Hanmi Financial Corporation Reports Third-Quarter 2009 Financial Results and Formalizes Agreement with Regulators
LOS ANGELES--(BUSINESS WIRE)-- Hanmi Financial Corporation (NASDAQ: HAFC) ("we," "our" or "Hanmi"), the holding company for Hanmi Bank (the "Bank"), reported a third-quarter net loss of $59.7 million, or ($1.26) per share, compared to net income of $4.3 million, or $0.09 per diluted share, in the third quarter of 2008. During the third quarter, we incurred tax charges of $38.2 million related to a valuation allowance of deferred tax assets. Excluding this charge, the net loss would have been $21.5 million for the third quarter of 2009, primarily driven by $49.5 million in credit loss provisions.
Hanmi also announced today that Hanmi and the Bank have entered into a Written Agreement (the "Written Agreement") with the Federal Reserve Bank of San Francisco (the "FRB"), effective as of November 2, 2009. In addition, the board of directors of the Bank has consented to the issuance of a Final Order (the "Final Order") by the California Department of Financial Institutions (the "DFI"), effective as of November 2, 2009. The Written Agreement and the Final Order provide for certain actions to be taken in cooperation with the regulatory authorities and are intended to address various matters including issues related to capital, liquidity and asset quality.
Jay S. Yoo, President and Chief Executive Officer, commented, "In the continuing weakness of the credit markets, the third-quarter provision for loan losses was again a record high, leading to disappointing operating results. However, we have continued our business strategies in the third quarter and achieved meaningful improvements in our core banking foundation. The balance sheet deleveraging strategy changed our liability profile to core-deposit based and substantially expanded our net interest margin. Various asset quality management programs, as well as higher loan charge-offs and transfers to other real estate owned, at last reduced delinquent loans and we also took a step forward in our capital raising efforts by receiving a $6.95 million capital infusion from Leading Investment & Securities Co. as previously announced. We are currently in active negotiations with certain Korean institutional investors relating to a larger capital infusion sufficient for Hanmi to weather this credit environment."
Regulatory Agreements
The Final Order and Written Agreement require the Bank to prepare and submit written plans to the DFI and the FRB that address the following items: (i) strengthening board oversight of the management and operation of the Bank; (ii) strengthening credit risk management practices; (iii) improving credit administration policies and procedures; (iv) improving the Bank's position with respect to problem assets; (v) improving the capital position of the Bank and, with respect to the Written Agreement, of Hanmi; (vi) maintaining adequate reserves for loan and lease losses; (vii) improving the Bank's earnings through a strategic plan and a budget for 2010; (viii) improving the Bank's liquidity position and funds management practices; and (ix) contingency funding. In addition, the Order and the Agreement place restrictions on the Bank's lending to borrowers who have adversely classified loans with the Bank and require the Bank to charge off or collect certain problem loans. The Final Order and Written Agreement also require the Bank to review and revise its allowance for loan and lease losses consistent with relevant supervisory guidance. The Bank is also prohibited from paying dividends, incurring, increasing or guaranteeing any debt, or making certain changes to its business without prior approval from the DFI, and the Bank and Hanmi must obtain prior approval from the FRB prior to declaring and paying dividends.
Under the Final Order, the Bank is also required to increase its capital and maintain certain regulatory capital ratios prior to certain dates specified therein. By July 31, 2010, the Bank will be required to increase its contributed equity capital by not less than an additional $100 million. The Bank will be required to maintain a ratio of tangible shareholders' equity to total tangible assets as follows:
Date Ratio of Tangible Shareholders'
Equity to Total Tangible Assets
By December 31, 2009 Not Less Than 7.0 Percent
By July 31, 2010 Not Less Than 9.0 Percent
From December 31, 2010 and Not Less Than 9.5 Percent
Until the Order is Terminated
If the Bank is not able to maintain the capital ratios identified in the Final Order, it must notify the DFI, and Hanmi and the Bank are required to notify the FRB if their respective capital ratios fall below those set forth in the capital plan to be submitted to the FRB.
Results of Operations
The net interest income before provision for credit losses increased by $3.4 million, or 14.6 percent, to $26.5 million in the third quarter of 2009 compared to $23.1 million in the prior quarter. Such increase in net interest income reflects the effects of our core deposit campaign that was launched in the prior quarter. Most of our high-cost six-month time deposits that were offered from December 2008 through March 2009 and matured in the third quarter of 2009 have been rolled over into lower-cost deposits and the average cost of interest-bearing deposits decreased by 67 basis points to 2.70 percent from 3.37 percent in the second quarter of 2009. On the other hand, our stringent lending policy allowed us to increase our loan pricing and to improve the average yield on the loan portfolio to 5.50 percent in the third quarter of 2009 compared to 5.46 percent in the prior quarter. The combined result was the increase of net interest margin by 52 basis points to 3.00 percent in the third quarter compared to 2.48 percent in the second quarter.
The provision for credit losses in the third quarter of 2009 increased by $25.6 million to $49.5 million compared to $23.9 million in the prior quarter, due mainly to the $16.4 million additional provision provided to the impaired loans that was part of our continuing efforts to address the further deteriorating commercial real estate market. For the first nine months of 2009, the provision for credit losses more than doubled to $119.4 million compared to $50.2 million for the prior year's same period, reflecting our effort to prepare for the uncertain credit risk in this weak credit market.
Total non-interest income in the third quarter of 2009 was $8.2 million compared to $6.7 million in the prior quarter and $5.3 million in the third quarter of 2008. The sequential increase in non-interest income reflects an $864,000 net gain on sales of SBA loans. The second quarter income was also reduced by an impairment loss of $909,000 on a low income housing investment
Total non-interest expense in the third quarter of 2009 was $23.7 million compared to $24.7 million in the second quarter, a decrease of $1.0 million, or 4.1 percent, and an increase of $1.5 million, or 6.5 percent, compared to $22.2 million in the third quarter of 2008. The decrease from the second quarter of 2009 was mainly caused by the reduction of deposit insurance premiums and regulatory assessments. Increased expenses in the second quarter reflect the one-time FDIC special assessment fees of $1.8 million. Reflecting a second-quarter out-of-court settlement fee of $850,000, third-quarter loan-related expenses declined by 84.2 percent to $192,000 from $1.2 million in the second quarter. Salaries and employee benefits, the biggest single contributor to total non-interest expense, was essentially unchanged at $8.6 million compared to $8.5 million in the prior quarter. We will continue to hold down all operating costs for the remainder of 2009; however, further cost control may be offset by regulatory-related expenses such as professional fees and potential FDIC assessments. We also expect that expenses to manage our asset quality in this stressed credit environment continue to be significant. In the third quarter, expenses in relation with other real estate owned ("OREO"), such as valuation expenses and maintenance costs, more than doubled to $3.4 million from the prior quarter's $1.5 million.
Due to increased net interest income before provision for credit losses and increased non-interest income, along with decreased non-interest expense, the efficiency ratio (non-interest expense divided by the sum of net interest income before provision for credit losses and non-interest income) sequentially improved to 68.2 percent compared to 82.9 percent in the second quarter of 2009.
Balance Sheet and Asset Quality
Total assets at September 30, 2009 decreased by $418.3 million, or 10.8 percent, to $3.46 billion from $3.88 billion at December 31, 2008, and decreased by $308.5 million, or 8.2 percent, from $3.77 billion at September 30, 2008, reflecting the Bank's ongoing strategy to deleverage the balance sheet.
With our ongoing stringent lending policy to carefully evaluate all maturing loans and selectively renew our loans based on quality, gross loans, net of deferred loan fees, decreased by $384.6 million, or 11.4 percent, to $2.98 billion as of September 30, 2009, compared to $3.36 billion at December 31, 2008, and decreased by $367.5 million, or 11.0 percent, compared to $3.35 billion at September 30, 2008.
The success of our core deposit campaign together with our deleveraging strategy substantially changed our liability profile in the third quarter by increasing our core deposits and decreasing the brokered deposits and borrowings.
Our total deposits decreased by $78.2 million, or 2.5 percent, to $2.99 billion at September 30, 2009, compared to $3.07 billion at December 31, 2008, and increased by $192.5 million, or 6.9 percent, compared to $2.80 billion at September 30, 2008. Such decrease was carefully designed under our deleveraging strategy which allows some run off of volatile and expensive time deposits. For the nine months ended September 30, 2009, time deposits decreased by $472.1 million and our non-time deposits increased by $393.9 million. For the same nine month period, FHLB advances also decreased by $261.4 million, or 61.9 percent, to $160.8 million at September 30, 2009, compared to $422.2 million at December 31, 2008, At September 30, 2009, brokered deposits, excluding CDARS, were $365.7 million, a decrease of $508.4 million, or 58.2 percent, compared to $874.1 million at December 31, 2008.
Third quarter charge-offs, net of recoveries, were $29.9 million compared to $23.6 million in the prior quarter and $11.8 million in the third quarter of 2008. Out of the third quarter charge-offs, $22.8 million was made from unsecured commercial and industrial ("C&I") loans, including one large loan in the amount of $7.0 million to an international trading company. Also included were some commercial real estate and business property loans due to decreases in hard collateral values, resulted in partial charge-offs of $4.0 million, with the remaining balance of $3.5 million consisting of consumer and SBA loans.
Delinquent loans were $151.0 million (5.07 percent of total gross loans) at September 30, 2009, compared to $178.7 million (5.66 percent of total gross loans) at June 30, 2009, $164.4 million (4.95 percent of total gross loans) at March 31, 2009, $128.5 million (3.82 percent of total gross loans) at December 31, 2008, and $102.9 million (3.08 percent of total gross loans) at September 30, 2008. The decrease in delinquencies from the prior quarter is attributable to diligent collection efforts, which involve proactive negotiations with borrowers in financial difficulty, often leading to loan modifications or charge-offs.
Non-performing loans ("NPL") at September 30, 2009 were $174.4 million (5.85 percent of total gross loans), compared to $167.3 million (5.3 percent of total gross loans) at June 30, 2009, $156.3 million (4.71 percent of total gross loans) at March 31, 2009, $121.9 million (3.62 percent of total gross loans) at December 31, 2008, and $111.9 million (3.34 percent of total gross loans) at September 30, 2008. The breakdown in third quarter 2009 NPLs was as follows: 10.4 percent were construction loans, 47.6 percent were C&I loans including owner/user business property loans, 30.3 percent were commercial real estate ("CRE") loans, 9.5 percent were SBA loans, and 2.2 percent were consumer loans.
As of September 30, 2009, total non-performing assets of $201.6 million included OREO of $27.1 million compared to total non-performing assets of $201.3 million with OREO of $34.0 million at June 30, 2009, $157.5 million with OREO of $1.2 million at March 31, 2009, and $122.7 million with OREO of $823,000 at December 31, 2008. At September 30, 2008, total non-performing assets were $114.9 million, which included OREO of $3.0 million. At September 30, 2009, OREO was $6.9 million lower, when compared to the prior quarter, mainly due to the sale of a golf course north of San Diego.
At September 30, 2009, the allowance for loan losses was $124.8 million, or 4.19 percent of total gross loans (71.53 percent of total non-performing loans), compared to $71.0 million, or 2.11 percent of total gross loans (58.23 percent of total non-performing loans), at December 31, 2008, and $63.9 million, or 1.91 percent of total gross loans (57.16 percent of total non-performing loans), at September 30, 2008.
Capital Adequacy
On September 4, 2009, Hanmi received an investment of $6.95 million from Leading Investment & Securities Co. Ltd. IWL Partners LLC, an affiliate of Leading, is additionally preparing a separate definitive agreement that would result in a larger equity capital infusion. If completed as expected, the Korean investment will augment Hanmi's capital reserves and, in conjunction with our program to deleverage the balance sheet, will enhance our ability to weather the current recession and emerge well-positioned to take advantage of opportunities as the economy recovers.
At September 30, 2009, the Bank's Tier 1 Leverage, Tier 1 Risk-Based Capital, and Total Risk-Based Capital ratios were 7.05 percent, 8.40 percent and 9.69 percent, respectively, compared to 8.85 percent, 9.44 percent, and 10.71 percent, respectively, at December 31, 2008. The Bank's ratio of tangible shareholders' equity to total tangible assets was 7.57 percent at September 30, 2009.
Deferred Tax Assets
During the third quarter of 2009, Hanmi established a valuation allowance of $44.9 million against its existing net deferred tax assets. The Company's primary deferred tax assets relate to its allowance for loan losses and impairment charges. Under generally accepted accounting principles, a valuation allowance must be recognized if it is "more likely than not" that such deferred tax assets will not be realized. Appropriate consideration is given to all available evidence (both positive and negative) related to the realization of the deferred tax assets on a quarterly basis.
In conducting its regular quarterly evaluation, Hanmi made a determination to establish a valuation allowance at September 30, 2009 based primarily upon the existence of a three-year cumulative loss derived by combining the pre-tax income (loss) reported during the two most recent annual periods with management's current projected results for the year ending 2009. This three-year cumulative loss position is primarily attributable to significant provisions for credit losses incurred during 2009. Although the Company's current financial forecasts indicate that sufficient taxable income will be generated in the future to ultimately realize the existing deferred tax benefits, those forecasts were not considered to constitute sufficient positive evidence to overcome the observable negative evidence associated with the three-year cumulative loss position determined at September 30, 2009. Although the creation of the valuation allowance will increase tax expense for the quarter ended September 30, 2009 and similarly reduce tangible book value, it will not have an effect on Hanmi's cash flows. The remaining net deferred tax assets of $2.5 million will be reversed by NOL carryover during the 4th quarter of 2009.
Forward-Looking Statements
This 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. 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 statements. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of regulatory orders we have entered into and 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; the ability of Leading to complete the transactions contemplated by the Securities Purchase Agreement; 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 ("SBA") loans; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability to receive regulatory approval for Hanmi Bank to declare dividends to Hanmi Financial; adequacy of our allowance for loan losses, credit quality and the effect of credit quality on our provision for credit losses and allowance for loan 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 successfully integrate acquisitions we may make; our ability to control expenses; and changes in securities markets. In addition, we set forth certain risks in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and current and periodic reports filed with the Securities and Exchange Commission thereafter, which could cause actual results to differ from those projected. You should understand that it is not possible to predict or identify all such risks. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties. We undertake no obligation to update such forward-looking statements except as required by law.
About Hanmi Financial Corporation
Headquartered in Los Angeles, Hanmi Bank, a wholly owned subsidiary of Hanmi Financial Corporation, provides services to the multi-ethnic communities of California, with 27 full-service offices in Los Angeles, Orange, San Bernardino, San Francisco, Santa Clara and San Diego counties, and two loan production offices in Virginia and Washington State. Hanmi Bank specializes in commercial, SBA and trade finance lending, and is a recognized community leader. Hanmi Bank's mission is to provide a full range of quality products and premier services to its customers and to maximize shareholder value. Additional information is available at www.hanmi.com.
HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)
(Dollars in Thousands)
September 30, December 31, % September 30, %
2009 2008 Change 2008 Change
ASSETS
Cash and Due from $ 57,727 $ 83,933 (31.2 )% $ 81,640 (29.3 )%
Banks
Interest-Bearing
Deposits in Other 155,607 2,014 7,626.3 % 755 20,510.2 %
Banks
Federal Funds Sold
and Securities -- 130,000 (100.0 )% 5,000 (100.0 )%
Purchased Under
Resale Agreements
Cash and Cash 213,334 215,947 (1.2 )% 87,395 144.1 %
Equivalents
Investment 205,901 197,117 4.5 % 221,714 (7.1 )%
Securities
Loans:
Gross Loans, Net of 2,977,504 3,362,111 (11.4 )% 3,345,049 (11.0 )%
Deferred Loan Fees
Allowance for Loan (124,768 ) (70,986 ) 75.8 % (63,948 ) 95.1 %
Losses
Loans Receivable, 2,852,736 3,291,125 (13.3 )% 3,281,101 (13.1 )%
Net
Due from Customers 1,859 4,295 (56.7 )% 7,382 (74.8 )%
on Acceptances
Premises and 19,302 20,279 (4.8 )% 20,703 (6.8 )%
Equipment, Net
Accrued Interest 11,389 12,347 (7.8 )% 13,801 (17.5 )%
Receivable
Other Real Estate 27,140 823 3,197.7 % 2,988 808.3 %
Owned, Net
Deferred Income 2,464 29,456 (91.6 )% 18,682 (86.8 )%
Taxes, Net
Servicing Assets 3,957 3,791 4.4 % 4,018 (1.5 )%
Other Intangible 3,736 4,950 (24.5 )% 5,404 (30.9 )%
Assets, Net
Investment in
Federal Home Loan 30,697 30,697 -- 30,424 0.9 %
Bank Stock, at Cost
Investment in
Federal Reserve 10,053 10,228 (1.7 )% 11,733 (14.3 )%
Bank Stock, at Cost
Bank-Owned Life 26,171 25,476 2.7 % 25,239 3.7 %
Insurance
Income Taxes 34,908 11,712 198.1 % 17,785 96.3 %
Receivable
Other Assets 13,843 17,573 (21.2 )% 17,622 (21.4 )%
TOTAL ASSETS $ 3,457,490 $ 3,875,816 (10.8 )% $ 3,765,991 (8.2 )%
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Liabilities:
Deposits:
Noninterest-Bearing $ 561,548 $ 536,944 4.6 % $ 634,593 (11.5 )%
Interest-Bearing 2,430,312 2,533,136 (4.1 )% 2,164,784 12.3 %
Total Deposits 2,991,860 3,070,080 (2.5 )% 2,799,377 6.9 %
Accrued Interest 19,730 18,539 6.4 % 11,344 73.9 %
Payable
Bank Acceptances 1,859 4,295 (56.7 )% 7,382 (74.8 )%
Outstanding
Federal Home Loan 160,828 422,196 (61.9 )% 583,315 (72.4 )%
Bank Advances
Other Borrowings 1,496 787 90.1 % 1,657 (9.7 )%
Junior Subordinated 82,406 82,406 -- 82,406 --
Debentures
Accrued Expenses
and Other 12,191 13,598 (10.3 )% 13,314 (8.4 )%
Liabilities
Total Liabilities 3,270,370 3,611,901 (9.5 )% 3,498,795 (6.5 )%
Stockholders' 187,120 263,915 (29.1 )% 267,196 (30.0 )%
Equity
TOTAL LIABILITIES
AND STOCKHOLDERS' $ 3,457,490 $ 3,875,816 (10.8 )% $ 3,765,991 (8.2 )%
EQUITY
HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
Sept. 30, June 30, % Sept. 30, % Sept. 30, Sept. 30, %
2009 2009 Change 2008 Change 2009 2008 Change
INTEREST AND
DIVIDEND INCOME:
Interest and Fees on $ 42,705 $ 44,718 (4.5 )% $ 56,134 (23.9 )% $ 132,508 $ 172,637 (23.2 )%
Loans
Taxable Interest on
Investment 1,541 1,370 12.5 % 2,049 (24.8 )% 4,261 7,743 (45.0 )%
Securities
Tax-Exempt Interest
on Investment 607 621 (2.3 )% 650 (6.6 )% 1,871 2,071 (9.7 )%
Securities
Interest on Term 293 695 (57.8 )% -- -- 1,688 -- --
Federal Funds Sold
Dividends on Federal 150 153 (2.0 )% 176 (14.8 )% 456 528 (13.6 )%
Reserve Bank Stock
Interest on Federal
Funds Sold and
Securities Purchased 67 112 (40.2 )% 23 191.3 % 261 137 90.5 %
Under Resale
Agreements
Interest on
Interest-Bearing 68 11 518.2 % 4 1,600.0 % 81 5 1,520.0 %
Deposits in Other
Banks
Dividends on Federal 64 -- -- 405 (84.2 )% 64 953 (93.3 )%
Home Loan Bank Stock
Total Interest and 45,495 47,680 (4.6 )% 59,441 (23.5 )% 141,190 184,074 (23.3 )%
Dividend Income
INTEREST EXPENSE:
Interest on Deposits 17,365 22,686 (23.5 )% 19,365 (10.3 )% 62,836 64,699 (2.9 )%
Interest on Federal
Home Loan Bank 865 1,010 (14.4 )% 3,324 (74.0 )% 2,987 11,406 (73.8 )%
Advances
Interest on Junior
Subordinated 747 846 (11.7 )% 1,150 (35.0 )% 2,581 3,763 (31.4 )%
Debentures
Interest on Other -- 2 (100.0 )% 5 (100.0 )% 2 344 (99.4 )%
Borrowings
Total Interest 18,977 24,544 (22.7 )% 23,844 (20.4 )% 68,406 80,212 (14.7 )%
Expense
NET INTEREST INCOME
BEFORE PROVISION FOR 26,518 23,136 14.6 % 35,597 (25.5 )% 72,784 103,862 (29.9 )%
CREDIT LOSSES
-- -- --
Provision for Credit 49,500 23,934 106.8 % 13,176 275.7 % 119,387 50,226 137.7 %
Losses
NET INTEREST INCOME
(LOSS) AFTER (22,982 ) (798 ) 2,779.9 % 22,421 (202.5 )% (46,603 ) 53,636 (186.9 )%
PROVISION FOR CREDIT
LOSSES
NON-INTEREST INCOME:
Service Charges on 4,275 4,442 (3.8 )% 4,648 (8.0 )% 13,032 13,904 (6.3 )%
Deposit Accounts
Insurance 1,063 1,185 (10.3 )% 1,194 (11.0 )% 3,430 3,893 (11.9 )%
Commissions
Remittance Fees 511 545 (6.2 )% 499 2.4 % 1,579 1,543 2.3 %
Trade Finance Fees 512 499 2.6 % 784 (34.7 )% 1,517 2,474 (38.7 )%
Other Service 489 467 4.7 % 433 12.9 % 1,439 1,852 (22.3 )%
Charges and Fees
Net Gain on Sales of 864 -- -- -- -- 866 765 13.2 %
Loans
Bank-Owned Life 234 227 3.1 % 241 (2.9 )% 695 715 (2.8 )%
Insurance Income
Gain on Sales of
Investment -- 1 (100.0 )% -- -- 1,277 618 106.6 %
Securities
Loss on Sales of
Investment -- -- -- (483 ) (100.0 )% (109 ) (483 ) (77.4 )%
Securities
Other-Than-Temporary
Impairment Loss on -- -- -- (2,410 ) (100.0 )% -- (2,410 ) (100.0 )%
Investment
Securities
Other Operating 265 (695 ) (138.1 )% 422 (37.2 )% (462 ) 1,874 (124.7 )%
Income (Loss)
Total Non-Interest 8,213 6,671 23.1 % 5,328 54.1 % 23,264 24,745 (6.0 )%
Income
NON-INTEREST
EXPENSE:
Salaries and 8,648 8,508 1.6 % 10,782 (19.8 )% 24,659 33,363 (26.1 )%
Employee Benefits
Occupancy and 2,834 2,788 1.6 % 2,786 1.7 % 8,506 8,360 1.7 %
Equipment
Deposit Insurance
Premiums and 2,001 3,929 (49.1 )% 780 156.5 % 7,420 2,098 253.7 %
Regulatory
Assessments
Other Real Estate 3,372 1,502 124.5 % 2 N/M 5,017 141 3,458.2 %
Owned Expense
Data Processing 1,608 1,547 3.9 % 1,498 7.3 % 4,691 4,730 (0.8 )%
Professional Fees 1,239 890 39.2 % 647 91.5 % 2,745 2,627 4.5 %
Supplies and 603 599 0.7 % 681 (11.5 )% 1,772 2,008 (11.8 )%
Communications
Advertising and 447 624 (28.4 )% 914 (51.1 )% 1,640 2,614 (37.3 )%
Promotion
Loan-Related Expense 192 1,217 (84.2 )% 170 12.9 % 1,590 569 179.4 %
Amortization of
Other Intangible 379 406 (6.7 )% 478 (20.7 )% 1,214 1,504 (19.3 )%
Assets
Other Operating 2,366 2,686 (11.9 )% 3,497 (32.3 )% 7,383 7,859 (6.1 )%
Expenses
Impairment Loss on -- -- -- -- -- -- 107,393 (100.0 )%
Goodwill
Total Non-Interest 23,689 24,696 (4.1 )% 22,235 6.5 % 66,637 173,266 (61.5 )%
Expense
INCOME (LOSS) BEFORE
PROVISION (BENEFIT) (38,458 ) (18,823 ) 104.3 % 5,514 (797.5 )% (89,976 ) (94,885 ) (5.2 )%
FOR INCOME TAXES
Provision (Benefit) 21,207 (9,288 ) (328.3 )% 1,166 1,718.8 % (3,580 ) 3,393 (205.5 )%
for Income Taxes
NET INCOME (LOSS) $ (59,665 ) $ (9,535 ) 525.7 % $ 4,348 (1,472.2 )% $ (86,396 ) $ (98,278 ) (12.1 )%
EARNINGS (LOSS) PER
SHARE:
Basic $ (1.26 ) $ (0.21 ) 500.0 % $ 0.09 (1,500.0 )% $ (1.86 ) $ (2.14 ) (13.1 )%
Diluted $ (1.26 ) $ (0.21 ) 500.0 % $ 0.09 (1,500.0 )% $ (1.86 ) $ (2.14 ) (13.1 )%
WEIGHTED-AVERAGE
SHARES OUTSTANDING:
Basic 47,413,141 45,924,767 45,881,549 46,415,225 45,869,069
Diluted 47,413,141 45,924,767 45,933,043 46,415,225 45,869,069
SHARES OUTSTANDING 51,201,390 46,130,967 45,905,549 51,201,390 45,905,549
AT PERIOD-END
HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(Dollars in Thousands)
Three Months Ended Nine Months Ended
Sept. 30, June 30, % Sept. 30, % Sept. 30, Sept. 30, %
2009 2009 Change 2008 Change 2009 2008 Change
AVERAGE
BALANCES:
Average Gross
Loans, Net of $ 3,078,104 $ 3,282,152 (6.2 )% $ 3,341,250 (7.9 )% $ 3,235,455 $ 3,320,559 (2.6 )%
Deferred Loan
Fees
Average
Investment 209,021 179,129 16.7 % 244,027 (14.3 )% 190,243 294,130 (35.3 )%
Securities
Average
Interest-Earning 3,552,698 3,796,039 (6.4 )% 3,630,755 (2.1 )% 3,718,837 3,659,255 1.6 %
Assets
Average Total 3,672,253 3,897,158 (5.8 )% 3,789,614 (3.1 )% 3,842,266 3,892,197 (1.3 )%
Assets
Average Deposits 3,100,419 3,223,309 (3.8 )% 2,895,746 7.1 % 3,174,880 2,924,416 8.6 %
Average 297,455 386,477 (23.0 )% 590,401 (49.6 )% 374,139 588,267 (36.4 )%
Borrowings
Average
Interest-Bearing 2,844,821 3,083,774 (7.7 )% 2,835,917 0.3 % 3,013,651 2,861,288 5.3 %
Liabilities
Average
Stockholders' 232,136 240,207 (3.4 )% 267,433 (13.2 )% 249,742 340,894 (26.7 )%
Equity
Average Tangible 228,169 235,850 (3.3 )% 261,751 (12.8 )% 245,377 263,870 (7.0 )%
Equity
PERFORMANCE
RATIOS
(Annualized):
Return on (6.45 )% (0.98 )% 0.46 % (3.01 )% (3.37 )%
Average Assets
Return on
Average (101.97 )% (15.92 )% 6.47 % (46.25 )% (38.51 )%
Stockholders'
Equity
Return on
Average Tangible (103.75 )% (16.22 )% 6.61 % (47.08 )% (49.75 )%
Equity
Efficiency Ratio 68.21 % 82.85 % 54.33 % 69.38 % 134.73 %
Net Interest 2.47 % 1.88 % 3.21 % 2.08 % 3.02 %
Spread (1)
Net Interest 3.00 % 2.48 % 3.94 % 2.65 % 3.83 %
Margin (1)
ALLOWANCE FOR
LOAN LOSSES:
Balance at
Beginning of $ 105,268 $ 104,943 0.3 % $ 62,977 67.2 % $ 70,986 $ 43,611 62.8 %
Period
Provision
Charged to 49,375 23,922 106.4 % 12,802 285.7 % 119,067 47,685 149.7 %
Operating
Expense
Charge-Offs, Net (29,875 ) (23,597 ) 26.6 % (11,831 ) 152.5 % (65,285 ) (27,348 ) 138.7 %
of Recoveries
Balance at End $ 124,768 $ 105,268 18.5 % $ 63,948 95.1 % $ 124,768 $ 63,948 95.1 %
of Period
Allowance for
Loan Losses to 4.19 % 3.33 % 1.91 % 4.19 % 1.91 %
Total Gross
Loans
Allowance for
Loan Losses to
Total 71.53 % 62.92 % 57.16 % 71.53 % 57.16 %
Non-Performing
Loans
ALLOWANCE FOR
OFF-BALANCE
SHEET ITEMS:
Balance at
Beginning of $ 4,291 $ 4,279 0.3 % $ 3,932 9.1 % $ 4,096 $ 1,765 132.1 %
Period
Provision
Charged to 125 12 941.7 % 374 151.8 % 320 2,541 (87.4 )%
Operating
Expense
Balance at End $ 4,416 $ 4,291 2.9 % $ 4,306 2.6 % $ 4,416 $ 4,306 2.6 %
of Period
(1)Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.
HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA(UNAUDITED) (Continued)
(Dollars in Thousands)
Sept. 30, Dec. 31, % Sept. 30, %
2009 2008 Change 2008 Change
NON-PERFORMING
ASSETS:
Non-Accrual Loans $ 174,363 $ 120,823 44.3 % $ 111,335 56.6 %
Loans 90 Days or
More Past Due and 64 1,075 (94.0 )% 535 (88.0 )%
Still Accruing
Total
Non-Performing 174,427 121,898 43.1 % 111,870 55.9 %
Loans
Other Real Estate 27,140 823 3,197.7 % 2,988 808.3 %
Owned, Net
Total
Non-Performing $ 201,567 $ 122,721 64.2 % $ 114,858 75.5 %
Assets
Total
Non-Performing 5.85 % 3.62 % 3.34 %
Loans/Total Gross
Loans
Total
Non-Performing 5.83 % 3.17 % 3.05 %
Assets/Total Assets
Total
Non-Performing 161.6 % 172.9 % 179.6 %
Assets/Allowance
for Loan Losses
DELINQUENT LOANS $ 151,047 $ 128,469 17.6 % $ 102,917 46.8 %
Delinquent
Loans/Total Gross 5.07 % 3.82 % 3.08 %
Loans
LOAN PORTFOLIO:
Real Estate Loans $ 1,086,735 $ 1,180,114 (7.9 )% $ 1,166,436 (6.8 )%
Commercial and 1,824,042 2,099,732 (13.1 )% 2,096,222 (13.0 )%
Industrial Loans
Consumer Loans 68,537 83,525 (17.9 )% 84,031 (18.4 )%
Total Gross Loans 2,979,314 3,363,371 (11.4 )% 3,346,689 (11.0 )%
Deferred Loan Fees (1,810 ) (1,260 ) 43.7 % (1,640 ) 10.4 %
Gross Loans, Net of 2,977,504 3,362,111 (11.4 )% 3,345,049 (11.0 )%
Deferred Loan Fees
Allowance for Loan (124,768 ) (70,986 ) 75.8 % (63,948 ) 95.1 %
Losses
Loans Receivable, $ 2,852,736 $ 3,291,125 (13.3 )% $ 3,281,101 (13.1 )%
Net
LOAN MIX:
Real Estate Loans 36.5 % 35.1 % 34.9 %
Commercial and 61.2 % 62.4 % 62.6 %
Industrial Loans
Consumer Loans 2.3 % 2.5 % 2.5 %
Total Gross Loans 100.0 % 100.0 % 100.0 %
DEPOSIT PORTFOLIO:
Demand - $ 561,548 $ 536,944 4.6 % $ 634,593 (11.5 )%
Noninterest-Bearing
Savings 98,019 81,869 19.7 % 86,157 13.8 %
Money Market
Checking and NOW 723,585 370,401 95.4 % 597,065 21.2 %
Accounts
Time Deposits of 845,318 849,800 (0.5 )% 863,034 (2.1 )%
$100,000 or More
Other Time Deposits 763,390 1,231,066 (38.0 )% 618,528 23.4 %
Total Deposits $ 2,991,860 $ 3,070,080 (2.5 )% $ 2,799,377 6.9 %
DEPOSIT MIX:
Demand - 18.8 % 17.5 % 22.7 %
Noninterest-Bearing
Savings 3.3 % 2.7 % 3.1 %
Money Market
Checking and NOW 24.2 % 12.1 % 21.3 %
Accounts
Time Deposits of 28.3 % 27.7 % 30.8 %
$100,000 or More
Other Time Deposits 25.4 % 40.0 % 22.1 %
Total Deposits 100.0 % 100.0 % 100.0 %
CAPITAL RATIOS
(Bank Only):
Total Risk-Based 9.69 % 10.71 % 10.84 %
Tier 1 Risk-Based 8.40 % 9.44 % 9.57 %
Tier 1 Leverage 7.05 % 8.85 % 8.94 %
HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES, AVERAGE YIELDS EARNED AND AVERAGE RATES PAID (UNAUDITED)
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30, 2009 June 30, 2009 September 30, 2008 September 30, 2009 September 30, 2008
Average Interest Average Average Interest Average Average Interest Average Average Interest Average Average Interest Average
Balance Income/ Yield/ Balance Income/ Yield/ Balance Income/ Yield/ Balance Income/ Yield/ Balance Income/ Yield/
Expense Rate Expense Rate Expense Rate Expense Rate Expense Rate
INTEREST-EARNING
ASSETS
Loans:
Real Estate
Loans:
Commercial $ 887,028 $ 12,051 5.39 % $ 914,802 $ 13,041 5.72 % $ 867,684 $ 14,604 6.70 % $ 905,386 $ 38,029 5.62 % $ 821,097 $ 42,894 6.98 %
Property
Construction 138,340 1,464 4.20 % 178,456 1,594 3.58 % 199,969 2,539 5.05 % 165,455 4,605 3.72 % 208,519 8,081 5.18 %
Residential 83,387 1,050 5.00 % 86,913 1,119 5.16 % 90,739 1,209 5.30 % 86,904 3,332 5.13 % 90,069 3,584 5.32 %
Property
Total Real 1,108,755 14,565 5.21 % 1,180,171 15,754 5.35 % 1,158,392 18,352 6.30 % 1,157,745 45,966 5.31 % 1,119,685 54,559 6.51 %
Estate Loans
Commercial and 1,897,321 26,863 5.62 % 2,025,414 27,774 5.50 % 2,099,708 36,128 6.85 % 2,001,546 82,874 5.54 % 2,114,974 112,416 7.10 %
Industrial Loans
Consumer Loans 73,670 1,084 5.84 % 77,989 1,108 5.70 % 85,021 1,495 7.00 % 77,606 3,345 5.76 % 87,920 4,789 7.28 %
Total Gross 3,079,746 42,512 5.48 % 3,283,574 44,636 5.45 % 3,343,121 55,975 6.66 % 3,236,897 132,185 5.46 % 3,322,579 171,764 6.91 %
Loans
Prepayment -- 193 -- -- 82 -- -- 159 -- -- 323 -- -- 873 --
Penalty Income
Unearned Income
on Loans, Net of (1,642 ) -- -- (1,422 ) -- -- (1,871 ) -- -- (1,442 ) -- -- (2,020 ) -- --
Costs
Gross Loans, Net 3,078,104 42,705 5.50 % 3,282,152 44,718 5.46 % 3,341,250 56,134 6.68 % 3,235,455 132,508 5.48 % 3,320,559 172,637 6.94 %
Investment
Securities:
Municipal Bonds 58,179 933 6.41 % 59,222 956 6.46 % 60,979 1,000 6.56 % 58,760 2,878 6.53 % 65,329 3,186 6.50 %
(1)
U.S. Government
Agency 37,969 431 4.54 % 13,177 144 4.37 % 46,777 483 4.13 % 20,345 671 4.40 % 80,120 2,612 4.35 %
Securities
Mortgage-Backed 82,429 807 3.92 % 74,939 880 4.70 % 83,460 994 4.76 % 77,720 2,582 4.43 % 90,652 3,246 4.77 %
Securities
Collateralized
Mortgage 17,066 173 4.05 % 20,713 215 4.15 % 41,266 441 4.27 % 23,742 736 4.13 % 45,853 1,462 4.25 %
Obligations
Corporate Bonds 401 -- 0.00 % 233 22 37.77 % 7,751 89 4.59 % 265 -- 0.00 % 8,344 287 4.59 %
Other Securities 12,977 130 4.01 % 10,845 109 4.02 % 3,794 42 4.43 % 9,411 272 3.85 % 3,832 136 4.73 %
Total Investment 209,021 2,474 4.73 % 179,129 2,326 5.19 % 244,027 3,049 5.00 % 190,243 7,139 5.00 % 294,130 10,929 4.95 %
Securities(1)
Other
Interest-Earning
Assets:
Equity 41,741 214 2.05 % 41,532 153 1.47 % 39,929 581 5.82 % 41,667 520 1.66 % 37,160 1,481 5.31 %
Securities
Federal Funds
Sold and
Securities 56,568 67 0.47 % 135,362 112 0.33 % 4,797 23 1.92 % 95,365 261 0.36 % 7,096 137 2.57 %
Purchased Under
Resale
Agreements
Term Federal 90,239 293 1.30 % 147,692 695 1.88 % -- -- -- 125,249 1,688 1.80 % -- -- --
Funds Sold
Interest-Earning 77,025 68 0.35 % 10,172 11 0.43 % 752 4 2.13 % 30,858 81 0.35 % 310 5 2.15 %
Deposits
Total Other
Interest-Earning 265,573 642 0.97 % 334,758 971 1.16 % 45,478 608 5.35 % 293,139 2,550 1.16 % 44,566 1,623 4.86 %
Assets
TOTAL
INTEREST-EARNING $ 3,552,698 $ 45,821 5.12 % $ 3,796,039 $ 48,015 5.07 % $ 3,630,755 $ 59,791 6.55 % $ 3,718,837 $ 142,197 5.11 % $ 3,659,255 $ 185,189 6.76 %
ASSETS(1)
INTEREST-BEARING
LIABILITIES
Interest-Bearing
Deposits:
Savings $ 93,404 $ 585 2.48 % $ 84,588 $ 527 2.50 % $ 91,465 $ 533 2.32 % $ 86,715 $ 1,617 2.49 % $ 91,910 $ 1,587 2.31 %
Money Market
Checking and NOW 629,124 2,998 1.89 % 319,319 1,426 1.79 % 693,718 5,579 3.20 % 431,646 6,278 1.94 % 656,625 15,946 3.24 %
Accounts
Time Deposits of 983,341 7,447 3.00 % 1,313,683 12,108 3.70 % 973,752 8,709 3.56 % 1,124,876 29,877 3.55 % 1,143,975 35,436 4.14 %
$100,000 or More
Other Time 841,497 6,335 2.99 % 979,707 8,625 3.53 % 486,581 4,544 3.72 % 996,275 25,064 3.36 % 380,511 11,730 4.12 %
Deposits
Total
Interest-Bearing 2,547,366 17,365 2.70 % 2,697,297 22,686 3.37 % 2,245,516 19,365 3.43 % 2,639,512 62,836 3.18 % 2,273,021 64,699 3.80 %
Deposits
Borrowings:
FHLB Advances 213,583 865 1.61 % 302,220 1,010 1.34 % 506,981 3,324 2.61 % 290,142 2,987 1.38 % 492,434 11,406 3.09 %
Other Borrowings 1,466 -- 0.00 % 1,851 2 0.43 % 1,014 5 1.96 % 1,591 2 0.17 % 13,427 344 3.42 %
Junior
Subordinated 82,406 747 3.60 % 82,406 846 4.12 % 82,406 1,150 5.55 % 82,406 2,581 4.19 % 82,406 3,763 6.10 %
Debentures
Total Borrowings 297,455 1,612 2.15 % 386,477 1,858 1.93 % 590,401 4,479 3.02 % 374,139 5,570 1.99 % 588,267 15,513 3.52 %
TOTAL
INTEREST-BEARING $ 2,844,821 $ 18,977 2.65 % $ 3,083,774 $ 24,544 3.19 % $ 2,835,917 $ 23,844 3.34 % $ 3,013,651 $ 68,406 3.03 % $ 2,861,288 $ 80,212 3.74 %
LIABILITIES
NET INTEREST $ 26,844 $ 23,471 $ 35,947 $ 73,791 $ 104,977
INCOME(1)
NET INTEREST 2.47 % 1.88 % 3.21 % 2.08 % 3.02 %
SPREAD(1)
NET INTEREST 3.00 % 2.48 % 3.94 % 2.65 % 3.79 %
MARGIN(1)
(1)Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.
Source: Hanmi Financial Corporation
Released November 5, 2009