Hanmi’s First Quarter Results Reflect Solid Loan Production and 7.8% Increase in Net Income

2018 First Quarter Highlights:        

  • First quarter net income of $14.9 million, or $0.46 per diluted share, up 29.2% from the prior quarter and up 7.8% year-over-year.
  • Loans and leases receivable of $4.4 billion, up 10.0% in the first quarter on an annualized basis driven by new loan and lease production of $245.3 million; Loans and leases receivable up 11.9% year-over-year.
  • Deposits of $4.4 billion, up 2.8% in the first quarter on an annualized basis and up 7.2% year-over-year; Non-interest bearing demand deposits increased 3.0% from the prior quarter and 8.9% from a year ago.
  • Net interest margin was 3.70% compared to 3.79% in the prior quarter and 3.89% a year ago; Net interest margin in the prior quarter included an 8 basis point benefit from prepayment fees.
  • Net interest income was $44.9 million, down 3.1% from the prior quarter and up 6.1% year-over-year.
  • Return on average assets was 1.16% and return on average equity was 10.65% compared with 0.88% and 8.12%, respectively, for the prior quarter and 1.18% and 10.46%, respectively, a year ago.

LOS ANGELES, April 24, 2018 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ:HAFC) (or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported net income for the 2018 first quarter of $14.9 million, or $0.46 per diluted share, compared with $11.5 million, or $0.36 per diluted share for the 2017 fourth quarter and $13.8 million, or $0.43 per diluted share for the 2017 first quarter.

Mr. C. G. Kum, President and Chief Executive Officer, said, “Hanmi’s first quarter results represent a good start to the year with strong loan production, expanding net income and continued excellent asset quality. During the first quarter, which is typically our seasonally weakest quarter, new loan and lease production of $245.3 million increased 21% from last year’s first quarter. This robust origination activity, which benefitted from our focus on C&I lending, helped loans and leases receivable increase in the first quarter 10% on an annualized basis and grow 12% compared to a year ago, while net income expanded nearly 8% year-over-year. I am also pleased that our net interest margin held relatively steady after adjusting for benefits in the prior quarter from prepayment fees. Importantly, credit quality remained excellent with nonperforming assets declining to 32 basis points of total assets in the quarter.”

Mr. Kum concluded, “During the first quarter, our Board increased the quarterly dividend 14%, to $0.24 per share. Hanmi remains committed to rewarding its shareholders and this dividend increase reflects confidence in our ability to continue generating profitable growth in 2018 and beyond.”

Quarterly Highlights
(In thousands, except per share data)

   As of  or for the Three Months Ended    Amount Change
  March 31,   December 31,   September 30,   June 30,   March 31,   Q1-18   Q1-18
    2018       2017       2017       2017       2017     vs. Q4-17   vs. Q1-17
                           
Net income $ 14,855     $ 11,500     $ 14,923     $ 14,457     $ 13,783     $ 3,355   $ 1,072
Net income per diluted common share $ 0.46     $ 0.36     $ 0.46     $ 0.45     $ 0.43     $ 0.10   $ 0.03
                           
Assets $ 5,305,641     $ 5,210,485     $ 5,111,396     $ 4,973,346     $ 4,811,821     $ 95,156   $ 493,820
Loans receivable $ 4,413,557     $ 4,304,458     $ 4,195,355     $ 4,073,062     $ 3,943,951     $ 109,099   $ 469,606
Deposits $ 4,378,101     $ 4,348,654     $ 4,299,010     $ 4,259,173     $ 4,083,165     $ 29,447   $ 294,936
                           
Return on average assets   1.16 %     0.88 %     1.18 %     1.19 %     1.18 %     0.28     -0.02
Return on average stockholders' equity   10.65 %     8.12 %     10.73 %     10.65 %     10.46 %     2.53     0.19
                           
Net interest margin (1)   3.70 %     3.79 %     3.79 %     3.81 %     3.89 %     -0.09     -0.19
Efficiency ratio (3)   58.36 %     54.16 %     53.33 %     54.74 %     54.95 %     4.20     3.41
                           
Tangible common equity to tangible assets (2)   10.43 %     10.58 %     10.72 %     10.83 %     10.98 %     -0.15     -0.55
Tangible common equity per common share (2) $ 16.98     $ 16.96     $ 16.86     $ 16.59     $ 16.26     $ 0.02   $ 0.72
                           
                           
(1)  Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.                
(2)  Refer to "Non-GAAP Financial Measures" for further details.                        
(3)  Noninterest expense divided by net interest income plus noninterest income.                        

Results of Operations 
First quarter 2018 net interest income decreased 3.1% to $44.9 million from $46.3 million in the 2017 fourth quarter as the expansion of loans and leases receivable were more than offset by a five basis point decrease in overall loan and lease yields along with a five basis point increase in cost of deposits.  Interest and fees on loans and leases for the first quarter decreased 1.2%, or $0.6 million, from the preceding quarter while interest expense on deposits increased 5.2%, or $0.4 million.  Loan prepayment fees were $0.1 million for the first quarter compared with $1.0 million for the fourth quarter.

                           
   As of or For the Three Months Ended (in thousands)    Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-18   Q1-18
Net Interest Income 2018   2017   2017   2017   2017   vs. Q4-17   vs. Q1-17
                           
Interest and fees on loans and leases(1) $   51,574   $   52,176   $   50,265   $   47,971   $   45,378   -1.2 %   13.7 %
Interest on securities     3,105       3,194       3,188       2,949       2,520   -2.8 %   23.2 %
Dividends on FHLB stock     289       289       286       283       374   0.0 %   -22.7 %
Interest on deposits in other banks     114       125       123       123       77   -8.8 %   48.1 %
Total interest and dividend income $   55,082   $   55,784   $   53,862   $   51,326   $   48,349   -1.3 %   13.9 %
                           
Interest on deposits     7,785       7,402       7,071       6,463       5,154   5.2 %   51.0 %
Interest on borrowings     679       363       198       49       468   87.1 %   45.1 %
Interest on subordinated debentures     1,694       1,676       1,667       1,636       373   1.1 %   354.2 %
Total interest expense     10,158       9,441       8,936       8,148       5,995   7.6 %   69.4 %
Net interest income $   44,924   $   46,343   $   44,926   $   43,178   $   42,354   -3.1 %   6.1 %
                           
(1)  Includes loans held for sale.                          
                           

Net interest margin for the first quarter of 2018 was 3.70%, down 9 basis points from 3.79% for the fourth quarter of 2017, mainly due to higher interest income in the fourth quarter from end of year prepayment fees. Adjusting for this, net interest margin for the first quarter was relatively flat on a sequential quarter basis.

                           
   For the Three Months Ended (in thousands)    Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-18   Q1-18
Average Earning Assets and Interest-bearing Liabilities   2018       2017       2017       2017       2017     vs. Q4-17   vs. Q1-17
Loans and lease receivables (1) $ 4,310,964     $ 4,227,259     $ 4,092,131     $ 3,951,934     $ 3,881,686     2.0 %   11.1 %
Securities   588,738       611,181       611,538       585,384       526,549     -3.7 %   11.8 %
FHLB stock   16,385       16,385       16,385       16,385       16,385     0.0 %   0.0 %
Interest-bearing deposits in other banks   32,401       36,386       38,981       47,402       38,600     -11.0 %   -16.1 %
Average interest-earning assets $ 4,948,488     $ 4,891,211     $ 4,759,035     $ 4,601,105     $ 4,463,220     1.2 %   10.9 %
                           
Demand: interest-bearing $ 91,378     $ 90,646     $ 90,720     $ 93,873     $ 97,602     0.8 %   -6.4 %
Money market and savings   1,478,795       1,513,408       1,526,951       1,532,733       1,406,903     -2.3 %   5.1 %
Time deposits   1,440,382       1,408,227       1,384,724       1,320,005       1,173,184     2.3 %   22.8 %
Average interest-bearing deposits   3,010,555       3,012,281       3,002,395       2,946,611       2,677,689     -0.1 %   12.4 %
Borrowings   179,000       119,946       67,935       20,000       270,500     49.2 %   -33.8 %
Subordinated debentures   117,323       117,198       117,065       116,850       30,950     0.1 %   279.1 %
Average interest-bearing liabilities $ 3,306,878     $ 3,249,425     $ 3,187,395     $ 3,083,461     $ 2,979,139     1.8 %   11.0 %
                           
(1)  Includes loans held for sale.                          
                           
   For the Three Months Ended    Amount Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-18   Q1-18
Average Yields and Rates   2018       2017       2017       2017       2017     vs. Q4-17   vs. Q1-17
Loans and lease receivables (1)   4.85 %     4.90 %     4.87 %     4.87 %     4.74 %   -0.05     0.11  
Securities (2)   2.24 %     2.37 %     2.41 %     2.35 %     2.30 %   -0.13     -0.06  
FHLB stock   7.15 %     7.00 %     6.93 %     6.93 %     9.26 %   0.15     -2.11  
Interest-bearing deposits in other banks   1.43 %     1.36 %     1.25 %     1.04 %     0.81 %   0.07     0.62  
Interest-earning assets   4.53 %     4.56 %     4.53 %     4.52 %     4.44 %   -0.03     0.09  
                           
Interest-bearing deposits   1.05 %     0.97 %     0.93 %     0.88 %     0.78 %   0.08     0.27  
Borrowings   1.54 %     1.20 %     1.16 %     0.98 %     0.70 %   0.34     0.84  
Subordinated debentures   5.77 %     5.70 %     5.68 %     5.59 %     4.82 %   0.07     0.95  
Interest-bearing liabilities   1.25 %     1.15 %     1.11 %     1.06 %     0.82 %   0.10     0.43  
                           
Net interest margin (taxable equivalent basis)   3.70 %     3.79 %     3.79 %     3.81 %     3.89 %   -0.09     -0.19  
                           
Cost of deposits   0.73 %     0.68 %     0.66 %     0.62 %     0.54 %   0.05     0.19  
                           
(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 first quarter of 2018, the loan and lease loss provision expense was $0.6 million compared with $0.2 million for the preceding quarter.

First quarter noninterest income decreased 21.1% to $6.1 million from $7.7 million for the fourth quarter of 2017 primarily due to the $0.4 million loss on the sales of securities related to the sale of $22.0 million of CRA mutual funds and a $0.6 million decrease in gains on sales of SBA loans. Gains on sales of SBA loans were $1.4 million for the first quarter 2018, down from $2.1 million from the fourth quarter of 2017 as the volume of SBA loans sold decreased to $19.2 million from $27.5 million for the preceding quarter.

   For the Three Months Ended (in thousands)    Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-18   Q1-18
Noninterest Income   2018       2017     2017     2017     2017   vs. Q4-17   vs. Q1-17
Service charges on deposit accounts $ 2,511     $ 2,729   $ 2,678   $ 2,461   $ 2,528   -8.0 %   -0.7 %
Trade finance and other service charges and fees   1,173       1,047     1,133     1,269     1,047   12.0 %   12.0 %
Servicing income   662       799     625     644     564   -17.1 %   17.5 %
Bank-owned life insurance income   277       282     260     286     285   -1.7 %   -2.8 %
Other operating income   285       404     328     896     877   -29.5 %   -67.5 %
Service charges, fees & other   4,908       5,261     5,024     5,556     5,301   -6.7 %   -7.4 %
                           
Gain on sale of SBA loans   1,448       2,056     2,546     2,668     1,464   -29.6 %   -1.1 %
Disposition gain on PCI loans   133       91     979     540     183   46.2 %   -27.3 %
Net gain (loss) on sales of securities   (428 )     275     267     938     269   -255.6 %   -259.1 %
Total noninterest income $ 6,061     $ 7,683   $ 8,816   $ 9,702   $ 7,217   -21.1 %   -16.0 %
                           

Noninterest expense for the first quarter increased 1.7% to $29.8 million from $29.3 million for the prior quarter primarily due to a $1.4 million increase in salaries and employee benefits expenses, partially offset by a $0.7 million decrease in other operating expense. Salaries and employee benefits expenses are typically higher in the first quarter due to the seasonal impact of elevated payroll taxes and employee benefits. As a result of the increase in noninterest expense, as well as lower noninterest income due to losses on CRA mutual fund sales and lower SBA gain on sale income, the efficiency ratio increased to 58.4% in the first quarter from 54.2% in the prior quarter.

                           
   For the Three Months Ended (in thousands)    Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-18   Q1-18
  2018     2017       2017       2017     2017     vs. Q4-17   vs. Q1-17
Noninterest Expense                          
Salaries and employee benefits $ 18,702   $ 17,270     $ 16,947     $ 16,623   $ 17,104     8.3 %   9.3 %
Occupancy and equipment   4,072     3,997       3,883       3,878     3,982     1.9 %   2.3 %
Data processing   1,678     1,812       1,779       1,738     1,631     -7.4 %   2.9 %
Professional fees   1,369     1,552       1,210       1,554     1,148     -11.8 %   19.3 %
Supplies and communication   708     778       755       745     635     -9.0 %   11.5 %
Advertising and promotion   876     988       1,147       1,015     802     -11.3 %   9.2 %
Other operating expenses   2,273     2,961       2,955       2,881     2,070     -23.2 %   9.8 %
subtotal   29,678     29,358       28,676       28,434     27,372     1.1 %   8.4 %
                           
Other real estate owned expense (income)   79     (100 )     (16 )     510     (132 )   -179.0 %   -159.8 %
Total noninterest expense $ 29,757   $ 29,258     $ 28,660     $ 28,944   $ 27,240     1.7 %   9.2 %
                           

Hanmi recorded a provision for income taxes of $5.7 million for the first quarter of 2018, representing an effective tax rate of 27.8%, compared with $13.0 million, representing an effective tax rate of 53.2%, for the fourth quarter of 2017. As a result of the lower Federal corporate tax rate beginning in 2018, the provision for income taxes for the prior quarter included additional income tax expense of $3.9 million resulting from a one-time revaluation adjustment to reduce Hanmi’s deferred tax assets. The effective tax rate, before the additional income tax expense, was 37.5% for the 2017 fourth quarter.

Financial Position
Total assets were $5.31 billion at March 31, 2018, a 1.8% increase from $5.21 billion at December 31, 2017. The increase in total assets was primarily due to an increase in loans and leases receivable.

Loans and leases receivable, before the allowance for loan and lease losses, were $4.41 billion at March 31, 2018, up 2.5% from $4.30 billion at December 31, 2017. The increase in loans and leases from the prior quarter reflects Hanmi’s continued strong loan and lease production. Loans held for sale, representing the guaranteed portion of SBA loans, were $6.0 million at March 31, 2018 compared with $6.4 million at the end of 2017.

Loans and leases receivable, before the allowance for loan and lease losses, increased 11.9% from $3.94 billion for the first quarter last year, primarily due to strong loan and lease production over the last twelve months.

                           
   As of (in thousands)    Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-18   Q1-18
  2018   2017   2017   2017   2017   vs. Q4-17   vs. Q1-17
Loan and Lease Portfolio                          
Commercial real estate loans $ 3,122,745   $ 3,069,063   $ 3,108,931   $ 3,068,069   $ 2,991,123   1.7 %   4.4 %
Residential real estate loans   545,053     521,852     430,627     384,044     359,152   4.4 %   51.8 %
Commercial and industrial loans   409,380     399,197     364,456     346,150     316,284   2.6 %   29.4 %
Lease receivable   321,480     297,286     272,271     257,525     259,591   8.1 %   23.8 %
Consumer loans   14,899     17,060     19,070     17,274     17,801   -12.7 %   -16.3 %
Loans and leases receivable   4,413,557     4,304,458     4,195,355     4,073,062     3,943,951   2.5 %   11.9 %
Loans held for sale   6,008     6,394     6,469     10,949     8,849   -6.0 %   -32.1 %
Total loans $ 4,419,565   $ 4,310,852   $ 4,201,824   $ 4,084,011   $ 3,952,800   2.5 %   11.8 %
                           

New loan and lease production for the 2018 first quarter was $245.3 million while payoffs, amortization and net line utilization was $154.3 million compared with $262.4 million and $228.3 million, respectively, for the fourth quarter of 2017.  First quarter 2018 new loan and lease production was comprised of $136.6 million of commercial real estate loans, $27.4 million of commercial and industrial loans, $25.1 million of SBA loans, $55.0 million of commercial leases and $1.2 million of consumer loans. Loan purchases for the 2018 first quarter were $38.9 million, compared with $105.0 million in the fourth quarter of 2017. For the first quarter of 2018, commercial real estate loans as a percentage of loans and leases receivable decreased to 70.8% compared with 75.8% for the same period last year.

Deposits increased to $4.38 billion at the end of the 2018 first quarter from $4.35 billion at the end of the preceding quarter. Time deposits and non-interest bearing demand deposits led this growth with increases of 3.3% and 3.0%, respectively. The loans to deposits ratio at March 31, 2018 increased to 100.8% from 99.0% in the fourth quarter.

Deposits increased 7.2% from $4.08 billion in the first quarter last year, as time deposits and non-interest bearing demand deposits increased 21.1% and 8.9%, respectively, from a year ago.

   As of (in thousands)    Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-18   Q1-18
  2018   2017   2017   2017   2017   vs. Q4-17   vs. Q1-17
Deposit Portfolio                          
Demand: noninterest-bearing $ 1,352,162   $ 1,312,274   $ 1,293,538   $ 1,260,929   $ 1,241,272   3.0 %   8.9 %
Demand: interest-bearing   93,591     92,948     90,734     93,390     99,433   0.7 %   -5.9 %
Money market and savings   1,469,010     1,527,100     1,534,457     1,528,127     1,534,578   -3.8 %   -4.3 %
Time deposits of $100,000 or more   1,197,026     954,104     949,826     916,197     731,445   25.5 %   63.7 %
Other time deposits   266,312     462,228     430,455     460,530     476,437   -42.4 %   -44.1 %
Total deposits $ 4,378,101   $ 4,348,654   $ 4,299,010   $ 4,259,173   $ 4,083,165   0.7 %   7.2 %
                           

At March 31, 2018, stockholders’ equity was $564.3 million, compared with $562.5 million at December 31, 2017. Tangible common stockholders’ equity was $551.8 million, or 10.43% of tangible assets, compared with $549.9 million, or 10.58% of tangible assets at December 31, 2017. Tangible book value per share was $16.98, compared to $16.96 in the fourth quarter.

Hanmi continues to be well capitalized, with a preliminary Tier 1 risk-based capital ratio of 12.55% and a Total risk-based capital ratio of 15.47% at March 31, 2018, versus 12.55% and 15.50%, respectively, at year end 2017.

   As of    Amount Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-18   Q1-18
  2018   2017   2017   2017   2017   vs. Q4-17   vs. Q1-17
Regulatory Capital ratios (1)                          
Hanmi Financial                          
Total risk-based capital 15.47 %   15.50 %   15.58 %   15.69 %   16.16 %   -0.03   -0.69
Tier 1 risk-based capital 12.55 %   12.55 %   12.56 %   12.58 %   12.93 %   0.00   -0.38
Common equity tier 1 capital 12.12 %   12.19 %   12.20 %   12.22 %   12.56 %   -0.07   -0.44
Tier 1 leverage capital ratio 10.88 %   10.79 %   10.92 %   11.08 %   11.21 %   0.09   -0.33
Hanmi Bank                          
Total risk-based capital 15.16 %   15.20 %   15.32 %   15.44 %   15.91 %   -0.04   -0.75
Tier 1 risk-based capital 14.43 %   14.47 %   14.55 %   14.62 %   15.07 %   -0.04   -0.64
Common equity tier 1 capital 14.43 %   14.47 %   14.55 %   14.62 %   15.07 %   -0.04   -0.64
Tier 1 leverage capital ratio 12.50 %   12.44 %   12.66 %   12.89 %   13.08 %   0.06   -0.58
                           
(1)  Preliminary ratios for March 31, 2018                        
                           

Hanmi declared a cash dividend of $0.24 per common share on its common stock in the 2018 first quarter, up 14% from the prior quarter. The dividend was paid on February 23, 2018, to stockholders of record as of the close of business on February 5, 2018.

Asset Quality
Nonperforming loans were $15.4 million at the end of the first quarter of 2018, or 0.35% of loans, compared with $15.8 million at the end of 2017, or 0.37% of loans. Loans 30 to 89 days past due and still accruing were 0.16% of loans at the end of the first quarter of 2018, compared with 0.20% of loans at the end of the fourth quarter.

Nonperforming assets were $17.0 million at the end of the first quarter of 2018, or 0.32% of assets, compared with 0.34% of assets at the end of the prior quarter.

Gross charge-offs for the first quarter of 2018 were $1.6 million compared with $2.6 million for the preceding quarter. Recoveries of previously charged-off loans for the first quarter of 2018 were $1.7 million compared with $973,000 for the preceding quarter. As a result, there were net recoveries of $85,000 for the first quarter of 2018, compared to net charge-offs of $1.7 million, or 4 basis points, for the preceding quarter.  For the first quarter of 2018, net recoveries were 0.01% of average loans and leases compared with net charge-offs of 0.16% for the preceding quarter.   

The allowance for loan and lease losses (ALLL) was $31.8 million as of March 31, 2018, generating an allowance of loan and lease losses to gross loans and leases of 0.72%, unchanged from the prior quarter. ALLL to nonperforming loans for the first quarter of 2018 was 206.9%, up from 196.4% a quarter ago. 

   As of or for the Three Months Ended (in thousands)    Amount Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-18   Q1-18
    2018       2017       2017       2017       2017     vs. Q4-17   vs. Q1-17
Asset Quality                          
Non-performing assets (1):                          
Nonaccrual loans $ 15,345     $ 15,805     $ 14,558     $ 16,464     $ 12,774     $ (460 )   $ 2,571  
Loans 90 days or more past due and still accruing   17       -       -       -       -       17       17  
Non-performing loans and leases   15,362       15,805       14,558       16,464       12,774       (443 )     2,588  
Other real estate, net   1,660       1,946       1,946       4,321       4,636       (286 )     (2,976 )
Nonperforming assets $ 17,022     $ 17,751     $ 16,504     $ 20,785     $ 17,410     $ (729 )   $ (388 )
                           
Delinquent loans:                          
Loans, 30 to 89 days past due and still accruing $ 7,270     $ 8,666     $ 5,682     $ 9,602     $ 8,356     $ (1,396 )   $ (1,086 )
Delinquent loans to loans   0.16 %     0.20 %     0.14 %     0.24 %     0.21 %     (0.04 )     (0.05 )
                           
Allowance for loan and lease losses:                          
Balance at beginning of period $ 31,043     $ 32,492     $ 33,758     $ 33,152     $ 32,429          
Loan and lease loss provision (income)   649       220       269       422       (80 )        
Net loan charge-offs (recoveries)   (85 )     1,669       1,535       (184 )     (803 )        
Balance at end of period $ 31,777     $ 31,043     $ 32,492     $ 33,758     $ 33,152          
                           
Asset quality ratios:                          
Non-performing loans and leases to loans and leases   0.35 %     0.37 %     0.35 %     0.41 %     0.32 %        
Non-performing assets to assets   0.32 %     0.34 %     0.32 %     0.42 %     0.36 %        
Net loan and lease charge-offs (recoveries) to average loans and leases (1)   -0.01 %     0.16 %     0.15 %     -0.02 %     -0.08 %        
Allowance for loan and lease losses to loans and leases   0.72 %     0.72 %     0.77 %     0.83 %     0.84 %        
Allowance for loan and lease losses to non-performing loans and leases   206.85 %     196.41 %     223.19 %     205.04 %     259.53 %        
                           
Allowance for off-balance sheet items:                          
Balance at beginning of period $ 1,296     $ 915     $ 1,135     $ 1,184     $ 1,184          
Provision (income) for off-balance sheet items   27       381       (220 )     (49 )     -          
Balance at end of period $ 1,323     $ 1,296     $ 915     $ 1,135     $ 1,184          
                           
(1)  Annualized                          

Conference Call                             
Management will host a conference call today, April 24, 2018 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 40 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; 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 related to our real estate portfolio; risks associated with Small Business Administration loans; 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; and changes in securities markets. 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, 2017, 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

Richard Pimentel
Senior Vice President & Corporate Finance Officer
213-427-3191

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

Hanmi Financial Corporation and Subsidiaries                    
Consolidated Balance Sheets (Unaudited)                    
(In thousands)                    
                     
  March 31,   December 31,   Percentage   March 31,   Percentage  
    2018       2017     Change     2017     Change  
Assets                    
Cash and due from banks $ 151,611     $ 153,826     -1.4 %   $ 138,592     9.4 %  
Securities available for sale, at fair value   570,351       578,804     -1.5 %     548,010     4.1 %  
Loans held for sale, at the lower of cost or fair value   6,008       6,394     -6.0 %     8,849     -32.1 %  
Loans receivable, net of allowance for loan losses   4,381,780       4,273,415     2.5 %     3,910,799     12.0 %  
Accrued interest receivable   12,751       12,770     -0.1 %     10,774     18.3 %  
Premises and equipment, net   26,465       26,655     -0.7 %     28,350     -6.6 %  
Customers' liability on acceptances   870       803     8.3 %     932     -6.7 %  
Servicing assets   9,867       10,218     -3.4 %     10,609     -7.0 %  
Goodwill and other intangible assets, net   12,454       12,544     -0.7 %     12,797     -2.7 %  
Federal Home Loan Bank ("FHLB") stock, at cost   16,385       16,385     0.0 %     16,385     0.0 %  
Bank-owned life insurance   50,831       50,554     0.5 %     49,722     2.2 %  
Prepaid expenses and other assets   66,268       68,117     -2.7 %     76,002     -12.8 %  
Total assets $    5,305,641     $    5,210,485     1.8 %   $    4,811,821     10.3 %  
                     
Liabilities and Stockholders' Equity                    
Liabilities:                    
Deposits:                    
Noninterest-bearing $ 1,352,162     $ 1,312,274     3.0 %   $ 1,241,272     8.9 %  
Interest-bearing   3,025,939       3,036,380     -0.3 %     2,841,893     6.5 %  
Total deposits   4,378,101       4,348,654     0.7 %     4,083,165     7.2 %  
Accrued interest payable   5,931       5,309     11.7 %     2,619     126.5 %  
Bank's liability on acceptances   870       803     8.3 %     932     -6.7 %  
Borrowings   220,000       150,000     46.7 %     50,000     340.0 %  
Subordinated debentures   117,400       117,270     0.1 %     116,795     0.5 %  
Accrued expenses and other liabilities   19,061       25,972     -26.6 %     18,768     1.6 %  
Total liabilities     4,741,363         4,648,008     2.0 %       4,272,279     11.0 %  
                     
Stockholders' equity:                    
Common stock   33       33     0.0 %     33     0.0 %  
Additional paid-in capital   567,081       565,627     0.3 %     563,151     0.7 %  
Accumulated other comprehensive income   (8,207 )     (1,869 )   339.1 %     (1,603 )   412.0 %  
Retained earnings   77,691       70,575     10.1 %     49,395     57.3 %  
Less treasury stock   (72,320 )     (71,889 )   0.6 %     (71,434 )   1.2 %  
Total stockholders' equity     564,278         562,477     0.3 %       539,542     4.6 %  
Total liabilities and stockholders' equity $    5,305,641     $    5,210,485     1.8 %   $    4,811,821     10.3 %  
                     

Hanmi Financial Corporation and Subsidiaries                    
Consolidated Statements of Income (Unaudited)                    
(In thousands, except share and per share data)                    
                     
   Three Months Ended   
  March 31,   December 31,   Percentage   March 31,   Percentage  
    2018       2017     Change     2017     Change  
Interest and dividend income:                    
Interest and fees on loans and leases $ 51,574     $ 52,176     -1.2 %   $ 45,378     13.7 %  
Interest on securities   3,105       3,194     -2.8 %     2,520     23.2 %  
Dividends on FHLB stock   289       289     0.0 %     374     -22.7 %  
Interest on deposits in other banks   114       125     -8.8 %     77     48.1 %  
Total interest and dividend income   55,082       55,784     -1.3 %     48,349     13.9 %  
Interest expense:                    
Interest on deposits   7,785       7,402     5.2 %     5,154     51.0 %  
Interest on borrowings   679       363     87.1 %     468     45.1 %  
Interest on subordinated debentures   1,694       1,676     1.1 %     373     354.2 %  
Total interest expense   10,158       9,441     7.6 %     5,995     69.4 %  
Net interest income before provision for loan and lease losses   44,924       46,343     -3.1 %     42,354     6.1 %  
Loan and lease loan provision (income)   649       220     195.0 %     (80 )   -911.3 %  
Net interest income after provision for loan and lease losses   44,275       46,123     -4.0 %     42,434     4.3 %  
Noninterest income:                    
Service charges on deposit accounts   2,511       2,729     -8.0 %     2,528     -0.7 %  
Trade finance and other service charges and fees   1,173       1,047     12.0 %     1,047     12.0 %  
Gain on sale of Small Business Administration ("SBA") loans   1,448       2,056     -29.6 %     1,464     -1.1 %  
Servicing income   662       564     0.0 %     799     0.0 %  
Bank-owned life insurance income   277       285     0.0 %     282     0.0 %  
Disposition gains on Purchased Credit Impaired ("PCI") loans   133       91     46.2 %     183     -27.3 %  
Net gain (loss) on sales of securities   (428 )     275     -255.6 %     269     -259.1 %  
Other operating income   285       637     -55.2 %     646     -55.9 %  
Total noninterest income   6,061       7,683     -21.1 %     7,217     -16.0 %  
Noninterest expense:                    
Salaries and employee benefits   18,702       17,270     8.3 %     17,104     9.3 %  
Occupancy and equipment   4,072       3,997     1.9 %     3,982     2.3 %  
Data processing   1,678       1,812     -7.4 %     1,631     2.9 %  
Professional fees   1,369       1,552     -11.8 %     1,148     19.3 %  
Supplies and communications   708       778     -9.0 %     635     11.5 %  
Advertising and promotion   876       988     -11.3 %     802     9.2 %  
Other real estate owned expense (income)   79       (100 )   -179.0 %     (101 )   -178.2 %  
Other operating expenses   2,273       2,961     -23.2 %     2,039     11.5 %  
Total noninterest expense   29,757       29,258     1.7 %     27,240     9.2 %  
Income from continuing operations before provision for income taxes   20,579       24,548     -16.2 %     22,411     -8.2 %  
Provision for income taxes   5,724       13,048     -56.1 %     8,628     -33.7 %  
Net income $    14,855     $    11,500     29.2 %   $    13,783     7.8 %  
                       
Basic earnings per share: $ 0.46     $ 0.36         $ 0.43        
Diluted earnings per share: $ 0.46     $ 0.36         $ 0.43        
                     
Weighted-average shares outstanding:                    
Basic   32,145,214       32,109,792           32,001,766        
Diluted   32,301,095       32,299,838           32,191,458        
Common shares outstanding   32,502,658       32,431,630           32,392,580        
                     

Hanmi Financial Corporation and Subsidiaries                        
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)                        
 (In thousands, except ratios)                        
                         
  Three Months Ended  
  March 31, 2018   December 31, 2017   March 31, 2017  
    Interest Average     Interest Average     Interest Average  
  Average Income / Yield /   Average Income / Yield /   Average Income / Yield /  
  Balance Expense Rate   Balance Expense Rate   Balance Expense Rate  
Assets                        
Interest-earning assets:                        
Loans and leases (1) $ 4,310,964   $ 51,574 4.85 %   $ 4,227,259   $ 52,176 4.90 %   $ 3,881,686   $ 45,378 4.74 %  
Securities (2)   588,738     3,296 2.24 %     611,181     3,619 2.37 %     526,549     3,026 2.30 %  
FHLB stock   16,385     289 7.15 %     16,385     289 7.00 %     16,385     374 9.26 %  
Interest-bearing deposits in other banks   32,401     114 1.43 %     36,386     125 1.36 %     38,600     77 0.81 %  
Total interest-earning assets   4,948,488     55,273 4.53 %     4,891,211     56,209 4.56 %     4,463,220     48,855 4.44 %  
                         
Noninterest-earning assets:                        
Cash and due from banks   122,580           118,230           117,802        
Allowance for loan and lease losses   (32,487 )         (32,469 )         (32,842 )      
Other assets   175,209           185,994           190,041        
                         
Total assets $   5,213,790         $   5,162,966         $   4,738,221        
                         
Liabilities and Stockholders' Equity                        
Interest-bearing liabilities:                        
Deposits:                        
Demand: interest-bearing $ 91,378   $ 18 0.08 %   $ 90,646   $ 18 0.08 %   $ 97,602   $ 19 0.08 %  
Money market and savings   1,478,795     3,326 0.91 %     1,513,408     3,315 0.87 %     1,406,903     2,666 0.77 %  
Time deposits   1,440,382     4,441 1.25 %     1,408,227     4,069 1.15 %     1,173,184     2,469 0.85 %  
Total interest-bearing liabilities   3,010,555     7,785 1.05 %     3,012,281     7,402 0.97 %     2,677,689     5,154 0.78 %  
Borrowings   179,000     679 1.54 %     119,946     363 1.20 %     270,500     468 0.70 %  
Subordinated debentures   117,323     1,694 5.77 %     117,198     1,676 5.70 %     30,950     373 4.82 %  
Total interest-bearing liabilities   3,306,878     10,158 1.25 %     3,249,425     9,441 1.15 %     2,979,139     5,995 0.82 %  
                         
Noninterest-bearing liabilities and equity:                        
Demand deposits: noninterest-bearing   1,307,072           1,321,182           1,196,151        
Other liabilities   33,973           30,482           28,658        
Stockholders' equity   565,867           561,877           534,273        
                         
Total liabilities and stockholders' equity $   5,213,790         $   5,162,966         $   4,738,221        
                         
Net interest income (tax equivalent basis)   $    45,115       $    46,768       $   42,860    
                         
Cost of deposits     0.73 %       0.68 %       0.54 %  
Net interest spread (taxable equivalent basis)   3.28 %       3.41 %       3.62 %  
Net interest margin (taxable equivalent basis)   3.70 %       3.79 %       3.89 %  
                         
(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.          

Non-GAAP Financial Measures

Tangible Common Equity to Tangible Assets Ratio

Tangible common equity to tangible assets ratio is supplemental financial information determined by a method other than in accordance with U.S. generally accepted accounting principles (“GAAP”). This non-GAAP measure is used by management in the analysis of Hanmi’s capital strength. Tangible equity is calculated by subtracting goodwill and other intangible assets from stockholders’ equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from stockholders’ equity when assessing the capital adequacy of a financial institution. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the capital strength of Hanmi. This disclosure should not be viewed as a substitution for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following table reconciles this non-GAAP performance measure to the GAAP performance measure for the periods indicated:

 

Tangible Common Equity to Tangible Assets Ratio (Unaudited)
(In thousands, except share, per share data and ratios)
                     
  March 31,   December 31,   September 30,   June 30,   March 31,  
Hanmi Financial Corporation   2018       2017       2017       2017       2017    
Assets $ 5,305,641     $ 5,210,485     $ 5,111,396     $ 4,973,346     $ 4,811,821    
Less goodwill and other intangible assets   (12,454 )     (12,544 )     (12,628 )     (12,712 )     (12,797 )  
Tangible assets $ 5,293,187     $ 5,197,941     $ 5,098,768     $ 4,960,634     $ 4,799,024    
                     
Stockholders' equity $ 564,278     $ 562,477     $ 559,247     $ 550,140     $ 539,542    
Less goodwill and other intangible assets   (12,454 )     (12,544 )     (12,628 )     (12,712 )     (12,797 )  
Tangible stockholders' equity $ 551,824     $ 549,933     $ 546,619     $ 537,428     $ 526,745    
                     
Stockholders' equity to assets   10.64 %     10.80 %     10.94 %     11.06 %     11.21 %  
Tangible common equity to tangible assets   10.43 %     10.58 %     10.72 %     10.83 %     10.98 %  
                     
Common shares outstanding   32,502,658       32,431,630       32,413,082       32,393,856       32,392,580    
Tangible common equity per common share $ 16.98     $ 16.96     $ 16.86     $ 16.59     $ 16.26    

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Source: Hanmi Bank