Edward Han - IR J.W. Yoo - President & CEO Alex Ko - EVP & CFO Peter Koh - EVP & Chief Credit Officer.

Aaron Deer - Sandler O'Neill & Partners Gary Tenner - DA Davidson Don Worthington - Raymond James John Deysher - Pinnacle Tim Coffey - FIG Partners Julianna Balicka - KBW.

Welcome to the Q3 2014 Wilshire Bancorp, Inc earnings conference call. My name is Whitley and I will be your operator for today. (Operator Instructions). I would now like to turn the conference over to your host for today, Mr. Edward Han, Investor Relations. Please proceed, sir..

Thank you and good morning, everyone. We appreciate you joining us today for our third quarter 2014 conference call. Again, I am Edward Han and joining me are J.W.

Yoo, the Company's President and Chief Executive Officer, Alex Ko, our Executive Vice President and Chief Financial Officer and Peter Koh, our Executive Vice President and Chief Credit Officer.

Yesterday Wilshire Bancorp issued its third quarter 2014 financial results which can be accessed either through the investors relations tab at wilshirebank.com, the SEC's website or from the various financial news websites. This call is being webcast and will be available on archive for one year on the company's website.

Before we begin, I must remind you that during this call we may make certain statements concerning Wilshire's future performance or events. Any such comments constitute forward-looking statements and are subject to a number of risks and uncertainties that might cause actual results to differ materially from stated expectations.

These factors include but are not limited to the ability to grow market share in our markets including New York and Los Angeles, success of new branch, marketing costs, loan growth and balance sheet management, credit quality, our ability to collect on past-due loans, deposit generation, net interest margin expectations, interest rate exposure, global and local economic conditions and other risks detailed in the most recent reports on Form 10-K and Form 10-Q as filed with the Securities and Exchange Commission as well as other filings with the SEC.

Given these uncertainties undue reliance should not be placed on such forward-looking statements. Wilshire Bancorp is under no obligation to update this information as future events and developments take place and may change these forward-looking statements. Mr.

Yoo will begin with the call by providing an overview of the highlights of the quarter and Mr. Alex Ko will review our financial results in more detail and Mr. Peter Koh will discuss our asset quality. Mr. Yoo will provide some closing comments and we will then commence the question and answer portion of the call.

With that I will now turn the call over to our Chief Executive Officer, Mr. Yoo..

Thank you, Edward. Good morning, everyone. And we thank you all for joining us today for this call. We are pleased with our performance in the third quarter which provides further avenues of a strong increase we have seen in our earnings power since the acquisition of BankAsiana and Saehan Bancorp.

We generated a net income of $15.1 million or $0.19 per diluted common share which is a 21% increase in earnings per share over the third quarter of last year. We also continue to generate a high level of profitability with an ROA of 1.61% and ROE of over 12.80% in the third quarter.

We had an outstanding quarter from a business development standpoint generating almost $400 million in loan originations which is a record level for the company.

I am pleased with the performance of our marketing team and the branch managers in actively working their resources and developing relationships that produced a large volume of attractive lending opportunities for us to pursue this quarter.

Our business development team has been strengthened by the addition of several talented bankers that joined through our acquisitions of BankAsiana and Saehan and I am proud of how our expanded team is collaborating and working well together to win business and help increase our market share.

We had strong contributions from all of our major lending areas. We have commercial real estate, commercial loans and origination mortgages all accounting for more than 15% of our total loan originations in the third quarter.

We had $191 million in CRD [ph] loan production in the third quarter with our largest new originations spread across industrial, hospitality, retail and the office properties. We had $89 million in commercial loan production which reflects our ongoing focus on developing more C&I relationships.

Most of the production was related to companies in the wholesale trade industry and split between trader finance and the commercial line of credit. We had $71 million in residential mortgage production with approximately $50 million of the production coming in the form of new warehouse lending relationships.

The remainder of our residential mortgage production came from our retail loan customers. We also had $41 million in SBA loan production in the third quarter which represents our largest quarter of the year and there was a strong performance under our new SBA department manager.

As a result of strong loan production, our total loan portfolio has increased 12% since the start of the year. At the same time, we have seen a steady decline in our level of problem assets. I'm pleased that we have been able to generate robust loan growth while maintaining our commitment to a strong credit culture and strict underwriting standards.

Now let me turn the call over to Alex Ko, our Chief Financial Officer for further review of the third quarter financials.

Alex?.

Thank you, J.W., and hello everyone. I will begin by discussing our income statement. Net interest income before provision for loan losses was $36.8 million for the third quarter of 2014, up 2% from the second quarter of 2014.

The increase is mostly due to a higher average loan balance and an increase in discount accretion income related to acquired loans. Discount accretion income from loans acquired from Saehan and the BankAsiana totaled $2.9 million for the third quarter of 2014 compared to $2.5 million for the previous quarter.

Our net interest margin was 4.26% in the third quarter of 2014 compared to 4.35% last quarter. On a core basis which excludes our purchase accounting adjustment for Saehan Bancorp and BankAsiana, our net interest margin was 3.89% in the third quarter of 2014 compared with 4% for the second quarter of 2014.

The decrease from the previous quarter is largely due to a decline in average yield of the loan and an increase in cost of deposits. Excluding the effect of purchase accounting adjustment, our average loan yield were 4.74% in the third quarter compared with 4.85% last quarter.

The reduction in average loan yield reflects the growth in our warehouse lending relationships as these warehouse lines carry lower interest rates than the rest of the portfolio. With loan demand exceeding our core deposit inflow during the third quarter, we mostly utilized newly issued CDs to fund our loan production.

This had an effect of raising our deposit cost by 5 basis points to 53 basis points in the third quarter. As part of our long term interest rate management strategy, during the third quarter we entered into an interest rate hedging with FHLB which will help to mitigate our future interest rate risk.

Turning to non-interest income, we generated $9.6 million in the third quarter of 2014 compared to $10.7 million last quarter. The decrease from the prior quarter was due to a lower net gain on sale of loans. Our net gain on the sale of loans was $2.4 million in the third quarter down from $4.7 million last quarter.

We sold $20.3 million of SBA loans in the third quarter compared with $45.3 million last quarter. The reduction in SBA loan sales was due to the reduced balances available for sale at the end of the previous quarter. We had $16.2 million in SBA loans held for sale at the end of Q3, 2014 compared to $5.1 million at the end of Q2, 2014.

Total other non-interest income increased $1 million from the prior quarter. The increase was due to an increase in overall [ph] rental income, loan servicing income and other miscellaneous recoveries. Our non-interest expense was $23.2 million in the third quarter down from $24.6 million last quarter.

With the expiration of the loss sharing agreement with FDIC related to the Mirae Bank acquisition, we no longer carry any FDIC indemnification assets on our balance sheet which led to a reduction in the impairment charge in Q3, 2014.

Most of the other major expense line items were relatively consistent with the prior quarter, with the exception of our data processing costs which have increased following the conversion of BankAsiana and the Saehan's core processing system. We expect the new run-rate for data processing costs to be in the range of $1.1 million per quarter.

Our other non-interest expense category declined by approximately $634,000 from the prior quarter mainly due to reduction in OREO and low income housing related expenses.

Moving to balance sheet, our total loans recovered receivables before allowance for loan losses were $3.16 billion at September 30, 2014 up from $2.97 billion at the end of the prior quarter.

The strongest areas of growth in the portfolio were real estate secured loans which were up 4% and commercial and industrial loans which were up 19% from the end of the prior quarter. Our total deposits were $3.19 billion at September 30, 2014 up from $2.96 billion at the end of the prior quarter.

The increase in the total deposits was mainly due to the growth in the timed deposits which was partially offset by a decrease in non-interest bearing demand deposits and the savings and the interest checking deposits.

At the end of the quarter, we had a few large CDA accounts that had temporary offloads of approximately $20 million toward the end of the month. I will now turn the call over to Peter Koh, our Chief Credit Officer for a discussion of our asset quality trend.

Peter?.

Thank you, Alex. We continue to see positive credit trends throughout the portfolio, primarily driven by loan upgrades based on improving cash flows for many of our borrowers. We also continued to see a few problem loans each quarter that are repaid in full after the credits were refinanced by other banks.

The most significant improvement can be seen in our classified loans which declined by more than $18.4 million during the quarter to $110.3 million. We have made steady progress in reducing our classified loans as this category has declined 30% since the beginning of the year.

Total outflow from classified loans was $23.8 million in the third quarter while inflow into classified loans was just $5.5 million. Our non-performing loans totaled 44.9 million at September 30, 2014 up slightly from 42.4 million at the end of the prior quarter.

As a percentage of total gross loans, our non-performing loans decreased to 1.41% from 1.42% at the end of last quarter. Total inflow into non-accrual was $6.9 million during the third quarter and within the range of 5 million to 10 million in inflow per quarter that we have seen over the past year.

The bulk of the inflow was from one golf course loan totaling $4.3 million that was placed in non-accrual status during the third quarter of 2014. The loan was already adequately reserved for and no additional reserve was required in Q3.

Total outflow of non-accrual loans was $4.4 million in the third quarter which was primarily due to payoffs, paydowns and charge-offs. We continue to see -- experience a low level of loss in the portfolio and we actually had net recoveries of $447,000 in the third quarter.

With the continued low loss experience and a significant decline we had in problem loans, we did not record a provision for loan losses during the third quarter. As of September 30, 2014 we had an allowance for loan losses of 53.1 million or 1.67% of gross loans held for investment and we had 103% coverage of our non-performing assets.

Loans acquired from BankAsiana and Saehan included in the allowance leverage [ph] ratio were already marked down and recorded at fair value. The discount on these loans represented expected losses at the time of acquisition.

The remaining total discount on loans acquired from BankAsiana and Saehan Bancorp was approximately $24.7 million at September 30, 2014. Now, I will turn the call back to our Chief Executive Officer, Mr. Yoo..

Thank you, Peter. We are pleased with how the company has performed this year and we believe that we are doing a good job of realizing the synergies that we projected for the BankAsiana and the Saehan acquisitions.

We still have some additional integration and consolidation actions to be taken with our Saehan acquisition over the next few months that should result in some additional cost savings. However, we will be deploying some of those cost savings to expand our presence in the southeastern United States which has growing communities of Korean-Americans.

We recently had a soft opening for our first full service branch in Houston and they will have a grand opening in November. We are also planning to open two new branches in other Southern states during the first half of 2015. We believe these markets present a good opportunity to grow our franchise and a great additional value for shareholders.

We also continue to evaluate opportunities to expand existing business lines or enter new businesses so that we can create a more diversified business model. One of our longer term priorities is to reduce our reliance on commercial real estate.

We have made good progress in building out our commercial and origination mortgage lending platform and we are focused on growing these businesses and adding other complementary businesses that can enhance our diversification and improve our overall risk profile. Thank you all for being with us this morning..

Thank you. That concludes our formal presentation and at this time we would like to open the call for questions..

(Operator Instructions) And our first question comes from the line of Aaron Deer, Sandler O'Neill & Partners. Please proceed..

The loan growth this quarter was very impressive. I was hoping to get a little bit more color and forgive me if you’ve discussed this earlier; I came on late into the conference call.

But Peter, maybe you can talk about -- were there any outsized loans that contributed to the growth in the quarter? And what was the average size of the new loans added this quarter?.

Generally speaking -- actually we had a very, very great quarter in terms of loan production. I think the average size is still what we have seen consistent with what we have seen in the past. Generally speaking, that’s a few million dollars to maybe $5 million loan sizes.

We had a few larger credits, one of which was naturally from the warehouse lending piece. So those typically can be in the tens of millions. I think the largest one we did in third quarter was about $35 million, but from there our loan balance has pretty much dropped off..

Okay.

And you are talking about the mortgage warehouse, those balances can be kind of volatile anyway, correct?.

Yes. But we did have pretty good success this quarter. So we generated some new relationships, but commitment-wise yes, the balances are fairly large..

And then, flipping to the other side of the balance sheet, I was hoping you could talk a little bit about the -- I think the deposit cost ticked up a little bit in the quarter, maybe talk about what was behind that and talk about your strategies going forward to attract more in the way of DDA balances..

Sure, Aaron. Yes, you know based on the increase on the loan demand we actually funded our core deposits but the actual loan growth was in excess of our deposit growth. So we actually launched a CD campaign to fund the loan growth and the rate for the new CD campaign was 1.2% for 15 months of CD.

We had targeted about $250 million from those money toward the end of the year or if you reach $250 million target we will stop that campaign. But that new CD campaign actually were as I mentioned earlier to fund the growth of the loans..

Okay and then the second part of my question in terms of -- can you talk about some of the initiatives that you have that might help attract more in the way of low cost deposits to fund this growth going forward?.

Yes. We’re trying to bring more of the low cost or even in the DDA account by being bringing like commercial loans or C&I loans. When we originate the loans, ask the transaction account to be open, kind of a mandatory, that would be our strategy.

And consistent with our previous strategy, we are focusing on total banking with us when we originate the loans and more focused on the DDA account has been all raised and will continue to be our primary focus..

Aaron, I will add my comments. Still we have been maintaining about 30% of the total deposits in the form of a DDA. So I think there is pretty good, but as our loan balance on C&I part is growing, we expect more DDA is coming along. So in the fourth quarter, we expect some more..

(Operator Instructions). Your next question comes from the line of Gary Tenner with DA Davidson. Please proceed..

Just real briefly, I missed the detail Alex, as you were going through the mortgage originations in the quarter as you split it out between the warehouse and the retail side..

Yes. We have a total origination of the mortgage, we have total of $70.8 million are the mortgage component, and the $50 million out of that $70.8 million is the warehouse. And the remaining is the retail..

Okay.

And as of September 30, what is your mortgage warehouse outstanding?.

$100 million..

I'm sorry, 400 million?.

Sorry, $100 million..

Just $100 million, okay. Thanks for that.

And just in terms of the CD campaign of the 250 million that you are targeting how much do you already have in the bank by the end of the quarter?.

We have about half of that -- our target we achieved. But still the remaining we still need to go throughout the Q4..

Okay and then just one last question if I could on the SBA. I know that the reduction this quarter was due to the change in management of that business earlier in the summer or in the spring and the impact to second quarter production.

How do you see the kind of third quarter production leading into sale levels in the fourth quarter?.

I think for the overall production side, we’ve been very pleased with the transition to the new manager and so I think we see a pretty good production level in the third quarter. I think going to fourth quarter as well we’re seeing comparable levels of a pipeline there. We are entering kind of a season seasonally slower period.

So we are anticipating some of -- perhaps a little bit of a slowdown based on the seasonality of it. But I think generally speaking we’re looking at a pretty consistent operation here.

Now for the sale levels, I think it's really based on the premium levels at that time and in terms of managing our liquidity, it will change how much we sell per quarter..

Right, you know, the actual loan held for sale balance increased quarter-over-quarter. At June 30, we had $6.2 million and at September 30th, we’ve a $16.2 million, so about $10 million increase and that will help for us to position to sell if we choose to sell.

In terms of the premium, there was a 10.5%, still it's a two-digit premium so we will continue to monitor the sale activity going forward..

Your next question comes from the line of Don Worthington with Raymond James. Please proceed..

In terms of -- just continuing along the SBA discussion, was there say a conscious decision to keep some of those loans in portfolio rather than sell them? Or is this just kind of a timing issue as the production has ramped up and then ultimately be sold in the secondary market?.

You know actually it is a quarter-by-quarter considering the production for the quarter as well as the premium and also going forward how much SBA balance that we want to carry.

All those things we consider together, but particularly the previous quarter, actually about $10 million of SBA loans we actually put out for the sale but last minute the settlement didn't happen on a timely manner before September 30. So there will be about $9 million to $10 million carry forward to the Q4.

So that’s why we might increase it a little bit more because I would expect that $10 million carried over to Q4 will be settled and that will be added on top of our production and sale.

So at this point, we have been selling those loans as reproduced based on the stronger -- the premium rate and also other types of loan production, i.e., CRE was very strong. So that is the main reasons going forward. But again, this is a quarter-by-quarter and we will evaluate all those aspects and we will make that decision..

And then just in terms of loan growth for the fourth quarter, I'm assuming it's got to come down from the third quarter.

What are you expecting there in terms of any seasonality or what the volumes might be for total loan production?.

I think you’re correct in your anticipation for the fourth quarter. Definitely third quarter was a great quarter in terms of originations but our pipeline has remained fairly consistent and fairly healthy throughout the year. I think that’s really attributable to our very, very strong marketing team and the way we’re producing loans right now.

I think the fourth quarter will also be another good quarter, but I do anticipate some seasonality playing through the numbers..

Okay, and then in terms of say loan activity in other markets other than Los Angeles, are you seeing traction there as well?.

I think from a geographic standpoint, we’ve been very pleased to see that a lot of our production is coming from our core areas. Our New York and New Jersey area is stabilizing from the BankAsiana merger. I think our production there is starting to pick up as well as Dallas and our Houston branch that we’re opening this quarter.

I think a lot of the production from there should be ramping up as well. So I think geographically we are looking pretty good..

And then were there any loan purchases in the loan volume this quarter?.

No..

Your next question comes from the line of John Deysher with Pinnacle. Please proceed..

I was just curious, a couple of quarters ago I think you indicated you were targeting the hospitality space and if that was correct, I'm just curious how that initiative is going right now in terms of loan growth..

Well actually we definitely lend to the hospitality but it's not an area we actually focus on. We do see opportunities in that area and when we look at the credit and we feel that it's a good credit we definitely lend to that area.

I think overall, as a portfolio diversification, we actually are looking to control that product type as much as possible going forward. And so, I think overall levels of hospitality from a portfolio standpoint actually were declining..

What would you say is the total loans to that now? And I assume that’s embedded in the commercial real estate?.

Correct, commercial real estate, roughly speaking I think we are around 10%..

10% of commercial real estate?.

Correct..

Or 10% of total loans?.

10% of commercial real estate..

Okay.

And you are looking to stabilize that?.

Right..

(Operator Instructions). Our next question comes from the line of Tim Coffey with FIG Partners. Please proceed..

Are there any other planned cost saves or already anticipated cost saves from the acquisitions?.

Yes. Actually we are now working on our -- cautiously bought some additional consolidation and some branch closures. So it is going to be taking place in the fourth quarter and early part of next year, that we are planning right now..

Just to add, that was actually planned at the time of our acquisition but we actually kind of delayed the process due to some reasons including the customer retention and the competition reasons.

But we plan to actually execute the plan including the branch closures which will have additional savings on the occupancy expenses and other salary and benefit expenses going forward. But there will be some -- as we indicated earlier there will be some additional branch openings which will offset the cost savings from the acquisitions.

So in terms of the non-interest expense run-rate, we’ve about $23 million of non-interest expenses this quarter which was reduced by about $1 million compared to previous quarter.

So going forward, the run-rate for these non-interest expenses including the savings from the acquisition as well as additional branch openings we would see kind of a $23 million level. So it will be pretty much consistent with the quarter that we have experienced..

Your next question comes from the line of Julianna Balicka with KBW. Please proceed..

With the very strong loan growth that you are seeing could you talk to us about your target for loan to deposit ratio? How are you thinking about managing balance sheet leverage? What are kind of the paradigms around which you see yourself operating in the near term and then also in the longer term, where you would like to see Wilshire kind of operate a few years out?.

Sure. The deposit has been strong but it wasn't as strong as the loan growth.

So at one point, we had reached 100% or even net loan to deposit in excess of 100% but our strategic plan, optimal loan to deposit ratio is much lower than 100% and in two years -- I don't think we can change the loan to deposit ratio on a quarter-over-quarter basis but on a longer term we want to bring the net loan to deposit ratio to be lower end of 90% like 93%, 94% in two years.

So there will be a much more healthier than at the current level. On top of that the lowering loan to deposit ratio, to support the loan growth we have FHLB borrowing and currently we have $150 million, but we still have in excess of $900 million available in case we need it.

And, on top of that we actually entered into interest rate risk kind of a hedging strategy and the contract with FHLB securing the interest rate risk. So I think again loan to deposit ratio will go down to lower 90s over the course..

And also if I could ask a question on capital, with your TC at 10.45%, you have had a good run of it with M&A.

How are you thinking about deploying capital or capital management for the next year or two at this point?.

Sure. The capital -- we still are strong, but our loan growth is actually stronger. So definitely we will use our capital to fund our loan growth as well as we’re diversifying our kind of businesses.

So we might include some acquisitions for the banks or other types going forward and also consistent with our previous practices carefully managing the level of the cash dividend. So in case we don't have a better use of the capital, we might increase our capital.

So that is our -- capital management is our management's key focus at this time, but I do believe we have options to use for acquisition and also already the loan production is strong enough to have an effective use of our capital at this point..

And I'm sorry; let me make sure I heard you correctly.

Did you say you were thinking of potentially increasing the cash dividend? Or are you thinking about like the ongoing regular dividend or are you thinking about a special cash dividend?.

Yes, that is something we need to evaluate later on but we’re open for special dividend in case it is needed. But also we can increase the dividend going forward, but I'm not saying that we haven't reached any conclusion to increase the dividend at this point, but when it is needed, definitely that is our consideration..

Julianna, let me make some additional comments. Given the level of loan growth that we are seeing right now, we are going to be very careful and more conservative than before in our approach toward the capital usage basically to make sure that we have sufficient capital to support our loan growth.

Definitely we are open to look at all kinds of alternatives and capital usages but at this time we like to make sure that we have a more conservative for the organic growth. So that’s kind of our situation right now..

(Operator Instructions). Your next question comes from the line of Tom Alonso of Macquarie. Please proceed..

Just real quickly on the hedge that you mentioned you entered into with the FHLB.

Is there any near term impact on the net interest margin from that?.

Yes. Actually it might because the derivative transaction that we entered into FHLB includes two types of transactions. One, we have a fixed rate borrowing from FHLB but that borrowing would not start until next year in September, but the rate is higher than the current rate. So, going forward that might include -- increase our total cost.

And the second one that we also entered into FHLB is adjustable rate capability which is variable rate, but we actually capped the increase on the LIBOR which was indexed on this transaction at 1% and that variable borrowing we entered and it is effective immediately, but it is still variable.

But the whole purpose of entering those two transactions is to mitigate the interest rate risk going forward immediately as well as the rate expected to be increased next year and going forward. So there will be impact but we’re trying to mitigate that impact at this point..

That concludes our Q&A. I will now turn the call back over to Mr. Han for closing remarks..

Okay. Thank you, Whitley. That concludes our quarterly conference call. On behalf of our management team and the Board of Directors I would like to thank everyone again for your participation and continued interest and support of Wilshire Bancorp. If you have any further questions please feel free to contact us directly. Thank you..

Ladies and gentlemen that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day..