Edward Han - Investor Relations Jae Whan Yoo - President and Chief Executive Officer Alex Ko - Executive Vice President and Chief Financial Officer Peter Koh - Executive Vice President and Chief Credit Officer.

Aaron Deer - Sandler O’Neill & Partners Julianna Balicka - Keefe, Bruyette & Woods, Inc. Donald Allen Worthington - Raymond James & Associates, Inc. Gary Tenner - D.A. Davidson & Co..

Good day, ladies and gentlemen, and welcome to the Q2 2015 Wilshire Bancorp, Inc. Earnings Conference Call. My name is Steve, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a Q&A session towards the end of this conference.

[Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Edward Han, Investor Relations. Please proceed..

Thank you and good morning, everyone. We appreciate you joining us today for our second quarter 2015 conference call. Again, I am Edward Han and joining me today 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 second quarter 2015 financial results, which can be accessed either through the Investor Relations tab at wilshirebank.com, 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 our market share including New York, Texas, Georgia and Los Angeles; success of new branches; marketing costs; loan growth and balance sheet management; credit quality; our ability to collect on past-due loans; deposit generation; net interest [ph] margin expectations; interest rate exposure; global and local economic conditions; and other risks detailed in our most recent reports on Form 10-K and Form 10-Q as filed with the Securities and Exchange Commission, as well as our other filings with 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 or developments take place and may change these forward-looking statements. Mr. Yoo will begin the call by providing an overview of the highlights of the quarter. Mr.

Alex Ko will review our financial results in more detail. And then, 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. Thank you for joining us today for this call. We delivered another solid quarter highlighted by well-diversified loan production, strong deposit inflows, and stable credit quality. We generated $15.6 million of net income, or $0.20 per share in the second quarter of 2015.

Through the first six months of 2015, we have generated $0.43 in earnings per share, an increase of $0.23 over the same period last year.

We continued to deliver our high level of profitability by focusing on our core competencies, delivering exceptional customer service, consistently generating new business relationships, and maintaining our strong credit culture.

We generated $293 million in loan production in the second quarter with well-balanced contributions from the commercial real estate, C&I, SBA [ph], and residential mortgage lending businesses. After a very strong first quarter of loan originations, it took a while to rebuild the pipeline, which impacted our overall loan production in the quarter.

We also saw our higher than normal level of payoffs and paydowns, primarily driven by one large bridge loan that we managed out of the bank.

As a result of all these factors, we saw a lower level of loan growth in the quarter than we have recently experienced, but over the first-half of the year, our loan portfolio has increased 6.7%, which puts us on track for another strong year of loan growth.

Our loan pipeline is larger going through the third quarter than it was the second quarter, and we don’t expect to see the same level of payoffs and paydowns, so we should see a pickup in the loan growth.

The pipeline also consists of a greater mix of traditional CRE and C&I loans than in recent quarters in which we house lending facilities, comprised a large percentage of the loan pipeline.

We continue to generate more commercial lending opportunities and expansion over our presence in the southeastern United States will support this strategy over the long-term.

It’s a long process to develop new commercial banking relationships, but we are pleased with the pipeline that we are building in Georgia and Alabama, and we expect these markets to be solid contributors to our commercial loan growth over the long-term.

We’re also making good progress in integrating and ramping up our expanded residential mortgage lending group. As we converted the platform we added from the Bank of Manhattan on to our systems, it took a couple of months to implement our integration procedures.

As of June 30, 2015, the integration of a new division is almost complete, and we are seeing increasing production with each month. We’re also starting to introduce this product to our other markets in New York and Texas, where we think it can be successful.

We generated $90 million in residential mortgage production during the second quarter, and we should continue to increase our level of originations as we move through the year. With the growth we are seeing in the commercial, residential, and warehouse lending businesses, we continue to make a good progress in creating a more diversified portfolio.

As of June 30, 2015, our commercial real estate portfolio was down to 72% of our total loans outstanding compared with 78% at the same point last year. We are pleased with the progress we’re making in creating a more diversified business model, which we believe is improving the overall risk profile of the company.

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

Thank you J.W., and hello, everyone. I’ll begin with some general commentary around our balance sheet trend, and the resulting impact on our net interest margin. As we indicated on our last conference call, we initiated some deposit gathering initiatives to support our strong loan production.

These initiatives centered around building up money market deposits by offering swib [ph] account and locking in some longer-term funding through retail CD campaigns. Along with continued growth in our non-interest bearing deposits, these initiatives were successful and generated strong deposit inflows.

As of June 30, 2015, we built a strong amount of excess liquidity, which weighed on our net interest margin. And in response, we began to wind down the deposit campaigns. We redeployed approximately $51 million of the excess liquidity into the security portfolio during the second quarter at an average rate of 2.25%.

And we also paid off $100 million of our overnight FHLB advancing. Even after redeploying this $150 million, we remain well-positioned from the liquidity standpoint for the second-half of the year. Our loan-to-deposit ratio was down to 91% at June 30.

So we have a great deal of room to increase leverage over the next few quarters, as we deploy more of our excess liquidity into additional higher yielding assets, which should have a positive impact on our level of profitability. I’ll now provide more detail on our second quarter results.

Starting with a discussion of our income statement; net interest income before provision for loan losses was $37.5 million for the second quarter of 2015, an increase of 2.7% from the first quarter of 2015. The increase was mainly due to an increase in total average loans.

Our net interest margin was 3.59% for the second quarter of 2015, compared to 3.69% last quarter. The primary factor in the lower margin was due to the increase in average interest earning cash balances, resulting from the increase in deposits.

Had our level of cash and cash equivalents remained the same as in the first quarter, our net interest margin would have declined by just 1 basis point. Excluding the effect of purchase accounting estimate, our average loan yields were 4.57% for the second quarter, compared to 4.54% last quarter.

Our cost of deposits was 61 basis points in the second quarter, an increase of 3 basis points from the prior quarter. The increase was largely due to larger balances of time deposits, resulting from our deposit campaign, as well as an increase on the rates paid on those time deposits.

Given the strong liquidity position that we have built, we can be a more conservative in deposit pricing, which should result in more stable in our deposit cost.

To enhance our deposit gathering efforts during the second quarter, the bank hired a Marketing Officer, who will focus exclusively on developing relationship with customers that can provide long-term low-cost deposits.

The individual we hired is a deposit specialist with extensive experience in building deposit relationships in Southern California market. And we believe this person will bring a lot of value to the bank. Turning to non-interest income, we generated $11.3 million in the second quarter of 2015, compared to $15.3 million last quarter.

As you may recall, in the first quarter our non-interest income was positively impacted by a large gain over sale of non-accrual loans, which contributed $4.3 million to our non-interest income last quarter, compared to only $626,000 gain from the sale of non-accrual loans in the second quarter of 2015.

Our net gain on sale of loans was $4.2 million in the second quarter, compared to $6.8 million last quarter. The decline in net gain on sale of loans for the second quarter of 2015 compared to the previous quarter was due to decline in gain from the sale of non-accrual loans.

Our second quarter gain on sale income consisted of $2.6 million of gain on SBA loans, $928,000 of gain on residential mortgage loans, and $626,000 of gain on sale of non-accrual loans. We saw $27.6 million of SBA loans and $42 million of residential loans in the second quarter, compared with $24 million and $17 million respectively last quarter.

Total other non-interest income was $4 million compared to $5.4 million in the prior quarter. The decline in other non-interest income was due to a decrease in income related to value of servicing assets, which declined from $1.5 million to $108,000 for the second quarter of 2015.

During the second quarter of 2015, we also received a one-time special dividend from FHLB totally $611,000, which was offset by a reduction in income recorded on the change in fair value for the mortgage banking derivative.

Our non-interest expense was $24.7 million for the second quarter of 2015 compared with $22.9 million for the first quarter of 2015. The increase was primarily due to a higher salaries and benefit expenses resulting from the full impact of the addition of former Bank of Manhattan Mortgage Division employees.

The integration of Bank of Manhattan’s operations has gone smoothly and the expanded residential mortgage division is on track with the projections we had at the time of the transaction in terms of the total production and its contribution to the net income.

We are starting to introduce our residential mortgage product to our other markets in New York and Texas where we think it can be successful. We anticipate seeing steady growth in loan production as we move forward. And we expect this division to become a larger part of our overall business mix in the future.

Moving to the balance sheet, our total loans receivable before loss for loan losses were $3.52 billion at June 30, 2015, up from $3.51 billion at the end of the prior quarter. The growth in the portfolio mainly came in residential real estate loans. On a year-to-date basis, our total loans receivable increased by 6.4%.

Our total deposits were $3.9 billion at June 30, 2015, up from $3.64 billion at the end of the prior quarter. Demand deposits grew 2.7% during the second quarter of 2015 exceeding $1 billion for the first time.

The increase in deposits has helped to lower our total loan to deposit ratio to 90.8% at June 30, 2015, down from 96.9% at March 31, 2015, and 100.7% at June 30, 2014. I will now turn the call over to Peter Koh, our Chief Credit Officer for discussion of our asset quality trend.

Peter?.

Thank you, Alex. We continue to see positive credit trends in the portfolio, resulting in a further decline in non-performing loans and a very low loss experience. The second quarter in a row, we recognized a significant gain on the sale on non-accrual loans. And for the second time in the past four quarters, our recoveries exceeded our charge offs.

We believe this provides strong evidence of the conservatism we employ when valuating problem assets, and the proactive approach we take towards recognizing losses within the portfolio. At June 30, 2015, our non-performing loans totaled $30.9 million, down from $32.5 million at the end of the prior quarter.

As a percentage of total growth loans, our non-performing loans decreased to 87 basis points from 92 basis points at the end of last quarter. Total inflow into non-accrual was $6.9 million during the second quarter, compared with $4.3 million last quarter.

Total outflow of non-accrual loans was $8.6 million in the second quarter with $4.5 million attributable to note sales and $2.2 million attributable to upgrades to performing status. Our total classified loans were $102 million at June 30, 2015, an increase from $99.2 million at the end of the prior quarter.

Total inflow into classified loans was $18.2 million, compared with $15.4 million last quarter. Total outflow was $15.4 million in the second quarter with $5.3 million attributable to loan upgrades, $4.5 million attributable to note sales, and $3.4 million attributable to payoffs.

We had $559,000 of charge-offs and $1.2 million in recovery putting us in a net recovery position for the second quarter. With the decline in non-performing loans and net recovery, we did not record a provision for loan losses during the second quarter.

As of June 30, 2015, we had an allowance for loan losses of $48.8 million, or 1.38% of growth loans held for investment, and we had a 130.5% coverage of allowance to our non-performing assets.

While we anticipate credit trends to remain healthy, we continue to believe there is a chance we may return to a quarterly provision requirement at some point during 2015, with biggest determinant being the level of growth that we experienced in the portfolio. Now, I will turn the call back to our Chief Executive Officer, Mr. Yoo..

Thank you, Peter. We have had a good first-half of the year with a solid loan and deposit growth and important expansion of our residential mortgage business.

We’re generating a high level of profitability and we feel good about our opportunities to continue growing earnings in the second-half of the year, as we redeploy our excess liquidity into higher yielding assets.

In light of our strong growth and profitability, the Board of Directors approved a 20% increase in our quarterly cash dividend to $0.06 per share.

We’re pleased that our strong financial position and earnings growth has enabled us to increase the amount of capital we return to shareholders, while also maintaining sufficient resources to support our organic growth, as well as the continued evaluation of the prospective M&A opportunities. 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 standby for your first question, which comes from the line of Aaron Deer from Sandler O’Neill. Please go ahead..

Hey, good morning, everyone..

Hello, Aaron.

Hi, Aaron..

Alex, I just wanted to follow-up on a couple of your comments regarding some of the items in the quarter.

The $611,000 FHLB special dividend, I presume that went through the margin, correct?.

No. Actually, instead of putting it in the margin, we actually included it in non-interest income..

Okay.

So that’s why you say, it was offsetting an MSR revaluation?.

Yes..

Okay.

And what – can you give, was that MSR valuation pretty close to that $600,000 number?.

No, actually, let me give you a little bit more color on the servicing asset, both MSR and maybe SBA servicing asset as well. Mortgage servicing, first, we had fair value changes, for the second quarter was about $330,000, so it was about half of whatever the FHLB gained. And SBA, we had a fair value actually loss of $12,000.

So, net of those two, we had about $100,000 gain on deferred value for both mortgage servicing and SBA servicing assets..

Okay. And then, when you – obviously, you’ve got a lot of excess liquidity in the balance sheet currently or at least as of quarter end.

What is your expectation as that gets deployed out this quarter? You think we might see a bounce back up in the net interest margin then? And if so, are we talking more than five basis points or something less than that or if you have a sense of that?.

Sure, that’s a very good point actually. We have a further compression after we experienced a large compression last quarter. The biggest reason for the 10 basis compression was due to higher cash equivalent balances, and the higher cash equivalent balances mainly came from the deposit increases.

We did have a deposit campaign, which was very successful. We had a target of $215 million by end of June, but we were successful, and to balancing the loan-to-deposit ratio, we actually start, I think it was early part of June even we didn’t reach the goal. So, the deposit was very successful. Again, that helped to increase on the cash equivalent.

But now, we believe we have some excess cash equivalent that we can deploy going forward. We have some strategy, how we deploy and reduce cash balance include; there is about like $13 million of broker CD which will be re-priced, but we do not intent renew it. So there will be some reduction on the broker CD.

And also we would expect about $50 million to $80 million of investment security. And thirdly, but the most important, the largest one is loan production increase. And we would expect to use those excess cash equivalent to loan production. Probably, rough estimation about $100 million can be used for the loan production.

So with that, we are targeting to decrease our cash equivalent balances between $150 million to $200 million going forward. And I think that would definitely help to improve or stabilize our net interest margin. And just to add a little bit more color on the net interest margin, loan yield as you saw is pretty much stabilized.

But there is a little bit accretion decrease, but that didn’t impact too much, same thing for the non-accrual loan reversal as well. And as we have a very strong liquidity, I would expect the deposit pricing will be stabilized.

So based on all those things, loan production and the reduction of the cash equivalent and deposit pricing stabilized, I would expect no more further significant compression or it will be pretty much stabilized margin going forward in Q3..

Okay. That’s great color. Thank you, Alex.

And then one last question I had, just kind of given the, I guess, what was a little bit of disappointing growth in the second quarter, can you give us a sense of how originations are shaping up here at least in the first few weeks of the third quarter?.

Sure. I’ll answer that question. Coming up a very, very strong first quarter, it’s kind of a record quarter for us. It did take a little bit of time to rebuild the pipeline. Originations were still at a very good level. We’re not worried about that.

And I think the good news I think going into third quarter is that pipeline looks very healthy at this point. So, I think some of the dip that we saw in the second quarter, a lot of that actually had to do with some of the timing of closing some of these transactions. So, I think we feel very comfortable going forward into the third quarter..

Okay. Great thanks, Peter. I appreciate you guys taking my questions..

Thank you..

Thank you..

And your next question comes from the line of Julianna Balicka from KBW. Please go ahead..

Good morning..

Hi, good morning Julianna..

Good morning, Julianna..

Good morning. I wanted to follow-up on a couple of items. And I’m sorry if I missed this in your prepared remarks. In terms of your origination of the mortgage division, you had previously said that you want to target $550 million annually.

So given the ramp up in that division, how long do you think it will take you before you get to that pace?.

Okay. Thanks for asking the question, because the Bank of Manhattan is the one that we acquired, but this second quarter is actually the full quarter of operation, and we’re monitoring closely. And, overall, it’s going on the right direction, but specific to your loan production, yes, correct.

We had initially anticipated about $550 million loan production annually. That was based on assumption that we bring total employees of 50.

But as part of the closing processes and during the first quarter of the full operation, there was some turnover which didn’t really impact it too much, but the total employees that we have onboard as of now is 29. So there are loan officers and some back office employees, about 20 people didn’t come over, and it was a part of our plan as well.

We did have a kind of a cherry pick for the high-performing loan officers. But having that being said that $550 million, the projection needs to be revised because of fewer number of people. So our revised total production on a quarterly basis is about like $120 million or $40 million per month. So that is kind of a revised our production.

However, even though production decreases, they will have an impact to less commission or expenses, and also you will have a less amount of a gain on sale of those mortgage loans. So if you want we can go over more details of that component. But overall, Bank of Manhattan, I do believe, it is on the right track.

We have about $90 million of origination, which we believe it was quite successful. Reason for that was April versus May, and May versus June each month, the loan production really picked up. So I would expect to going forward, the loan production will continuously increase and be on track of our revised target..

Okay. And then in terms of the volume of the loans sold, I’m sorry, I didn’t catch it when you said, I think you said $42 million of residential loans sold.

And what was that SBA amount? And also in looking at your production targets for the mortgage portfolio, are you planning on selling half of it, or what’s kind of your goal in terms of percentage of loans sold?.

Okay. Let me start with our SBA loan we sold was $27.6 million, that’s what we sold and we recognized $2.6 million gain. And the premium percentage is 9.5%, and home mortgage, we sold $42 million and we’ve recognized $928,000 of gain. So that is about 2.2% gain on sale.

In terms of gain on sale, I think there was a big swing compared to first quarter was non-accrual loan sale. And I think because of that, the total gain on sale has decreased..

Right.

But, I mean, as far as your production of $120 million per quarter as it ramps up to that level, should we be thinking about half of that as being for sale and half of that as being for portfolio, or how should we think about that?.

It really depends. What we initially anticipated is to sell most of the loans as we originate. But this quarter, second quarter, we actually retained as a portfolio around like $35 million, while we had a production of total $90 million, there was a – this quarter.

By going forward, if we have $120 million of loan production, we would expect around 80% of that will be sold in the secondary market..

Got it. And then two more questions and I’ll step back.

One, what was the accretion dollar amount this quarter in your interest income?.

I think the balance is relatively small. And if you have impact to margin by three basis point, and let me see if I get the impact of the margin, now, let me get back to you. I think it was a relatively very small amount, I think about smaller. Here, I found it. Accretion was – last quarter it was $1.9 million and this quarter it’s $1.7 million.

In terms of impact to the yield it was at 16 basis point this quarter versus last quarter it was at 20 basis point. So there was about 3 basis point reduction in the net interest margin impact..

And how much of that accretion do you have left to recognize in the rest of the next couple of years?.

I think around $20 million..

Okay. Great. And then final question and I’ll step back. You had discussed in your remarks and also in the previous questioning about the excess liquidity that you have to redeploy.

So kind of thinking about your starting with point of – 91% loan to deposit ratio, how high would you be comfortable taking that up to?.

Actually, we were in excess of even 100%. And we were very successful in gathering those deposits. So now, we are 98% – no, actually, recently it was below 90%. So I feel comfortable reaching like 95%, no problem. But I wouldn’t be too worried about close to 100%, because there is some uniqueness in our deposit characters.

And as long as loan production is strong I don’t think we will be too much of a restricted only simply based on the loan-to-deposit ratio. So to answer your question, even it reaches the 100%, because we are monitoring carefully I wouldn’t be really too concerned about it..

Got it. Thank you very much..

Thank you, Julianna..

And your next question comes from the line of Don Worthington from Raymond James. Please go ahead..

Good morning, everyone..

Hey, good morning, Don..

Hey, good morning, Don..

In terms of, just talking about the gain on sale here a little bit more, where do you think the SBA volume will be going forward? Is it going to be kind of similar to what you saw this quarter with about $2.5 million in gain on sale?.

I think, in terms of the SBA originations, I think we are basically getting very comfortable with our current operations with our new management that has been onboard for about a year now. I think we anticipate that division of the business to definitely add consistent originations each quarter.

I think we did about $25.6 million this quarter, so we anticipate something along those lines, probably it increased from there actually as we go forward. And I think, gain on sale that will be depending on what premium we get in the market, but the premium has been holding pretty steady so far..

Okay.

And then, do you anticipate further gains on sale of non-performing loans?.

Hopefully so; I think we had two good quarters here. We are fairly accurate and conservative in terms of our mark-down. And I think that because the market conditions in economies are improving whenever we do see opportunities to get some recovery or gain on sales. We definitely do try to obtain those.

So I wouldn’t put that – a heavy dependence on it, but it is something that we go after every quarter..

Okay. Great. And then, Alex, on the deposit campaign, what – refresh my memory in terms of what the rate was on those deposits..

Sure, it was mainly a CD campaign with 15-month CD with 1.2% rate..

Okay. All right, thank you..

Thank you..

Thank you..

Your next question comes from the line of Gary Tenner from D.A. Davidson. Please go ahead..

Thanks. Good morning. I just had a couple of follow-up questions. Alex, first off, I wanted to make sure I understood you correctly regarding the MSR for the servicing asset valuation changes. It looks like there was a net benefit there of $118,000 or so. I thought you’d originally said that the special dividend was offset by that servicing asset..

Right, right..

It looks like it was actually an additive to it..

Right. That was correct..

Okay. All right. Great.

And then as you discussed your expectation for reducing cash balances, the $150 million to $200 million range, do you think that that’s over the course of the third quarter, or is that over the course of the second half of the year?.

Right, I think it will be continuous processes. It might be a little bit challenged to reduce like almost $200 million in one quarter. But we actually started those cash redeployment strategy in the month of June. So it will continue to carry towards the end of the year. So, but if we reach the target by the third quarter we will stop..

Okay.

And then, lastly, on the mortgage business from Bank of Manhattan down to 29 people, do you expect to locally increase that number? Are you actively trying to add producers in California, before you roll it out to Texas and New York? Or is that – the $480 million or $120 million per quarter kind of goal is that based on the 29 people or is that based on some larger number of producers?.

It is based on the current number of the employees. And we just actually hired a couple of the loan officers. And to answer your first question, we are actually hiring loan officers in California area. And since we didn’t have active mortgage in New York, New Jersey and Dallas, but the cross-selling opportunity is great.

So internally, our mortgage division, they’re travelling to East Coast and Texas. And they are doing internal kind of training and the buildup of platform to more actively reaching out to the customers.

So we are not hiring at this time those New York, New Jersey and Dallas areas, but as we move forward we are open up to hiring more people on those areas as well..

Okay. Thank you..

Thank you..

[Operator Instructions] And your next question comes from the line of Julianna Balicka from KBW. Please go ahead..

Hello, I have a follow-up, please. In terms of your reserve coverage of loans stabilized this quarter and kind of thinking about going forward you mention that you may go into a positive provision expense in the second half of the year.

In terms of thinking of the kind of reserve coverage you think is appropriate for your loan portfolio given the current environment, how much lower do you think we can see the reserves trend down to?.

Yes. I think we’re actually pretty comfortable with where our coverage ratio is right now. But I don’t think there is much more room to decline further. We are looking at this on a quarter-to-quarter basis. I think the largest determinant is going to be how much we grow. We have grown quite a bit in the last year.

And so, if that growth continues, I think we’ll anticipate some provision expense I think perhaps in the latter half of this year. And even if we do I believe it won’t be a material amount, but I think that is something that we are looking at going forward..

Great. Thank you..

Thank you..

There are no further questions. And I’d now like to turn the call back over to Edward Han for closing remarks..

Thank you. 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..

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Thank you very much and have a very good day..