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Welcome to the Center Financial Center Financial's third quarter 2009 earnings's conference call.

My name is Frances and I will be your coordinator for today.

At this time all participants are in listen-only mode.

(Operator Instructions) As a reminder this conference is being recorded for replay purposes.

I would now like to turn your presentation over to your host for today, Angie Yang, Investor Relations, please proceed.

Thank you Frances.

Good morning everyone and thank you for joining us today for Center Financial's 2009 third quarter investor conference call.

Before we begin please recognize certain statements made during this call may not be historical fact and may be deemed therefore to be forward-looking statements under the Private Securities Litigation Reform Act of 1995.

Many important factors may cause the Company's actual results to differ materially from those discussed in or implied by any such forward-looking statements.

These risks and uncertainties are described in further detail in the Company's filings with the SEC.

Center Financial undertakes no obligation to publicly update or revise its forward-looking statements.

Now as usual we have allotted one hour for this call.

Center Financial's President and CEO Jae Whan Yoo will begin today with some introductory comments.

CFO Lonny Robinson will then provide additional some color and details for the Company's 2009 third quarter.

JW will then make closing remarks before we open up the call for a question and answer session.

As usual Jason Kim, Center's Chief Credit Officer, is also here with us and will participate in the Q&A session.

I'd now like to turn the call over to JW.

Thank you Angie.

Good morning everyone and thank you for joining us today.

Only this morning we announced the financial results for Center Financial's third quarter 2009 and we reported a net loss of $2.5 million.

This reflects a sharp reduction from the net loss of $12.8 million in the second quarter of 2009 and that is certainly in the direction we are aiming for.

As you may recall last quarter we took a very assertive stance on credit and posted a $29.8 million provision for loan losses.

With our continued focus on early detection of problem loans, proactive resolution and rapid disposition of assets as warranted, we believe we have a very strong hold on our credit situation.

And we are confident that we will stay ahead of the confronting challenges.

Now, let me start with a review of our nonperforming assets which ticked upward to $47.8 million as of September 30 from $43.5 million at June 30 this year.

Of this $43 million represents nonaccrual loans.

Commercial real estate loans accounted for 58.5% of nonaccrual loan, C&I loans represented 21.9% and construction loans were 12.3%.

77% of the nonaccrual loans at September 30 were attributed to six relationships.

Let's start by looking at new additions to nonaccrual status during the quarter.

The first and the largest by far is one relationship that includes six loans with an aggregate balance of $16.4 million and representing 38% of total nonaccrual loans at September 30, 2009.

$10.6 million of this is categorized as CRE and $5.8 million represents C&I loans.

This is an industrial business operation.

Based on very recent appraisal of the two properties which we have first deeds of trust on and calculating in a 25% discount and liquidation costs we have reserved $2.5 million for this relationship.

There are a number of parties interested in these properties, but the borrower is also very interested in resolving the situation.

The second largest relationship that was added to nonaccrual loans during the third quarter is $4 million vacant land loan that is located in a prime location right here in Korea town.

This is a participation loan.

The third is $2.9 million loan for an apartment to an existing borrower.

This was just resolved through a note sale completed this week.

This certainly is a testament to how quickly and effectively we are taking action when we believe it is the right course of action.

The fourth is a relationship that includes three CRE loans with a total balance of $2.2 million to retail building.

We are in the process of effecting a note sale and expect it will be completely resolved this quarter.

So those are the larger loans that migrated to nonaccrual in the third quarter and these four total $25.5 million.

Now, let me update you on the status for some of the larger nonperforming loans that we have talked about.

We previously mentioned a $4.2 million CRE loan that we are in the process of getting bids on.

Based on our purchase agreement we charged off $0.5 million so that the balance on this loan now stands at $3.7 million.

The sale is pending necessary approvals by the bankruptcy court.

We are still hopeful that this will be resolved by year end, although it is in the bankruptcy court's hands.

We also previously mentioned a $5 million participation loan for residential construction project in a very good neighborhood in Los Angeles.

As we said last quarter, the borrowers and guarantors for this high end condo have extremely strong credit and we are more than sufficiently collateralized.

Given the strength of the borrowers we have signed a forbearance agreement so it will take another six to eight months before this loan is resolved.

To recap, these six loans accounted for 77% of our total nonperforming loans.

Now, including the $4.8 million in OREO property, total nonperforming assets amounted to $47.8 million at September 30, up from $43.5 million at June 30.

Now, if you remember I mentioned that the four larger loans that migrated to nonaccrual status totaled $25.5 million, but our total NPAs increased by a little more than $4 million.

And this is due in large part to our successful resolution of four larger loans during the third quarter as noted in our release.

Notably this includes the warehouse line of credit that had outstanding balance of $11.3 million that we discussed previously.

You may recall that we mentioned in our last quarter's conference call that we expected complete resolution for this credit may take a couple quarters.

So we are very pleased with how quickly we are able to resolve this credit and again, this underscores our ability to effectively dispose of a problem asset when needed.

It is also worth mentioning as stated in our release that of these four resolved loans two were not nonaccrual, but in the 60 to 89 days past due status.

We sold the notes for each of these four relationships and charged off a little more than $5.7 million in total for these credits during the quarter.

So to summarize our total chargeoffs for the 2009 third quarter which amounted to $11.8 million net.

Construction real estate chargeoffs accounted for 47%.

CRE related chargeoffs 21%.

And C& I chargeoffs approximately 19%.

And this includes our relatively larger chargeoffs, $0.5 million and up.

The balance approximately 13% of the chargeoffs were related to smaller loans with average chargeoffs approximating $60,000.

Now, let's look at our delinquencies.

As noted in our release delinquent loans 30 to 89 days past due declined by more than $14 million to $15.6 million as of September 30 from $29.7 million at June 30.

Now, this is largely due to the larger credits that migrated from delinquent to nonaccrual status during the third quarter.

What's important here is that we are now seeing a much slower pace of delinquency inflows.

We still believe it is too early to determine whether we have turned the corner on asset quality deterioration, but we are more cautiously optimistic that we are nearing that point, particularly given the direction of recent credit trends including lower levels of classified and delinquent loans.

So if we step back and take a look at the actions that we have taken to date and where we stand today, we believe we are on solid ground.

With that let me pass it over to Lonny to provide some additional color on the provision and to highlight some operational results.

Lonny?

Thank you JW.

And good morning everyone.

Let me begin with the main components of our third quarter provision.

We further heightened the risk ratios in our methodology during the third quarter to account for the ongoing challenges in the credit environment.

This change resulted in additional SFAS 5 provisioning of just under $1 million in the third quarter.

We continued to proactively identify credits that we deemed to be impaired and posted additional impairment reserves as warranted.

This was more than an offset however, by the credits that were resolved during the quarter as JW discussed.

As such our FASB 114 or impairment reserves reduced by approximately $2.2 million in the 2009 third quarter.

Net net this resulted in a total allowance for loan losses of $64 million as of September 30th, 2009.

Which is down $1.2 million when compared to the $65.2 million as of June 30th the previous quarter.

Despite this slight decline in our total allowance given the reductions in our loan portfolio, our allowance for loan losses as a percentage of gross loans was actually boosted further to an even more robust 4.01% at September 30th 2009 from 3.96% at June 30th.

And to give you a little color on impaired loans as of September 30th, our balance of impaired loans declined modestly to $140 million from $147 million at June 30th, 2009.

Based on declining debt coverage ratios, cash flows and CRE valuations, we identified a number of new loans as impaired and added reserves for a few existing loans.

As of September 30th, 2009, 39 relationships totaling $119 million were impaired with specific reserves setting aside aggregating $24.4 million -- or approximately 20% of -- 20.5% of the loan balance.

Now let's move on to loan production for the quarter.

Loan production continued to be at considerably lower levels than past years, but originations have picked up relative to the first half of the year.

We originated $126 million in loans during the 2009 third quarter and year-to-date that number is $249 million.

Now$, most of the production in the third quarter reflects renewals with just 19 million in new originations.

Approximately 82% of this production was variable rate loans.

Commercial real estate lending including CRE related SBA loans accounted for less than 35% of the production with most of these being renewals.

Trade finance accounted for 12%.

So again, this quarter the bulk of the originations were in C&I which is the area we are selectively focusing on.

Just a quick note on SBA lending, another area in which we are focusing on, we originated $7 million in SBA loans during the 2009 third quarter.

We hope this will continue to trend upward.

Moving on to deposits, total deposits as of September 30th 2009 declined by nearly $45 million from the June 30th levels.

We rolled off some high rate deposits including brokered deposits and most of this came from our jumbo time deposits and money market accounts.

We are pleased to see that noninterest bearing deposits increased reflecting 18% of total deposits at September 30th compared with 17% at June 30th.

With the increased contribution of DDA's to our total deposits and a 32 basis point reduction in the cost of interest bearing deposits, we further lowered our overall cost of deposits to 1.95% for the 2009 third quarter from 2.22% in the preceding second quarter.

Now even with the decline in total deposits given the reduction in our loan portfolio our loan to deposit ratio dipped a little lower to 84.4% from 85.2% at June 30th, 2009.

Now, moving on to our net interest margin.

Our third quarter NIM declined 11 basis points to 2.85%.

This contraction is attributed to a number of factors.

First with the large portion of the excess liquidity on our balance sheet currently placed in federal funds this had the impact of pressuring our NIM as the investment yield is certainly lower than our other interest earning assets.

Second, our interest revenues were reduced by approximately $1.1 million due to the reversal of interest income on nonaccrual loans which adversely impacted NIM by approximately 20 basis points.

And third, the contraction of our loan portfolio further pressured the NIM as higher yielding loans paid off.

In our last call we projected a 10 point to 15 basis point expansion of our NIM in the third quarter.

This assumption was based on our expectation of reducing some of the excess liquidity and management of our funding costs.

While we successfully lowered our cost of funds and rolled off higher rate maturing deposits we did not move off a level of fed funds as expected.

In the fourth quarter some of the excess liquidity will be put to work by increasing the bank's investment portfolio and generating new loans.

For the fourth quarter we anticipate double digit expansion in NIM based on the current business strategy of replacing higher rate deposits with low cost core deposits and increasing loan volume and ultimately lowering our on balance sheet excess liquidity to a more beneficial level assuming no substantial change in nonaccrual loans during the next quarter.

Now I'd like to briefly comment on our noninterest expenses.

Since 2008 one of the priority goals of our management team was to enhance our operating efficiencies.

I think it is very clear today that we have been quite successful on this front.

With the resolution of the KEIC litigation last year and the right sizing of our organization in the current environment we see a dramatic improvement in our operating cost structure.

Even with the elevated OREO related expenses that has increased our other operating expense category you can see that we have been very effective in containing our expenses.

As of September 30th 2009, we remain well capitalized by all regulatory standards with risk based capital at the holding company level at 13.43%.

Tangible common equity per common share equaled $8.40 and our tangible common equity to tangible assets was 6.41% as of September 30th, 2009.

With that let me turn the call back to JW.

Thank you Lonny for your review.

Our board and management team are confident that we are on the right course.

Our focus is clear and I think we have somewhat proven through our results the Company's commitment to adequately provisioning, early detection, proactive resolutions and speedy disposition of problem loans.

With the operational efficiencies that we have also achieved we believe we are in a good position to actively plan our path for returning to profitable growth.

So I personally look forward to keeping you apprised of our progress.

With that let's open up the call for questions.

Operator, would you please explain the technical elements for the Q&A session.

Thank you.

(Operator Instructions) Our first question is from the line of Don Worthington with Howe Barnes Hoefer & Arnett please proceed.

Good morning everyone.

Morning Don.

A couple things.

One in terms of CRE loans, do you have at least a high level of maturity scheduled, in other words how much you may have coming due to refinance over the next couple of quarters?

Yes, good morning Don, this is Jason.

I do have information.

Fourth quarter of '09 we have a loan CRE maturity amounts to $58 million, 23 accounts with the average loan size of $2.4 million.

And 2010 we have $75 million, 66 accounts with average loan size of $1.2 million.

Okay, great.

And then in terms of any color on what you're thinking in terms of the TARP capital -- keeping it, paying it off.

Yes Don, this is Lonny, good morning.

Yes, overall we really want to get -- make sure where this commercial real estate market is in southern California and make sure that we're in an economic recovery before we do any contemplation of any type of a TARP repayment.

I think it's prudent on most banks but especially with Center Financial that we keep that capital cushion just to assure ourselves that we can weather this storm.

Okay, great, thank you.

(Operator Instructions) Your next question is from the line of Bill [Gazellum] with Titan Capital Management, please proceed.

Thank you.

We have a group of questions.

First of all, relative to that 30 to 89 day past due category, did we hear correctly in your opening remarks that the assets or loans flowing into that category has slowed in addition to as noted in the release that the -- you had flow out of that category?

Yes, Bill, good morning.

Second quarter we had past due 30 to 89 days bucket of $29.7 million, third quarter we had $15.6 million.

To give you a little color, we have three commercial real estate loans that totals about $10.8 million in that bucket.

One account for $6.7 million, we're selling that note as we speak.

So there appears to be some lesser migration into the past due category.

And then secondarily the $1.1 million of interest accrual reversal that took place in the Q3, would you please remind us how that compares to the reversal that you did in the Q2?

Probably very similar.

Very similar number.

I can't recall the exact number off the top of my head, but it was around $1.1 million, $1.2 million, I think for the second quarter, so it was fairly comparable in nature.

And just to understand what I mean by reversal nonaccrual interest, when a loan goes nonaccrual we have to reverse the 90 days of interest.

Typically when a loan goes 90 days it goes nonaccrual -- delinquent -- it goes nonaccrual.

So we reverse basically 90 days of income even though it may not have been accrued in this particular quarter.

Right, okay, that is helpful.

And the tax rate was lower here in the third quarter by a little bit than what it has been.

What if anything is noteworthy about that and how it may relate to a future tax rate.

One of the things is that we filed our California and our federal tax returns this year and we had slight true up -- an entry that we do every year in the third quarter from that standpoint that had some impact on it from that standpoint.

But I do believe that the rate would be more in the 39% to 40% rate going forward.

That's helpful.

And then finally, the -- I realize this question is getting ahead of ourselves a little bit, but when do you anticipate growing the balance sheet again and tying back to the prior question, there was a question about the TARP money, how does that potentially relate or not relate to paying the TARP money back?

Well, I think overall, since the first quarter of 2008 we have been deleveraging our balance sheet.

It was more of anticipating the weakening economy, trying to preserve -- it was one way for us to preserve capital.

We did that to resolve the charge we took on the KEIC litigation, we had an [OTTI] impairment in 2008.

So we were deleveraging all along as more of a defensive measure.

In addition with the weakening economy there's not a lot of qualified borrowers in the marketplace as there were in obviously a recovering economy.

So we haven't missed a lot of opportunities from that standpoint.

We anticipate that as this economy starts to recover that [LINI] volumes will increase going forward.

Now, is that going to happen in the fourth quarter, I don't know that I can say that for sure, but we do believe we will see some expansion probably in 2010.

I would say within the first six months of that time period.

So we're aggressively looking at the SBA program, President Obama talked about expanding some of the program yesterday.

We're optimistic to see what that results in from that standpoint, but we do have some game plans in place and strategically we're anticipating growth for 2010.

Thank you both.

(Operator Instructions) And there are no other questions in the cue, I'd like to turn the call over to Angie Yang for remarks.

Thank you everyone for listening in to Center Financial's third quarter conference call.

We look forward to talking to you next quarter.

And ladies and gentlemen, thank you all for your participation in today's conference call.

This concludes the presentation and you may now disconnect.