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Hanmi Reports Third Quarter 2019 Results

Company Release - 10/22/2019 4:05 PM ET

2019 Third Quarter Highlights:      

  • Net income of $12.4 million, or $0.40 per diluted share, up from $2.7 million, or $0.09 per diluted share for the prior quarter and down from $16.1 million or $0.50 per diluted share from the same quarter a year ago; second quarter net income included a $16.7 million provision for loan and lease losses arising from a $15.7 million specific allowance relating to a $40.7 million loan relationship.
  • Loans and leases receivable stood at $4.57 billion at the end of the third quarter, compared with $4.56 billion at the end of the prior quarter, and $4.58 billion at the end of the third quarter of 2018; average loans and leases for the third quarter increased 2.5% on an annualized basis.
  • Deposits were $4.69 billion at June 30, 2019, down 1.5% from the end of the prior quarter principally due to a decline in higher-costing time deposits; deposits were up 1.6% from $4.61 billion a year ago.
  • Net interest income was $44.1 million, up 2.5% from the previous quarter benefitting from an improved net interest margin and one additional day in the quarter.
  • Net interest margin improved to 3.36% compared with 3.30% for the previous quarter reflecting a four basis point decline in the cost of deposits and an improvement in the yield on interest earning assets.
  • Noninterest income was $6.9 million, down from $7.7 million for the previous quarter; gains on sales of SBA loans were $1.8 million and $1.1 million, respectively; second quarter included gains on sales of securities of $0.6 million, and a gain on the sale of a branch building of $1.2 million.
  • Noninterest expense was $32.6 million compared with $30.1 million for the second quarter reflecting elevated charges arising from the troubled loan relationship, the implementation of the new credit loss accounting standard and legal matters.
  • Loan and lease loss provision of $1.6 million compared with $16.7 million for the second quarter; the ratio of the allowance to loans and leases ended the quarter at 1.11% compared with 1.08% at the end of the previous quarter.
  • Third quarter return on average assets was 0.90% and return on average equity was 8.67%.

LOS ANGELES, Oct. 22, 2019 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported net income for the 2019 third quarter of $12.4 million, or $0.40 per diluted share, compared with $2.7 million, or $0.09 per diluted share for the 2019 second quarter and $16.1 million, or $0.50 per diluted share for the 2018 third quarter.

Bonnie Lee, President and Chief Executive Officer, said, “Hanmi’s third quarter results reflect the continuation of our strategy to protect net interest margin which has led to moderate growth in loans and leases. Our focus on demand deposits and emphasis on loan and lease yields accretive to our overall portfolio underscore this effort. In addition, SBA loan production was the highest in nearly two years and earnings in the quarter benefitted from rising premiums on the guaranteed portion of the SBA (7a) loans that we sold in the period.  Importantly, net interest margin expanded six basis points in the quarter due to a slight increase in loan yields and lower deposit costs driven by a favorable mix of lower time deposits and growth in non-interest bearing demand deposits.”

Ms. Lee concluded, “Notwithstanding the troubled loan relationship identified in the prior quarter, overall asset quality remains strong. Hanmi continues to maintain disciplined underwriting standards and we remain focused on originating high-quality, well-priced loans and leases.”

Quarterly Highlights
(In thousands, except per share data)

               
 As of or for the Three Months Ended Amount Change 
 September 30, June 30, March 31, December 31, September 30, Q3-19 Q3-19 
  2019   2019   2019   2018   2018  vs. Q2-19 vs. Q3-18 
               
Net income$12,376  $2,656  $14,672  $11,385  $16,081  $9,720  $(3,705) 
Net income per diluted common share$0.40  $0.09  $0.48  $0.37  $0.50  $0.31  $(0.10) 
               
Assets$5,527,982  $5,511,752  $5,571,068  $5,502,219  $5,487,042  $16,230  $40,940  
Loans and leases receivable$4,569,837  $4,555,802  $4,575,620  $4,600,540  $4,582,883  $14,035  $(13,046) 
Deposits$4,690,141  $4,762,068  $4,820,175  $4,747,235  $4,614,422  $(71,927) $75,719  
               
Return on average assets 0.90%  0.19%  1.09%  0.83%  1.17%  0.71   -0.27  
Return on average stockholders' equity 8.67%  1.87%  10.62%  7.92%  10.91%  6.80   -2.24  
               
Net interest margin (1) 3.36%  3.30%  3.52%  3.51%  3.48%  0.06   -0.12  
Efficiency ratio (2) 64.04%  59.44%  56.83%  56.40%  56.28%  4.60   7.76  
               
Tangible common equity to tangible assets (3) 10.20%  10.04%  9.93%  9.84%  10.15%  0.16   0.05  
Tangible common equity per common share (3)$18.05  $17.83  $17.89  $17.47  $17.31  $0.22  $0.74  
               
               
(1)  Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.       
(2)  Noninterest expense divided by net interest income plus noninterest income.           
(3)  Refer to "Non-GAAP Financial Measures" for further details.            
               


Results of Operations
Third quarter 2019 net interest income increased 2.5% to $44.1 million from $43.0 million in the 2019 second quarter, principally due to an increase of $1.1 million in interest and fees on loans and leases as a result of increased balances and one additional day in the period as well as a decrease in interest expense on interest bearing liabilities due to lower time deposit balances.  Third quarter loan prepayment penalties were $0.3 million compared with $0.1 million for the second quarter.

              
 As of or For the Three Months Ended (in thousands) Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-19 Q3-19
Net Interest Income 2019   2019   2019   2018   2018  vs. Q2-19 vs. Q3-18
              
Interest and fees on loans and leases(1)$57,929  $56,872  $58,334  $57,947  $56,361   1.9%  2.8%
Interest on securities 3,769   3,770   3,456   3,278   3,238   -0.0%  16.4%
Dividends on FHLB stock 286   283   289   555   286   1.1%  0.0%
Interest on deposits in other banks 193   557   335   179   151   -65.4%  27.8%
Total interest and dividend income$62,177  $61,482  $62,414  $61,959  $60,036   1.1%  3.6%
              
Interest on deposits 15,995   16,728   15,683   14,139   11,694   -4.4%  36.8%
Interest on borrowings 367   -   71   420   1,264   0.0%  -71.0%
Interest on subordinated debentures 1,757   1,764   1,772   1,754   1,749   -0.4%  0.5%
Total interest expense 18,119   18,492   17,526   16,313   14,707   -2.0%  23.2%
Net interest income$44,058  $42,990  $44,888  $45,646  $45,329   2.5%  -2.8%
              
(1)  Includes loans held for sale.             
              

Net interest margin on a tax equivalent basis was 3.36% for the third quarter of 2019 compared with 3.30% for the second quarter of 2019. Net interest margin increased 6 basis points from the prior quarter primarily due to lower cost of deposits and an increase in interest-earning asset yields.

The average earning asset yield (tax equivalent) was 4.74% for the third quarter of 2019 compared with 4.72% for the second quarter of 2019. The two basis point increase was principally due to a higher level of loan and lease balances in average earning assets.

The cost of interest-bearing liabilities was 2.04% for the third quarter of 2019 compared with 2.06% for the second quarter of 2019. The two basis point decrease was primarily due to a 4.6% decrease in average interest-bearing deposits.

              
 For the Three Months Ended (in thousands) Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-19 Q3-19
Average Earning Assets and Interest-bearing Liabilities 2019   2019   2019   2018   2018  vs. Q2-19 vs. Q3-18
Loans and leases receivable (1)$4,519,770  $4,491,377  $4,533,120  $4,544,722  $4,551,284   0.6%  -0.7%
Securities 630,450   629,062   589,547   581,550   589,939   0.2%  6.9%
FHLB stock 16,385   16,385   16,385   16,385   16,385   0.0%  0.0%
Interest-bearing deposits in other banks 35,140   92,753   53,022   34,301   30,368   -62.1%  15.7%
Average interest-earning assets$5,201,745  $5,229,577  $5,192,074  $5,176,958  $5,187,976   -0.5%  0.3%
              
Demand: interest-bearing$82,665  $83,932  $85,291  $89,971  $92,090   -1.5%  -10.2%
Money market and savings 1,555,639   1,541,976   1,526,710   1,510,428   1,377,739   0.9%  12.9%
Time deposits 1,692,419   1,863,685   1,852,562   1,751,429   1,687,827   -9.2%  0.3%
Average interest-bearing deposits 3,330,723   3,489,593   3,464,563   3,351,828   3,157,656   -4.6%  5.5%
Borrowings 74,239   59   10,611   65,217   240,054   125728.8%  -69.1%
Subordinated debentures 118,145   118,007   117,863   117,728   117,584   0.1%  0.5%
Average interest-bearing liabilities$3,523,107  $3,607,659  $3,593,037  $3,534,773  $3,515,294   -2.3%  0.2%
              
(1)  Includes loans held for sale.             
              
 For the Three Months Ended Amount Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-19 Q3-19
Average Yields and Rates 2019   2019   2019   2018   2018  vs. Q2-19 vs. Q3-18
Loans and leases receivable(1) 5.08%  5.08%  5.22%  5.06%  4.91%  0.01   0.17 
Securities (2) 2.39%  2.40%  2.44%  2.37%  2.31%  -0.01   0.08 
FHLB stock 6.93%  6.93%  7.15%  13.44%  6.93%  -0.00   -0.00 
Interest-bearing deposits in other banks 2.18%  2.41%  2.56%  2.07%  1.97%  -0.23   0.21 
Interest-earning assets 4.74%  4.72%  4.89%  4.76%  4.60%  0.03   0.14 
              
Interest-bearing deposits 1.91%  1.92%  1.84%  1.67%  1.47%  -0.02   0.44 
Borrowings 1.96%  0.00%  2.71%  2.56%  2.09%  1.96   -0.13 
Subordinated debentures 5.92%  5.96%  6.01%  5.94%  5.92%  -0.04   0.00 
Interest-bearing liabilities 2.04%  2.06%  1.98%  1.83%  1.66%  -0.02   0.38 
              
Net interest margin (taxable equivalent basis) 3.36%  3.30%  3.52%  3.51%  3.48%  0.06   -0.12 
              
Cost of deposits 1.37%  1.41%  1.35%  1.20%  1.04%  -0.04   0.33 
              
(1)  Includes loans held for sale.             
(2)  Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.      
              

For the third quarter of 2019, the loan and lease loss provision was $1.6 million compared with $16.7 million for the preceding quarter. Net charge-offs were $0.3 million for the 2019 third quarter, compared with $0.2 million for the 2019 second quarter. The allowance to loans and leases increased to 1.11% at the end of the third quarter from 1.08% for the previous quarter.

Third quarter noninterest income decreased 11.2% to $6.9 million from the second quarter, primarily from the $1.2 million gain on sale of a branch building realized last quarter as well as the decrease of $0.6 million in gain on sales of securities from the second quarter sale of the Bank’s remaining portfolio of tax-exempt municipal bonds. These decreases were partially offset by a $0.7 million increase in gain on sale of SBA loans. Gains on sales of SBA loans were $1.8 million for the third quarter, up from $1.1 million for the preceding quarter. The volume of SBA loans sold for the 2019 third quarter and 2019 second quarter were $24.3 million and $15.4 million, respectively.

              
 For the Three Months Ended (in thousands) Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-19 Q3-19
Noninterest Income 2019   2019   2019   2018   2018  vs. Q2-19 vs. Q3-18
Service charges on deposit accounts$2,518  $2,486  $2,358  $2,648  $2,513   1.3%  0.2%
Trade finance and other service charges and fees 1,191   1,204   1,124   1,167   1,128   -1.1%  5.6%
Servicing income 614   600   357   630   673   2.3%  -8.8%
Bank-owned life insurance income 279   281   280   288   285   -0.7%  -2.1%
Gain on sale of bank premises -   1,235   -   -   -   -100.0%  0.0%
All other operating income 491   293   484   584   483   67.6%  1.7%
Service charges, fees & other 5,093   6,099   4,603   5,317   5,082   -16.5%  0.2%
              
Gain on sale of SBA loans 1,767   1,060   926   983   1,114   66.7%  58.6%
Net gain (loss) on sales of securities -   570   725   -   19   -100.0%  -100.0%
Total noninterest income$6,860  $7,729  $6,254  $6,300  $6,215   -11.2%  10.4%
              

Noninterest expense for the third quarter increased 8.2% to $32.6 million from $30.1 million for the prior quarter primarily due to a $1.1 million increase in occupancy and equipment expense, a $0.8 million increase in professional fees and a $0.6 million increase in salaries and benefits expense. The increase in salary and benefits expense arose from an increase in incentive expense and personnel. Occupancy and equipment expense was driven by the second quarter reassessment and reduction of personal property tax expense, while the increase in professional fees reflects charges related to the reporting delay for the troubled loan relationship, expenses for CECL implementation and legal fees from the year-ago terminated merger transaction. Primarily as a result of higher noninterest expense, the efficiency ratio increased to 64.0% in the third quarter from 59.4% in the prior quarter.

               
 For the Three Months Ended (in thousands) Percentage Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-19 Q3-19 
 2019 2019 2019 2018 2018 vs. Q2-19 vs. Q3-18 
Noninterest Expense              
Salaries and employee benefits$17,530  $16,881  $15,738  $15,845  $17,436   3.8%  0.5% 
Occupancy and equipment 4,528   3,468   4,521   4,105   3,685   30.6%  22.9% 
Data processing 2,410   2,140   2,083   1,894   1,745   12.6%  38.1% 
Professional fees 2,826   1,983   1,649   1,969   1,626   42.5%  73.8% 
Supplies and communication 726   649   844   797   805   11.9%  -9.8% 
Advertising and promotion 927   945   760   1,316   814   -1.9%  13.9% 
Merger and integration costs -   -   -   -   466   -   -100.0% 
Off-balance sheet loss allowance provision (income) 209   233   (339)  82   -   -10.3%  0.0% 
All other operating expenses 3,291   3,687   3,728   3,669   2,872   -10.7%  14.6% 
subtotal 32,447   29,986   28,984   29,677   29,449   8.2%  10.2% 
               
Other real estate owned expense (income) 160   158   81   (378)  (441)  1.3%  -136.3% 
Total noninterest expense$32,607  $30,144  $29,065  $29,299  $29,008   8.2%  12.4% 
               

Hanmi recorded a provision for income taxes of $4.3 million for the third quarter of 2019, representing an effective tax rate of 25.9% compared with $1.2 million, representing an effective tax rate of 31.5% for the second quarter of 2019. For the first nine months of 2019, the effective tax rate was 28.5%.

Financial Position
Total assets were $5.53 billion at September 30, 2019, a 0.3% increase from $5.51 billion at June 30, 2019.

Loans and leases receivable, before the allowance for loan and lease losses, were $4.57 billion at September 30, 2019, compared with $4.56 billion at June 30, 2019. Hanmi continued to emphasize growth in commercial loans and leases, while allowing residential mortgages to decline through amortization. Loans held for sale, representing the guaranteed portion of SBA loans, were $6.6 million at September 30, 2019 compared with $6.0 million at the end of the second quarter.

Loans and leases receivable, before the allowance for loan and lease losses, were $4.58 billion at September 30, 2018.

              
              
 As of (in thousands) Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-19 Q3-19
  2019   2019   2019   2018   2018  vs. Q2-19 vs. Q3-18
Loan and Lease Portfolio             
Commercial real estate loans$3,209,752  $3,213,135  $3,230,526  $3,257,792  $3,275,382   -0.1%  -2.0%
Residential real estate loans 436,576   458,327   483,830   500,563   516,968   -4.7%  -15.6%
Commercial and industrial loans 441,210   409,502   422,502   429,903   396,383   7.7%  11.3%
Lease receivables 467,777   460,519   425,530   398,858   379,455   1.6%  23.3%
Consumer loans 14,522   14,319   13,232   13,424   14,695   1.4%  -1.2%
Loans and leases receivable 4,569,837   4,555,802   4,575,620   4,600,540   4,582,883   0.3%  -0.3%
Loans held for sale 6,598   6,029   7,140   9,390   4,455   9.4%  48.1%
Total loans and leases$4,576,435  $4,561,831  $4,582,760  $4,609,930  $4,587,338   0.3%  -0.2%
              
              

For the third quarter of 2019, commercial real estate loans as a percentage of loans and leases receivable decreased to 70.2% compared with 71.5% for the same period last year.

New loan and lease production in the 2019 third quarter was $217.5 million at an average rate of 5.54% while the average rate of the loans that paid off during the period was 5.15%.

 For the Three Months Ended (in thousands)
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
  2019   2019   2019   2018   2018 
New Loan & Lease Production         
Commercial real estate loans$78,039  $105,527  $46,531  $87,523  $112,748 
Commercial and industrial loans 51,093   48,451   33,643   68,113   32,714 
SBA loans 34,114   19,970   29,976   30,758   25,388 
Lease receivable 52,333   77,983   69,577   59,023   64,284 
Consumer loans 1,882   450   122   831   2,873 
  subtotal 217,461   252,381   179,849   246,248   238,007 
          
          
Net line utilization (4,012)  (52,404)  19,581   (21,715)  (21,423)
Loan purchases -   -   -   -   2,160 
Payoffs & amortization (174,045)  (201,617)  (207,784)  (184,891)  (156,376)
Loan sales (24,286)  (16,650)  (15,459)  (18,210)  (19,751)
Charge-offs (916)  (1,527)  (1,107)  (3,775)  (1,245)
Other real estate owned (168)  -   -   -   (615)
          
Loans and leases-beginning balance$4,555,803  $4,575,620  $4,600,540  $4,582,883  $4,542,126 
Loans and leases-ending balance$4,569,837  $4,555,803  $4,575,620  $4,600,540  $4,582,883 
          

Deposits decreased to $4.69 billion at the end of the 2019 third quarter from $4.76 billion at the end of the preceding quarter. The decrease reflects an 11.6% decline in time deposits offset by a 5.8% increase in noninterest-bearing demand deposits. The average loan-to-deposit ratio for the third quarter was 97.6% compared with 94.6% in the second quarter.

Deposits increased 1.6% from $4.61 billion at the end of the third quarter last year, as money market and savings deposits and non interest-bearing demand deposits increased 7.5% and 5.7%, respectively.

              
 As of (in thousands) Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-19 Q3-19
  2019   2019   2019   2018   2018  vs. Q2-19 vs. Q3-18
Deposit Portfolio             
Demand: noninterest-bearing$1,388,121  $1,312,577  $1,316,114  $1,284,530  $1,313,777   5.8%  5.7%
Demand: interest-bearing 84,155   80,248   85,946   87,582   90,586   4.9%  -7.1%
Money market and savings 1,590,037   1,528,000   1,543,299   1,573,622   1,478,631   4.1%  7.5%
Time deposits 1,627,828   1,841,243   1,874,816   1,801,501   1,731,428   -11.6%  -6.0%
Total deposits$4,690,141  $4,762,068  $4,820,175  $4,747,235  $4,614,422   -1.5%  1.6%
              
          -   

At September 30, 2019, stockholders’ equity was $574.5 million, compared with $564.5 million at June 30, 2019. Tangible common stockholders’ equity was $562.6 million, or 10.20% of tangible assets, compared with $552.4 million, or 10.04% of tangible assets at June 30, 2019. Tangible book value per share increased to $18.05 from $17.83 in the second quarter.

Hanmi continues to be well capitalized, with a preliminary Tier 1 risk-based capital ratio of 12.04% and a total risk-based capital ratio of 15.23% at September 30, 2019, versus 11.83% and 14.99%, respectively, at June 30, 2019.  

 As of Amount Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-19 Q3-19
  2019   2019   2019   2018   2018  vs. Q2-19 vs. Q3-18
Regulatory Capital ratios (1)             
Hanmi Financial             
Total risk-based capital 15.23%  14.99%  14.17%  14.54%  15.01%  0.24   0.22 
Tier 1 risk-based capital 12.04%  11.83%  11.94%  11.74%  12.21%  0.21   -0.17 
Common equity tier 1 capital 11.61%  11.41%  11.52%  11.32%  11.79%  0.20   -0.18 
Tier 1 leverage capital ratio 10.44%  10.20%  10.39%  10.18%  10.53%  0.24   -0.09 
Hanmi Bank             
Total risk-based capital 14.81%  14.62%  14.37%  14.19%  14.76%  0.19   0.05 
Tier 1 risk-based capital 13.69%  13.54%  13.64%  13.47%  14.05%  0.15   -0.36 
Common equity tier 1 capital 13.69%  13.54%  13.64%  13.47%  14.05%  0.15   -0.36 
Tier 1 leverage capital ratio 11.90%  11.67%  11.88%  11.67%  12.11%  0.23   -0.21 
              
(1)  Preliminary ratios for September 30, 2019             
              

Hanmi declared a cash dividend of $0.24 per common share on its common stock in the 2019 third quarter. The dividend was paid on August 30, 2019, to stockholders of record as of the close of business on August 9, 2019.

Asset Quality
Loans and leases 30 to 89 days past due and still accruing were 0.18% of loans and leases at the end of the third quarter of 2019, compared with 0.25% at the end of the second quarter.

Classified loans were $80.7 million at September 30, 2019 compared with $75.7 million at the end of the second quarter, while special mention loans were $27.4 million at the end of the third quarter compared with $23.8 million at June 30, 2019.

Nonperforming loans and leases were $64.7 million at the end of the third quarter of 2019, or 1.42% of loans and leases compared with $63.0 million for the second quarter, or 1.38% of the portfolio.

Nonperforming assets were $65.1 million at the end of the third quarter of 2019, or 1.18% of assets, compared with $63.5 million, or 1.15% of assets, at the end of the prior quarter.

The troubled loan relationship identified in the 2019 second quarter, included in both the classified and nonaccrual categories, was $40.0 million at September 30, 2019, compared with $40.7 million at June 30, 2019. The decline reflects payments applied to the loans outstanding and the specific allowance remained unchanged at $15.7 million at the end of the third quarter. The $25.0 million commercial loan relationship previously identified in the 2019 first quarter declined to $2.1 million through payments; there were no charge-offs. The balance remaining at the end of the third quarter represents nonaccrual real estate secured loans expected to be paid-off from pending real estate sales.

Gross charge-offs for the third quarter of 2019 were $0.9 million compared with $1.5 million for the preceding quarter. Recoveries of previously charged-off loans and leases for the third quarter of 2019 were $0.6 million compared with $1.3 million for the preceding quarter. As a result, net charge-offs were $0.3 million for the third quarter of 2019, compared with $0.2 million for the second quarter of 2019. For the third and second quarters of 2019, net charge-offs were 0.02% of average loans and leases, respectively.

The allowance for loan and lease losses was $50.7 million as of September 30, 2019, generating an allowance for loan and lease losses to loans and leases of 1.11% compared with 1.08% in the prior quarter.

              
 As of or for the Three Months Ended (in thousands) Amount Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-19 Q3-19
  2019   2019   2019   2018   2018  vs. Q2-19 vs. Q3-18
Asset Quality Data and Ratios             
              
Delinquent loans and leases:             
Loans and leases, 30 to 89 days past due and still accruing$8,085  $11,210  $9,242  $10,674  $6,901  $(3,125) $1,184 
Delinquent loans and leases to loans and leases 0.18%  0.25%  0.20%  0.23%  0.15%  -0.07   0.03 
              
Criticized loans and leases:             
Special mention$27,400  $23,820  $9,257  $29,183  $38,076  $3,580  $(10,676)
Classified 80,734   75,686   53,087   29,542   33,199   5,048   47,535 
Total criticized loans & leases$108,134  $99,506  $62,344  $58,725  $71,275  $8,628  $36,859 
              
Nonperforming assets:             
Nonaccrual loans and leases$64,194  $63,031  $40,041  $15,525  $18,283  $1,163  $45,911 
Loans and leases 90 days or more past due and still accruing 544   -   -   4   -   544   544 
Nonperforming loans and leases 64,738   63,031   40,041   15,529   18,283   1,707   46,455 
Other real estate owned, net 330   507   622   663   877   (177)  (547)
Nonperforming assets$65,068  $63,538  $40,663  $16,192  $19,160  $1,530  $45,908 
              
Nonperforming loans and leases to loans and leases 1.42%  1.38%  0.88%  0.34%  0.40%    
Nonperforming assets to assets 1.18%  1.15%  0.73%  0.29%  0.35%    
              
Allowance for loan and lease losses:             
Balance at beginning of period$49,386  $32,896  $31,974  $31,676  $31,818     
Loan and lease loss provision 1,602   16,699   1,117   3,041   200     
Less: Net loan and lease charge-offs 276   209   195   2,743   342     
Balance at end of period$50,712  $49,386   $32,896   $31,974   $31,676     
              
Net loan and lease charge-offs to average loans and leases (1) 0.02%  0.02%  0.02%  0.24%  0.03%    
Allowance for loan and lease losses to loans and leases 1.11%  1.08%  0.72%  0.70%  0.69%    
              
Allowance for off-balance sheet items:             
Balance at beginning of period$1,333  $1,100  $1,439  $1,357  $1,357     
Provision (income) for off-balance sheet items 209   233   (339)  82   -     
Balance at end of period$1,542  $1,333  $1,100  $1,439  $1,357     
              

Conference Call                            
Management will host a conference call today, October 22, 2019 at 2:00 p.m. PT (5:00 p.m. ET) to discuss these results. This call will also be broadcast live via the internet. Investment professionals and all current and prospective stockholders are invited to access the live call by dialing 1-877-407-9039 before 2:00 p.m. PT, using access code HANMI. To listen to the call online, either live or archived, visit the Investor Relations page of Hanmi’s website at www.hanmi.com.

About Hanmi Financial Corporation
Headquartered in Los Angeles, California, Hanmi Financial Corporation owns Hanmi Bank, which serves multi-ethnic communities through its network of 35 full-service branches and 9 loan production offices in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Washington and Georgia. Hanmi Bank specializes in real estate, commercial, SBA and trade finance lending to small and middle market businesses. Additional information is available at www.hanmi.com.

Forward-Looking Statements
This press release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All statements other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital plans, strategic alternatives for a possible business combination, merger or sale transaction, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of potential future supervisory action against us or Hanmi Bank; our ability to remediate any material weakness in our internal controls over financial reporting; general economic and business conditions internationally, nationally and in those areas in which we operate; volatility and deterioration in the credit and equity markets; changes in consumer spending, borrowing and savings habits; availability of capital from private and government sources; demographic changes; competition for loans and deposits and failure to attract or retain loans and deposits; fluctuations in interest rates and a decline in the level of our interest rate spread; risks of natural disasters; a failure in or breach of our operational or security systems or infrastructure, including cyberattacks; the failure to maintain current technologies; inability to successfully implement future information technology enhancements; difficult business and economic conditions that can adversely affect our industry and business, including competition and lack of soundness of other financial institutions, fraudulent activity and negative publicity; risks associated with Small Business Administration loans; failure to attract or retain key employees; our ability to access cost-effective funding; fluctuations in real estate values; changes in accounting policies and practices; the imposition of tariffs or other domestic or international governmental policies impacting the value of the products of our borrowers; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability of Hanmi Bank to make distributions to Hanmi Financial Corporation, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial tests; ability to identify a suitable strategic partner or to consummate a strategic transaction; adequacy of our allowance for loan and lease losses; credit quality and the effect of credit quality on our provision for loan and lease losses and allowance for loan and lease losses; changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements; our ability to control expenses; changes in securities markets; and risks as it relates to cyber security against our information technology. In addition, we set forth certain risks in our reports filed with the U.S. Securities and Exchange Commission, including, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K that we will file hereafter, which could cause actual results to differ from those projected. We undertake no obligation to update such forward-looking statements except as required by law.

Investor Contacts:
Romolo (Ron) Santarosa
Senior Executive Vice President & Chief Financial Officer
213-427-5636

Lasse Glassen
Investor Relations / Addo Investor Relations
310-829-5400

Hanmi Financial Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(In thousands)

          
 September 30, June 30, Percentage September 30, Percentage
  2019   2019  Change  2018  Change
Assets         
Cash and due from banks$150,678  $130,851  15.2% $159,617  -5.6%
Securities available for sale, at fair value 621,815   639,995  -2.8%  572,236  8.7%
Loans held for sale, at the lower of cost or fair value 6,598   6,029  9.4%  4,455  48.1%
Loans and leases receivable, net of allowance for loan and lease losses 4,519,125   4,506,416  0.3%  4,551,207  -0.7%
Accrued interest receivable 11,723   12,946  -9.4%  13,646  -14.1%
Premises and equipment, net 27,271   26,698  2.1%  28,552  -4.5%
Customers' liability on acceptances 33   849  -96.1%  1,265  -97.4%
Servicing assets 7,436   7,567  -1.7%  8,878  -16.2%
Goodwill and other intangible assets, net 11,950   12,028  -0.6%  12,273  -2.6%
Federal Home Loan Bank ("FHLB") stock, at cost 16,385   16,385  0.0%  16,385  0.0%
Bank-owned life insurance 52,500   52,222  0.5%  51,372  2.2%
Prepaid expenses and other assets 102,468   99,766  2.7%  67,156  52.6%
Total assets$ 5,527,982  $ 5,511,752  0.3% $ 5,487,042  0.7%
          
Liabilities and Stockholders' Equity         
Liabilities:         
Deposits:         
Noninterest-bearing$1,388,121  $1,312,577  5.8% $1,313,777  5.7%
Interest-bearing 3,302,020   3,449,491  -4.3%  3,300,645  0.0%
Total deposits 4,690,141   4,762,068  -1.5%  4,614,422  1.6%
Accrued interest payable 10,076   11,438  -11.9%  8,153  23.6%
Bank's liability on acceptances 33   849  -96.1%  1,265  -97.4%
Borrowings 75,000   -  -   160,000  -53.1%
Subordinated debentures 118,232   118,087  0.1%  117,670  0.5%
Accrued expenses and other liabilities 59,973   54,852  9.3%  17,784  237.2%
Total liabilities 4,953,455   4,947,294  0.1%  4,919,294  0.7%
          
Stockholders' equity:         
Common stock 33   33  0.0%  33  0.0%
Additional paid-in capital 574,957   571,105  0.7%  568,861  1.1%
Accumulated other comprehensive income (loss) 3,708   2,375  56.1%  (11,295) -132.8%
Retained earnings 104,927   100,021  4.9%  93,768  11.9%
Less treasury stock (109,098)  (109,076) 0.0%  (83,619) 30.5%
Total stockholders' equity 574,527   564,458  1.8%  567,748  1.2%
Total liabilities and stockholders' equity$ 5,527,982  $ 5,511,752  0.3% $ 5,487,042  0.7%
          


Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In thousands, except share and per share data)

          
 Three Months Ended
 September 30, June 30, Percentage September 30, Percentage
  2019  2019  Change  2018  Change
Interest and dividend income:         
Interest and fees on loans and leases$57,929 $56,872  1.9% $56,361  2.8%
Interest on securities 3,769  3,770  -0.0%  3,238  16.4%
Dividends on FHLB stock 286  283  1.1%  286  0.0%
Interest on deposits in other banks 193  557  -65.4%  151  27.8%
Total interest and dividend income 62,177  61,482  1.1%  60,036  3.6%
Interest expense:         
Interest on deposits 15,995  16,728  -4.4%  11,694  36.8%
Interest on borrowings 367  -  -   1,264  -71.0%
Interest on subordinated debentures 1,757  1,764  -0.4%  1,749  0.5%
Total interest expense 18,119  18,492  -2.0%  14,707  23.2%
Net interest income before provision for loan and lease losses 44,058  42,990  2.5%  45,329  -2.8%
Loan and lease loss provision 1,602  16,699  -90.4%  200  701.0%
Net interest income after provision for loan and lease losses 42,456  26,291  61.5%  45,129  -5.9%
Noninterest income:         
Service charges on deposit accounts 2,518  2,486  1.3%  2,513  0.2%
Trade finance and other service charges and fees 1,191  1,204  -1.1%  1,128  5.6%
Gain on sale of Small Business Administration ("SBA") loans 1,767  1,060  66.7%  1,114  58.6%
Servicing income 614  600  2.3%  673  -8.8%
Bank-owned life insurance income 279  281  -0.7%  285  -2.1%
Net gain on sales of securities -  570  -100.0%  19  -100.0%
Other operating income 491  1,528  -67.9%  483  1.7%
Total noninterest income 6,860  7,729  -11.2%  6,215  10.4%
Noninterest expense:         
Salaries and employee benefits 17,530  16,881  3.8%   17,436  0.5%
Occupancy and equipment 4,528  3,468  30.6%  3,685  22.9%
Data processing 2,410  2,140  12.6%  1,745  38.1%
Professional fees 2,826  1,983  42.5%  1,626  73.8%
Supplies and communications 726  649  11.9%  805  -9.8%
Advertising and promotion 927  945  -1.9%  814  13.9%
Other real estate owned expense 160  158  1.3%  (441) -136.3%
Other operating expenses 3,500  3,920  -10.7%  3,338  4.9%
Total noninterest expense 32,607  30,144  8.2%  29,008  12.4%
Income before provision for income taxes 16,709  3,876  331.1%  22,336  -25.2%
Provision for income taxes 4,333  1,220  255.2%   6,255  -30.7%
Net income$ 12,376 $ 2,656  366.0%  $ 16,081  -23.0%
Basic earnings per share:$0.40 $0.09    $0.50   
Diluted earnings per share:$0.40 $0.09    $0.50   
          
Weighted-average shares outstanding:         
Basic 30,830,445  30,685,301     32,155,132   
Diluted 30,859,119  30,727,681     32,275,277   
Common shares outstanding 31,173,881  30,975,163     32,087,236   
          
          
Hanmi Financial Corporation and Subsidiaries          
Consolidated Statements of Income (Unaudited)         
(In thousands, except share and per share data)         
          
 Nine Months Ended    
 September 30, September 30, Percentage    
  2019  2018  Change    
Interest and dividend income:         
Interest and fees on loans$173,135 $161,643  7.1%    
Interest on securities 10,996  9,541  15.2%    
Dividends on FHLB stock 858  858  0.0%    
Interest on deposits in other banks 1,085  398  172.6%    
Total interest and dividend income 186,074  172,440  7.9%    
Interest expense:         
Interest on deposits 48,406  28,944  67.2%    
Interest on borrowings 439  2,959  -85.2%    
Interest on subordinated debentures 5,293  5,170  2.4%    
Total interest expense 54,138  37,073  46.0%    
Net interest income before provision for loan and lease losses 131,936  135,367  -2.5%    
Loan and lease loss provision 19,418  949  1946.2%    
Net interest income after provision for loan and lease losses 112,518  134,418  -16.3%    
Noninterest income:         
Service charges on deposit accounts 7,362  7,352  0.1%    
Trade finance and other service charges and fees 3,519  3,449  2.0%    
Gain on sale of Small Business Administration ("SBA") loans 3,752  3,970  -5.5%    
Servicing income 1,572  1,755  -10.4%    
Bank-owned life insurance income 840  819  2.6%    
Net gain (loss) on sales of securities 1,295  (341) -479.8%    
Other operating income 2,503  1,216  105.8%    
Total noninterest income 20,843  18,220  14.4%