Hanmi Earns $10.1 Million in the First Quarter of 2013 and Pre-Tax Income Doubles; Setting a Solid Platform for Growth

LOS ANGELES, April 25, 2013 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (Nasdaq:HAFC), the holding company for Hanmi Bank (the "Bank"), today reported a net income of $10.1 million, or $0.32 per diluted share, for the first quarter of 2013, compared to $7.3 million, or $0.23 per diluted share, for the first quarter of 2012. In the fourth quarter of 2012, Hanmi earned $14.0 million, or $0.44 per diluted share, which included the effect of the reversal of a $5.5 million deferred tax asset ("DTA") valuation allowance. Income before tax nearly doubled to $14.8 million in the first quarter of 2013 from $7.4 million in the first quarter of 2012. The increase in Hanmi's earnings is based on solid loan production, increasing core deposits, and improving asset quality and operating efficiencies. Tangible book value increased 32.3% and 2.6% to $12.28 per share at March 31, 2013 from $9.28 per share at March 31, 2012 and $11.97 per share at December 31, 2012, respectively.

"We started 2013 with solid performance in the first quarter, mainly attributable to increased loan production and continuing improvement in asset quality, and are confident that Hanmi will deliver another year of improved operating performance in 2013," said Jay S. Yoo, President and Chief Executive Officer. "As one of our organic growth initiatives to penetrate new markets, we recently hired an experienced SBA lender with a proven track record to lead our expansion efforts in the Texas SBA market. We anticipate that our new Texas loan production office will open in the second quarter of 2013, and will start to contribute to revenues in the second half of the year."

"To reduce excess liquidity and improve profitability, the redemption of $30 million of trust preferred securities ("TPS") was completed on March 15, 2013," said Yoo. "We redeemed an additional $30 million of TPS on April 15, 2013 and expect to reduce the remaining $20 million by the end of April. The full redemption of these securities will improve our net interest margin by saving more than $2.5 million in annual interest expense."

Financial Highlights (at or for the period ended March 31, 2013)

• Net income for the first quarter of 2013 increased by 37.7% to $10.1 million, or $0.32 per diluted share, compared to $7.3 million, or $0.23 per diluted share, in the first quarter of 2012.
• Net interest margin ("NIM") was 3.86% in the first quarter of 2013, compared to 3.69% in the first quarter of 2012. Yields on earning assets fell 13 basis points, while cost of deposits continued to improve by 30 basis points.
• New loan production in the first quarter of 2013 totaled $178.6 million.
• Asset quality improved during the first quarter of 2013, with lower levels of non-performing assets, which were 1.21% of total assets, and with continuing improvements in net charge-offs, which totaled $2.3 million, or 0.45% of average gross loans.
• Operating efficiency improved to 56.44% during the first quarter of 2013, down from 57.66% during the fourth quarter of 2012, and 66.56% during the first quarter of 2012, reflecting higher revenues and lower overall operating costs.
• The redemption of $30 million TPS was completed on March 15, 2013.   
• Tangible common equity ratio was 13.89%, and tangible book value was $12.28 per share at March 31, 2013, up 32.3% from $9.28 per share at March 31, 2012.

Results of Operations

Net interest income before the provision for credit losses totaled $25.6 million for the first quarter of 2013, down 3.1% from $26.4 million for the fourth quarter of 2012, and up 4.4% from $24.5 million for the first quarter of 2012. Interest and dividend income decreased 2.5% from the fourth quarter of 2012 and 3.0% from the first quarter of 2012, while interest expense increased 2.2% from the fourth quarter of 2012 and decreased 34.2% from the first quarter of 2012.  

NIM was 3.86% for the first quarter of 2013, even with the fourth quarter of 2012, and up 17 basis points from the first quarter of 2012. "Continued loan production along with reduced excess liquidity is contributing to a stable NIM," said Mark Yoon, Senior Vice President and Chief Financial Officer. The following table details the asset yields, liability costs, spread and margin.

Asset quality ratios continued to show improvement in the first quarter with the continuing downward trend in non-performing assets to total assets of 1.21% as of March 31, 2013 compared to 1.32% as of December 31, 2012. Allowance for loan losses ("ALLL") to non-performing loans ("NPLs") rose to 186.03% as of March 31, 2013 compared to 169.81% as of December 31, 2012. There was no provision for credit losses for the three months ended March 31, 2013 and December 31, 2012 compared to a $2.0 million provision for the three months ended March 31, 2012. 

Non-interest income in the first quarter of 2013 increased to $8.4 million, up from $7.5 million in the fourth quarter of 2012 and $3.6 million in the first quarter of 2012, due mainly to higher gain on sales of SBA loans and lower net losses recognized from selling NPLs.  

Non-interest expense in the first quarter of 2013 was $19.2 million, down from $19.5 million in the fourth quarter of 2012, reflecting lower deposit insurance premiums and regulatory assessments, partially offset by higher professional fees. For the first quarter of 2013, deposit insurance premiums and regulatory assessments were down more than $1.0 million from the fourth quarter of 2012 and $1.2 million from the first quarter of 2012, due mainly to a lower premium assessment resulting from our improved overall financial conditions. Professional fees increased in the first quarter of 2013, due mainly to costs associated with the strategic option considered in the beginning of the year as well as legal fees incurred in defending lawsuits in the ordinary course of business. 

Balance Sheet

Assets totaled $2.79 billion at March 31, 2013, down 3.1% from $2.88 billion at December 31, 2012, and up 0.8% from $2.77 billion at March 31, 2012. "We remain focused on right-sizing our balance sheet through redeployment of excess liquidity, which will temporarily reduce the size of total assets, but will result in better profitability," said Yoon.

In the first quarter of 2013, Hanmi produced 164 new loans totaling $178.6 million, of which $36.1 million were Small Business Administration ("SBA") loans, $138.0 million were commercial real estate loans, $4.3 million were commercial term loans and lines of credit, and $201,000 were consumer loans. Overall loan production was down 14.4% from the fourth quarter of 2012 and up 11.7% from the first quarter of 2012. The decreased loan production was primarily attributable to a seasonal falloff. "Our goal is to grow loan portfolio 8% this year, while diversifying it. Despite intense competition, we expect that loan production will ramp up in the coming quarters," said Yoon. 

Loans receivable, excluding loans held for sale, increased to $2.06 billion at March 31, 2013, up 3.8% from $1.99 billion at December 31, 2012, and 8.7% from $1.90 billion at March 31, 2012.  Loans held for sale totaled $6.0 million at March 31, 2013, down from $8.3 million at December 31, 2012, and from $56.0 million at March 31, 2012. Average gross loans, net of deferred loan fees, increased to $2.07 billion for the first quarter of 2013, up from $2.03 billion for the fourth quarter of 2012, and $1.99 billion for the first quarter of 2012.

Average deposits for the first quarter of 2013 were $2.35 billion, down from $2.39 billion for the fourth quarter of 2012, and up from $2.34 billion for the first quarter of 2012. The overall mix of funding continued to improve with time deposits declining and low- and no-cost transaction account balances increasing. "Our deposits were down for the quarter due mainly to a decrease of $59.0 million in Jumbo CDs, which includes $28.5 million of CDs raised from Internet listing services, but our core deposits continued to grow as a percent of deposits," Yoon noted. The deposit mix for the past year is detailed in the table below.  

At March 31, 2013, total stockholders' equity was $389.1 million. Tangible common stockholders' equity was $387.8 million at March 31, 2013, or 13.89% of tangible assets, compared to $377.0 million, or 13.09% of tangible assets, at December 31, 2012, and $292.3 million, or 10.55% of tangible assets, at March 31, 2012. Tangible book value per share was $12.28 at March 31, 2013, up 2.6% from $11.97 at December 31, 2012, and 32.3% from $9.28 at March 31, 2012.

Asset Quality

NPLs, excluding loans held for sale, decreased to $32.9 million at March 31, 2013, down 11.8% from $37.3 million at December 31, 2012, and down 34.5% from $50.2 million at March 31, 2012. Troubled debt restructurings ("TDRs"), totaled $31.7 million at March 31, 2013, down from $35.7 million at December 31, 2012, and $41.5 million at March 31, 2012. Of these TDRs, $17.0 million are NPLs. Two loans of NPLs in the aggregate amount of $2.3 million were recorded at the lower of cost or fair value and classified as loans held for sale at March 31, 2013.  The following table shows NPLs in each category:

"As anticipated, continuing improvement in asset quality has resulted in a reduction of problem loan sales in the first quarter of 2013. The first quarter NPL sales totaled $1.6 million," said J.H. Son, Executive Vice President and Chief Credit Officer. "More importantly, the losses associated with our loan sales strategy are significantly lower than they have been in previous years, which indicate that our strategy to sell loans, before they are moved into foreclosure, has been effective." Classified loans were $95.1 million, or 4.5% of gross loans, at March 31, 2013, down from $100.4 million, or 4.9% of gross loans, at December 31, 2012, and $229.5 million, or 11.6% of gross loans, at March 31, 2012.    

Delinquent loans that are less than 90 days past due and still accruing interest increased to $6.4 million at March 31, 2013, or 0.30% of gross loans, up from $2.4 million, or 0.12% of gross loans, at December 31, 2012. "The incidental uptick in delinquent loans is a temporary setback due to administrative delays and is expected to decrease again in the second quarter of 2013 with diligent monitoring and collection efforts," said Son. At March 31, 2013, ALLL was $61.2 million, or 2.88% of gross loans and 186.0% of NPLs, compared to 4.10% of gross loans and 161.4% of NPLs at March 31, 2012. For the first quarter of 2013, net charge-offs were $2.3 million, down from $3.2 million for the fourth quarter of 2012, and $11.3 million for the first quarter of 2012.  

Conference Call Information  

Management will host a conference call today, April 25, 2013, at 1:30 p.m. Pacific Time (4:30 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 1-480-629-9643 at 1:30 p.m. Pacific Time, 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, 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 a loan production office in 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 stockholder value.

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 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; 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 to receive regulatory approval for Hanmi Bank to declare dividends to Hanmi Financial; ability to identify a suitable strategic partner or to consummate a strategic transaction; 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 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 ("SEC"), including, in Item 1A of our Form 10-K for the year ended December 31, 2012, our quarterly reports on Form 10-Q, and current and periodic reports that we will file with the SEC 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.

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 Financial and Hanmi Bank's capital strength. Tangible equity is calculated by subtracting goodwill and other intangible assets from total stockholders' equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from total 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 Financial and Hanmi Bank. 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:

CONTACT: Hanmi Financial Corporation
         Shick (Mark) Yoon
         SVP & Chief Financial Officer
         Direct Phone: 213-427-5636

         David Yang
         VP, Investor Relations & Corporate Strategy
         Direct Phone:  213-637-4798

Released April 25, 2013