the commercial real estate in California will be as bad this time around, as experienced in the early 1990s, and if not, why?

Well, definitely we are seeing additional stress on our commercial real estate, so as the unemployment rate goes up, and the vacancy rate goes up, I would expect to see more stress on our commercial real estate portfolio in California.

Okay. Thanks, Min.

Thank you. Our next question is from the line of Julianna Balicka with KBW. Please go ahead.

Good morning.

Good morning.

Good morning.

I have several questions. One, how many or how much of your C&I portfolio lines of credit have increased between third and fourth quarter? I mean, the existing lines of credit, how many have been drawn down to the maximum or a higher amount?

Actually, availability is relatively flat, 39% as of December, and also it was 39% as of third quarter, so it has not been changed.

And have you noticed any borrowers maxing out their lines of credit?

Yes, case by cases, they do have reasons, because we are closely monitoring their utilization on an ongoing basis.

Okay. And then finally, can you provide us a breakdown of the C&I portfolio by loan size, meaning of your $600 million C&I, how much is in that 100,000 to $200,000 range, how much is in a couple different buckets like that?

Sure. Well, less than $100,000 is about 11.8%.

Okay.

And $100,000 to 199,000 is about 4.4%. And $200,000 to $300,000 is about 9.6%. And $300,000 to $400,000 is 7.1%. And $400,000 to $500,000 is about 5%. And loans over $500,000 to $1 million is about 14.6%. And $1 million and over is about 38%.

Great. Thank you very much.

Thank you. There are no further questions at this time. I would like to turn the call back over to management for any closing remarks.

Once again, thank you all for joining us today, and we look forward to speaking with you next quarter.

Thank you. Ladies and gentlemen, this does conclude the fourth quarter 2008 Nara Bancorp earnings conference call. You may now disconnect.