Hanmi Reports Second Quarter 2022 Results

LOS ANGELES, July 26, 2022 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported financial results for the second quarter of 2022.

Net income for the second quarter of 2022 was $25.1 million, or $0.82 per diluted share, up 21.0% from $20.7 million, or $0.68 per diluted share for the first quarter of 2022. The sequential quarter increase in net income reflects growth in net interest income and noninterest income, carefully managed noninterest expenses and a modest credit loss expense. Return on average assets and return on average equity for the second quarter of 2022 were 1.45% and 14.92%, respectively.

CEO Commentary

“We delivered another quarter of solid results,” said Bonnie Lee, President and Chief Executive Officer of Hanmi Financial Corporation. “Our strong earnings were supported by record loan production, an increased net interest margin, and excellent asset quality, while we continued to exercise disciplined expense management. This outstanding performance for the quarter has made the first half of 2022 one of Hanmi’s strongest starts to a year.”

“During the quarter, we built strong momentum across our diverse business lines, which fueled our stellar loan production, driving 6.0% sequential growth in our loans. We generated record loan production in our residential mortgage platform, equipment finance and SBA group, validating the investments we have made in these key business lines. In addition, our deposit-gathering initiatives, designed to build and expand business banking relationships, continue to bear fruit. Deposits increased by 3.4% in the quarter, primarily driven by noninterest-bearing demand deposits, which grew by 3.9% in the quarter and 8.1% year-to-date. These core deposits now comprise 46.5% of total deposits and continue to help hold down our cost of deposits.”

“Our team remains focused on execution in both the pursuit of new customers and expanding our existing relationships. The strategic investments we made over the past several quarters in new talent and technology continue to fuel our strategic initiatives to grow and diversify our business. With a well-defined strategic plan in place and our ongoing focus on execution, we are well positioned to continue to deliver disciplined growth and attractive returns for our shareholders.”

Second Quarter 2022 Highlights:        

  • Second quarter net income increased 21.0% to $25.1 million, or $0.82 per diluted share from $20.7 million, or $0.68 per share for the first quarter of 2022.
  • Loans receivable grew to $5.66 billion at June 30, 2022, up 6.0% sequentially from the end of the first quarter and 9.8% from year-end on record loan production of $642.2 million for the second quarter.
  • Deposits were $5.98 billion at June 30, 2022, up 3.4% sequentially from the end of the first quarter and 3.3% from year-end; noninterest-bearing demand deposits increased 3.9% sequentially and were 46.5% of the deposit portfolio.
  • Net interest income was $59.0 million for the second quarter, up 15.9% from the first quarter.
  • Net interest margin (taxable-equivalent) increased to 3.55% for the second quarter, up 45 basis points from the first quarter; the yield on loans increased 13 basis points sequentially while the cost of interest-bearing deposits rose five basis points.
  • Credit loss expense was $1.6 million for the second quarter and the allowance for credit losses was $73.1 million at June 30, 2022, up from $71.5 million at March 31, 2022; the ratio of the allowance to loans however declined to 1.29% on higher loan balances.
  • Nonaccrual loans improved 3.7% to $11.0 million and nonperforming assets were 0.17% of total assets at June 30, 2022.
  • Noninterest income increased 9.3% to $9.3 million for second quarter from the first quarter on higher SBA gain on sale income as well as on higher overall service charges, fees and other income.
  • Noninterest expense was $31.5 million for the second quarter, down 0.7% from the first quarter; the efficiency ratio for the second quarter improved to 46.05% from 53.29% for the first quarter.
  • Hanmi’s tangible common equity to tangible assets was 8.74% at the end of the second quarter and it had a Common equity Tier 1 capital ratio of 11.07% and a Total capital ratio of 14.32%.

For more information about Hanmi, please see the Q2 2022 Investor Update (and Supplemental Financial Information), which is available on the Bank’s website at www.hanmi.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov. Also, please refer to “Non-GAAP Financial Measures” herein for further details of the presentation of certain non-GAAP financial measures.

Quarterly Results                            
(Dollars in thousands, except per share data)              
                             
  As of or for the Three Months Ended   Amount Change  
  June 30,   March 31,   December 31,   September 30,   June 30,   Q2-22   Q2-22  
    2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
                             
Net income $ 25,050     $ 20,695     $ 33,331     $ 26,565     $ 22,122     $ 4,355     $ 2,928  
Net income per diluted common share $ 0.82     $ 0.68     $ 1.09     $ 0.86     $ 0.72     $ 0.14     $ 0.10  
                             
Assets $ 6,955,968     $ 6,737,052     $ 6,858,587     $ 6,776,533     $ 6,578,856     $ 218,916     $ 377,112  
Loans receivable $ 5,655,403     $ 5,337,500     $ 5,151,541     $ 4,858,865     $ 4,820,092     $ 317,903     $ 835,311  
Deposits $ 5,979,390     $ 5,783,170     $ 5,786,269     $ 5,729,536     $ 5,629,830     $ 196,220     $ 349,560  
                             
Return on average assets   1.45 %     1.22 %     1.93 %     1.58 %     1.38 %     0.23       0.07  
Return on average stockholders' equity   14.92 %     12.74 %     20.89 %     17.13 %     14.91 %     2.18       0.01  
                             
Net interest margin   3.55 %     3.10 %     2.96 %     3.07 %     3.19 %     0.45       0.36  
Efficiency ratio(1)   46.05 %     53.29 %     53.81 %     52.01 %     52.66 %     -7.24       -6.61  
                             
Tangible common equity to tangible assets(2)   8.74 %     9.07 %     9.23 %     8.98 %     9.01 %     -0.33       -0.27  
Tangible common equity per common share(2) $ 19.91     $ 20.02     $ 20.79     $ 19.96     $ 19.27     $ (0.11 )   $ 0.64  
                             
                             
(1)Noninterest expense divided by net interest income plus noninterest income.                      
(2 )Refer to "Non-GAAP Financial Measures" for further details.                        
                             

Results of Operations
Net interest income was $59.0 million for the second quarter of 2022 compared with $51.0 million for the first quarter of 2022. Second quarter interest and fees on loans receivable increased 11.0%, or $5.9 million, from the preceding quarter primarily due to a 6.5% increase in the average balance of loans receivable and a 13 basis point increase in average loan yields. Interest on securities in the second quarter increased $0.4 million from the first quarter primarily due to a $14.8 million increase in the average balance and a 16 basis point increase in the average yield. Second quarter loan prepayment penalties were $0.5 million compared with $0.4 million for the first quarter. Total interest expense for the second quarter decreased $1.8 million from the preceding quarter primarily due to the first quarter redemption of the 5.45% 2027 Subordinated Notes due March 30, 2027 (the “2027 Subordinated Notes”) and the related charge for unamortized debt issuance costs, partially offset by a five basis point increase in the average rate paid on interest-bearing deposits.

                             
  As of or For the Three Months Ended(in thousands)   Percentage Change  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Q2-22   Q2-22  
Net Interest Income   2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
                             
Interest and fees on loans receivable(1) $ 59,855     $ 53,924     $ 52,240     $ 52,961     $ 52,785       11.0 %     13.4 %  
Interest on securities   2,930       2,516       1,821       1,865       1,404       16.5 %     108.7 %  
Dividends on FHLB stock   242       248       248       245       242       -2.4 %     0.0 %  
Interest on deposits in other banks   193       216       302       329       176       -10.6 %     9.7 %  
Total interest and dividend income $ 63,220     $ 56,904     $ 54,611     $ 55,400     $ 54,607       11.1 %     15.8 %  
                             
Interest on deposits   2,457       2,013       2,236       2,466       3,003       22.1 %     -18.2 %  
Interest on borrowings   370       337       364       409       447       9.8 %     -17.2 %  
Interest on subordinated debentures   1,349       3,598       2,515       2,545       1,585       -62.5 %     -14.9 %  
Total interest expense   4,176       5,948       5,115       5,420       5,035       -29.8 %     -17.1 %  
Net interest income $ 59,044     $ 50,956     $ 49,496     $ 49,980     $ 49,572       15.9 %     19.1 %  
                             

Net interest margin (taxable-equivalent) was 3.55% for the second quarter, up 45 basis points from the first quarter. The improvement was due to a combination of factors including lower subordinated debt costs, an increase in loan yields due to a shift in the composition of average loans together with a generally higher level of interest rates, and a significant decline in lower-yielding interest-bearing deposits held at other banks.

The yield on loans for the second quarter of 2022 increased 13 basis points to 4.31% from 4.18% for the first quarter of 2022 as average loans for the quarter increased 6.5% and average commercial and industrial loans grew to 12.7% of the average loan portfolio from 11.1%. Average interest-earning assets for the second quarter remained relatively unchanged sequentially at $6.67 billion: however, average interest-bearing deposits in other banks fell 72.4% quarter-over-quarter to $136.5 million from $494.9 million.

The cost of interest-bearing deposits increased five basis points to 0.31% for the second quarter compared with 0.26% for the previous quarter. Interest expense on subordinated debentures fell to $1.3 million for the second quarter from $3.6 million for the first quarter primarily due to the redemption of the 2027 Subordinated Notes and the related $1.1 million charge for unamortized debt issuance costs.

                             
  For the Three Months Ended(in thousands)   Percentage Change  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Q2-22   Q2-22  
Average Earning Assets and Interest-bearing Liabilities   2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
Loans receivable(1) $ 5,572,504     $ 5,231,672     $ 4,896,952     $ 4,684,570     $ 4,753,297       6.5 %     17.2 %  
Securities(2)   945,291       930,505       914,148       878,866       812,805       1.6 %     16.3 %  
FHLB stock   16,385       16,385       16,385       16,385       16,385       0.0 %     0.0 %  
Interest-bearing deposits in other banks   136,473       494,887       802,901       872,783       659,934       -72.4 %     -79.3 %  
Average interest-earning assets $ 6,670,653     $ 6,673,449     $ 6,630,386     $ 6,452,604     $ 6,242,421       -0.0 %     6.9 %  
                             
Demand: interest-bearing $ 122,771     $ 124,892     $ 122,602     $ 115,233     $ 112,252       -1.7 %     9.4 %  
Money market and savings   2,139,488       2,106,008       2,078,659       2,033,876       2,032,102       1.6 %     5.3 %  
Time deposits   894,345       937,044       1,013,681       1,061,359       1,136,903       -4.6 %     -21.3 %  
Average interest-bearing deposits   3,156,604       3,167,944       3,214,942       3,210,468       3,281,257       -0.4 %     -3.8 %  
Borrowings   140,245       130,556       137,500       143,750       150,091       7.4 %     -6.6 %  
Subordinated debentures   129,029       213,171       214,899       163,340       119,170       -39.5 %     8.3 %  
Average interest-bearing liabilities $ 3,425,878     $ 3,511,671     $ 3,567,341     $ 3,517,558     $ 3,550,518       -2.4 %     -3.5 %  
                             
Average Noninterest Bearing Deposits                            
Demand deposits - noninterest bearing $ 2,716,297     $ 2,634,398     $ 2,561,297     $ 2,444,759     $ 2,223,172       3.1 %     22.2 %  
                             
(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 Three Months Ended   Amount Change  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Q2-22   Q2-22  
Average Yields and Rates   2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
Loans receivable(1)   4.31 %     4.18 %     4.23 %     4.49 %     4.45 %     0.13       -0.14    
Securities (2)   1.27 %     1.11 %     0.83 %     0.87 %     0.69 %     0.16       0.58    
FHLB stock   5.93 %     6.14 %     6.00 %     5.93 %     5.93 %     -0.21       0.00    
Interest-bearing deposits in other banks   0.57 %     0.18 %     0.15 %     0.15 %     0.11 %     0.39       0.46    
Interest-earning assets   3.80 %     3.46 %     3.27 %     3.41 %     3.51 %     0.34       0.29    
                             
Interest-bearing deposits   0.31 %     0.26 %     0.28 %     0.30 %     0.37 %     0.05       -0.06    
Borrowings   1.10 %     1.05 %     1.05 %     1.13 %     1.19 %     0.05       -0.09    
Subordinated debentures   4.14 %     6.75 %     4.68 %     6.23 %     5.32 %     -2.61       -1.18    
Interest-bearing liabilities   0.49 %     0.69 %     0.57 %     0.61 %     0.57 %     -0.20       -0.08    
                             
Net interest margin (taxable equivalent basis)   3.55 %     3.10 %     2.96 %     3.07 %     3.19 %     0.45       0.36    
                             
Cost of deposits   0.17 %     0.14 %     0.15 %     0.17 %     0.22 %     0.03       -0.05    
                             
(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 second quarter of 2022, Hanmi recorded a $1.6 million credit loss expense comprised of a $1.6 million provision for loan losses and a $45,000 negative provision for off-balance sheet items. For the first quarter of 2022, the Company recorded a $1.4 million recovery of credit loss expense comprised of a $1.1 million negative provision for loan losses and a $0.3 million negative provision for off-balance sheet items.

Second quarter 2022 noninterest income increased to $9.3 million from $8.5 million for the first quarter of 2022 primarily due to a $0.3 million increase in gains on the sale of SBA 7(a) loans, a $0.3 million increase in trade finance and other service charges and fees, and a $0.3 million increase in other operating income. The volume of SBA loans sold in the second quarter increased 41.5% to $41.9 million from $29.6 million in the first quarter while trade premiums declined to 7.97% for the second quarter from 9.85% for the first quarter.

                             
  For the Three Months Ended(in thousands)   Percentage Change  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Q2-22   Q2-22  
Noninterest Income   2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
Service charges on deposit accounts $ 2,875     $ 2,875     $ 3,007     $ 3,437     $ 2,344       0.0 %     22.7 %  
Trade finance and other service charges and fees   1,416       1,142       1,160       1,188       1,259       24.0 %     12.5 %  
Servicing income   663       734       666       768       540       -9.7 %     22.8 %  
Bank-owned life insurance income   246       244       252       251       252       0.8 %     -2.4 %  
All other operating income   1,336       1,004       1,017       978       908       33.1 %     47.1 %  
Service charges, fees & other   6,536       5,999       6,102       6,622       5,303       9.0 %     23.3 %  
                             
Gain on sale of SBA loans   2,774       2,521       3,791       5,842       3,508       10.0 %     -20.9 %  
Net gain (loss) on sales of securities   -       -       (598 )     -       -       0.0 %     0.0 %  
Gain (loss) on sale of bank premises   -       -       -       45       -       0.0 %     0.0 %  
Legal settlement   -       -       -       -       75       0.0 %     -100.0 %  
Total noninterest income $ 9,310     $ 8,520     $ 9,295     $ 12,509     $ 8,886       9.3 %     4.8 %  
                             

Noninterest expense decreased slightly to $31.5 million for the second quarter of 2022 from $31.7 million for the first quarter. Salaries and employee benefits expense increased by $1.1 million reflecting annual merit increases and higher estimated incentive compensation for 2022 loan production. Offsetting this effect was a $0.2 million decline in professional fees, a $0.2 million decline in advertising and promotion expense, and a $0.7 million decrease in other operating expenses. The efficiency ratio improved to 46.05% for the second quarter from 53.29% for the prior quarter.

                             
  For the Three Months Ended(in thousands)   Percentage Change  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Q2-22   Q2-22  
    2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
Noninterest Expense                            
Salaries and employee benefits $ 18,779     $ 17,717     $ 18,644     $ 18,795     $ 18,302       6.0 %     2.6 %  
Occupancy and equipment   4,597       4,646       4,840       5,037       4,602       -1.1 %     -0.1 %  
Data processing   3,114       3,236       3,228       2,934       2,915       -3.8 %     6.8 %  
Professional fees   1,231       1,430       1,443       1,263       1,413       -13.9 %     -12.9 %  
Supplies and communication   581       665       795       741       733       -12.6 %     -20.7 %  
Advertising and promotion   660       817       964       953       374       -19.2 %     76.5 %  
All other operating expenses   2,463       3,186       1,980       2,906       2,607       -22.7 %     -5.5 %  
Subtotal   31,425       31,697         31,894         32,629         30,946       -0.9 %     1.5 %  
                             
Other real estate owned expense (income)   50       12       -       23       (47 )     -316.7 %     206.4 %  
Repossessed personal property expense (income)   -       (17 )     (258 )     (150 )     (116 )     100.0 %     100.0 %  
Total noninterest expense $ 31,475     $ 31,692     $ 31,636     $ 32,502     $ 30,783       -0.7 %     2.2 %  
                             

Hanmi recorded a provision for income taxes of $10.2 million for the second quarter of 2022, representing an effective tax rate of 29.0%, compared with $8.5 million, also representing an effective tax rate of 29.0% for the first quarter.

Financial Position
Total assets at June 30, 2022 increased 3.2%, or $218.9 million, to $6.96 billion from $6.74 billion at March 31, 2022. The increase reflects the 3.4%, or $196.6 million, growth in deposits as well as the $20.0 million increase in borrowings.

Loans receivable, before the allowance for credit losses, were $5.66 billion at June 30, 2022, up 6.0% from $5.34 billion at March 31, 2022. Loans held for sale, representing the guaranteed portion of SBA 7(a) loans, were $18.5 million at the end of the second quarter of 2022 compared with $15.6 million at the end of the first quarter.

                             
  As of (in thousands)   Percentage Change  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Q2-22   Q2-22  
    2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
Loan Portfolio                            
Commercial real estate loans $ 3,829,656     $ 3,771,453     $ 3,701,864     $ 3,528,506     $ 3,452,014       1.5 %     10.9 %  
Residential/consumer loans   521,576       432,805       400,548       354,860       348,730       20.5 %     49.6 %  
Commercial and industrial loans   766,813       633,107       561,830       516,357       587,729       21.1 %     30.5 %  
Leases   537,358       500,135       487,299       459,142       431,619       7.4 %     24.5 %  
Loans receivable   5,655,403       5,337,500       5,151,541       4,858,865       4,820,092       6.0 %     17.3 %  
Loans held for sale   18,528       15,617       13,342       17,881       36,030       18.6 %     -48.6 %  
Total $ 5,673,931     $ 5,353,117     $ 5,164,883     $ 4,876,746     $ 4,856,122       6.0 %     16.8 %  
                             
                             
  As of      
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,          
    2022       2022       2021       2021       2021            
Composition of Loan Portfolio                            
Commercial real estate loans   67.5 %     70.5 %     71.6 %     72.3 %     71.1 %          
Residential/consumer loans   9.2 %     8.1 %     7.8 %     7.3 %     7.2 %          
Commercial and industrial loans   13.5 %     11.8 %     10.9 %     10.6 %     12.1 %          
Leases   9.5 %     9.3 %     9.4 %     9.4 %     8.9 %          
Loans receivable   99.7 %     99.7 %     99.7 %     99.6 %     99.3 %          
Loans held for sale   0.3 %     0.3 %     0.3 %     0.4 %     0.7 %          
Total   100.0 %     100.0 %     100.0 %     100.0 %     100.0 %          
                             

New loan production was a record $642.2 million for the second quarter at an average rate of 4.35% while $230.5 million of loans paid-off during the quarter at an average rate of 4.43%.

Commercial real estate loan production for the second quarter was $271.0 million. Commercial and industrial loan production was $96.2 million, SBA loan production was $67.9 million, equipment finance lease production was $95.4 million and residential mortgage loan production was $111.8 million. The strong loan growth for the second quarter was supported by the increase in core deposits, a reduction in excess liquidity (cash and due from banks), and to a lesser extent an increase in borrowings.

  For the Three Months Ended (in thousands)  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,  
    2022       2022       2021       2021       2021    
New Loan Production                    
Commercial real estate loans $ 271,006     $ 233,295     $ 291,543     $ 214,380     $ 186,136    
Commercial and industrial loans   96,187       98,432       116,365       114,263       99,429    
SBA loans   67,900       42,632       47,397       46,264       42,560    
Leases receivable   95,371       71,487       83,813       83,642       70,923    
Residential/consumer loans   111,766       61,023       85,966       41,497       66,581    
            subtotal   642,230       506,869       625,084       500,046       465,629    
                     
                     
Payoffs   (230,536 )     (181,026 )     (152,134 )     (291,686 )     (264,822 )  
Amortization   (94,543 )     (96,852 )     (90,358 )     (63,435 )     (90,348 )  
Loan sales   (41,937 )     (29,577 )     (41,274 )     (65,253 )     (35,760 )  
Net line utilization   43,295       (12,620 )     (48,203 )     (39,941 )     (70,287 )  
Charge-offs & OREO   (606 )     (835 )     (439 )     (958 )     (1,471 )  
                     
Loans receivable-beginning balance   5,337,500       5,151,541       4,858,865       4,820,092       4,817,151    
Loans receivable-ending balance $ 5,655,403     $ 5,337,500     $ 5,151,541     $ 4,858,865     $ 4,820,092    
                     

Deposits were $5.98 billion at the end of the second quarter of 2022, up $196.2 million, or 3.4%, from $5.78 billion at the end of the preceding quarter. The change was primarily driven by a $104.0 million increase in noninterest-bearing demand deposits, a $21.2 million increase in money market and savings deposits and a $74.3 million increase in time deposits. Noninterest-bearing demand deposits represented 46.5% of total deposits at June 30, 2022 and the loan-to-deposit ratio was 94.6%.

                             
  As of(in thousands)   Percentage Change  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Q2-22   Q2-22  
    2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
Deposit Portfolio                            
Demand: noninterest-bearing $ 2,782,737     $ 2,678,726     $ 2,574,517     $ 2,548,591     $ 2,354,671       3.9 %     18.2 %  
Demand: interest-bearing   123,614       126,907       125,183       118,334       113,892       -2.6 %     8.5 %  
Money market and savings   2,102,161       2,080,969       2,099,381       2,033,000       2,045,143       1.0 %     2.8 %  
Time deposits   970,878       896,568       987,188       1,029,611       1,116,124       8.3 %     -13.0 %  
Total deposits $ 5,979,390     $ 5,783,170     $ 5,786,269     $ 5,729,536     $ 5,629,830       3.4 %     6.2 %  
                             
                             
  As of      
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,          
    2022       2022       2021       2021       2021            
Composition of Deposit Portfolio                            
Demand: noninterest-bearing   46.5 %     46.3 %     44.4 %     44.4 %     41.9 %          
Demand: interest-bearing   2.1 %     2.2 %     2.2 %     2.1 %     2.0 %          
Money market and savings   35.2 %     36.0 %     36.3 %     35.5 %     36.3 %          
Time deposits   16.2 %     15.5 %     17.1 %     18.0 %     19.8 %          
Total deposits   100.0 %     100.0 %     100.0 %     100.0 %     100.0 %          
                             
                             

Stockholders’ equity at June 30, 2022 was $618.3 million, compared with $621.5 million at March 31, 2022. The sequential decline was primarily due to the $21.7 million unrealized after-tax loss because of changes in the value of the securities portfolio resulting from increases in interest rates during the quarter which outpaced the $18.3 million contribution of second quarter net income less dividends. Tangible common stockholders’ equity was $607.0 million, or 8.74% of tangible assets, at June 30, 2022, compared with $610.1 million, or 9.07% of tangible assets at the end of the first quarter. Tangible book value per share decreased to $19.91 at June 30, 2022 from $20.02 at the end of the prior quarter.

Hanmi and the Bank exceeded the minimum regulatory capital requirements and the Bank continues to exceed the minimum for the “well capitalized” category. At June 30, 2022, Hanmi’s preliminary Common equity Tier 1 capital ratio was 11.07% and its Total risk-based capital ratio was 14.32% compared with 11.34% and 14.73%, respectively, at the end of the first quarter of 2022.

  As of   Amount Change  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Q2-22   Q2-22  
    2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
Regulatory Capital ratios(1)                            
Hanmi Financial                            
Total risk-based capital   14.32 %     14.73 %     16.57 %     17.18 %     15.53 %     -0.41       -1.21    
Tier 1 risk-based capital   11.42 %     11.71 %     11.93 %     12.18 %     12.30 %     -0.29       -0.88    
Common equity tier 1 capital   11.07 %     11.34 %     11.55 %     11.78 %     11.88 %     -0.27       -0.81    
Tier 1 leverage capital ratio   9.94 %     9.70 %     9.63 %     9.50 %     9.57 %     0.24       0.37    
Hanmi Bank                            
Total risk-based capital   13.70 %     14.19 %     14.70 %     15.17 %     15.25 %     -0.49       -1.55    
Tier 1 risk-based capital   12.64 %     13.09 %     13.59 %     13.91 %     13.99 %     -0.45       -1.35    
Common equity tier 1 capital   12.64 %     13.09 %     13.59 %     13.91 %     13.99 %     -0.45       -1.35    
Tier 1 leverage capital ratio   11.00 %     10.84 %     10.96 %     10.86 %     10.89 %     0.16       0.11    
                             
(1)Preliminary ratios for June 30, 2022                            
                             

Asset Quality
Loans and leases 30 to 89 days past due and still accruing were 0.07% of loans and leases at the end of the second quarter of 2022, compared with 0.10% at the end of the prior quarter.

Special mention loans were $80.5 million at the end of the second quarter, down from $141.0 million at March 31, 2022. The quarter-over-quarter change included increases from downgrades of pass loans of $1.9 million and upgrades from classified loans of $0.7 million. Reductions included upgrades to pass of $57.7 million, payoffs and paydowns of $5.3 million and $0.1 million of downgrades to classified.   

Classified loans were $53.0 million at June 30, 2022, down from $57.4 million at the end of the first quarter.

Nonperforming loans were $11.0 million at June 30, 2022, or 0.20% of loans, down from $11.5 million at the end of the first quarter, or 0.21% of the portfolio.

Nonperforming assets were $11.7 million at the end of the second quarter of 2022, or 0.17% of total assets, down from $12.1 million, or 0.18% of assets, at the end of the prior quarter.

Gross charge-offs for the second quarter of 2022 were $0.6 million, compared with $0.8 million for the preceding quarter. Recoveries of previously charged-off loans for the second quarter of 2022 were $0.5 million, compared with $0.9 million for the preceding quarter. As a result, there were net charge-offs of $0.1 million for the second quarter of 2022, compared with net recoveries of $0.1 million for the prior quarter. For the second quarter of 2022, net charge-offs represented 0.01% of average loans on an annualized basis, compared with net recoveries of 0.01% of average loans for the first quarter on an annualized basis.

The allowance for credit losses was $73.1 million at June 30, 2022, up $1.6 million from $71.5 million at March 31, 2022. The ratio of the allowance for credit losses to loans however declined to 1.29% at the end of the second quarter on essentially higher loan balances. Specific allowances for loans declined $0.2 million while quantitative and qualitative allowances increased $1.8 million principally on higher loan balances. Qualitative loss factors remained essentially unchanged; however, they now begin to reflect the uncertainties of future economic conditions in a rising interest rate environment.

                             
  As of or for the Three Months Ended(in thousands)   Amount Change  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Q2-22   Q2-22  
    2022       2022       2021       2021       2021     vs. Q1-22   vs. Q2-21  
Asset Quality Data and Ratios                            
                             
Delinquent loans:                            
Loans, 30 to 89 days past due and still accruing $ 4,174     $ 5,493     $ 5,881     $ 6,017     $ 4,332     $ (1,319 )   $ (158 )  
Delinquent loans to total loans   0.07 %     0.10 %     0.11 %     0.12 %     0.09 %     -0.03       -0.02    
                             
Criticized loans:                            
Special mention $ 80,453     $ 140,958     $ 95,295     $ 130,564     $ 121,826     $ (60,505 )   $ (41,373 )  
Classified   53,007       57,402       60,632       82,436       110,120       (4,395 )     (57,113 )  
Total criticized loans $ 133,460     $ 198,360     $ 155,927     $ 213,000     $ 231,946     $ (64,900 )   $ (98,486 )  
                             
Nonperforming assets:                            
Nonaccrual loans $ 11,044     $ 11,470     $ 13,360     $ 21,223     $ 39,573     $ (426 )   $ (28,529 )  
Loans 90 days or more past due and still accruing   -       -       -       13       12,446       -       (12,446 )  
Nonperforming loans   11,044       11,470       13,360       21,236       52,019       (426 )     (40,975 )  
Other real estate owned, net   675       675       675       675       712       -       (37 )  
Nonperforming assets $ 11,719     $ 12,145     $ 14,035     $ 21,911     $ 52,731     $ (426 )   $ (41,012 )  
                             
Nonperforming loans to total loans   0.20 %     0.21 %     0.26 %     0.44 %     1.08 %          
Nonperforming assets to assets   0.17 %     0.18 %     0.20 %     0.32 %     0.80 %          
                             
Allowance for credit losses:                            
Balance at beginning of period $ 71,512     $ 72,557     $ 76,613     $ 83,372     $ 88,392            
Credit loss expense (recovery) on loans   1,640       (1,147 )     (13,375 )     (7,623 )     (4,112 )          
Net loan (charge-offs) recoveries   (85 )     102       9,319       864       (908 )          
Balance at end of period $ 73,067     $ 71,512       $ 72,557       $ 76,613       $ 83,372            
                             
Net loan charge-offs (recoveries) to average loans(1)   0.01 %     -0.01 %     -0.76 %     -0.07 %     0.08 %          
Allowance for credit losses to loans   1.29 %     1.34 %     1.41 %     1.58 %     1.73 %          
                             
Allowance for credit losses related to off-balance sheet items:                            
Balance at beginning of period $ 2,358     $ 2,586     $ 4,851     $ 3,643     $ 2,342            
Credit loss expense (recovery) on off-balance sheet items   (45 )     (228 )     (2,265 )     1,208       1,301            
Balance at end of period $ 2,313     $ 2,358     $ 2,586     $ 4,851     $ 3,643            
                             
Unused commitments to extend credit $ 613,804     $ 626,615     $ 626,474     $ 536,149     $ 552,773            
                             
Allowance for Losses on Accrued Interest Receivable:                            
Balance at beginning of period   -       -     $ 311     $ 680     $ 1,196            
Interest reversal for loans placed on nonaccrual   -       -       -       -       -            
Credit loss expense (recovery) on interest accrued on CARES Act modifications   -       -       (311 )     (369 )     (516 )          
Balance at end of period   -       -     $ -     $ 311     $ 680            
                             
(1)Annualized                            

Corporate Developments
On April 28, 2022, Hanmi’s Board of Directors declared a cash dividend on its common stock for the 2022 second quarter of $0.22 per share. The dividend was paid on May 25, 2022, to stockholders of record as of the close of business on May 9, 2022.

Earnings Conference Call        
Hanmi Bank will host its second quarter 2022 earnings conference call today, July 26, 2022 at 2:00 p.m. PST (5:00 p.m. EST) to discuss these results. This call will also be webcast. To access the event the call, please dial 1-877-407-9039 before 2:00 p.m. PST, using access code HANMI. To listen to the call online, either live or archived, please visit Hanmi’s Investor Relations website at www.hanmi.com.

About Hanmi Financial Corporation
Headquartered in Los Angeles, California, Hanmi Financial Corporation owns Hanmi Bank, which serves multi-ethnic communities through its network of 35 full-service branches and eight 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. 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 our 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 and strategic plans, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. 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 our forward-looking statements to be reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Forward-looking 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:

  • a 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;
  • the effect of our rating under the Community Reinvestment Act and our ability to address any issues raised in our regulatory exams;
  • 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;
  • inflation and fluctuations in interest rates and a decline in the level of our interest rate spread;
  • the current or anticipated impact of military conflict, terrorism or other geopolitical events;
  • risks of natural disasters;
  • legal proceedings and litigation brought against us;
  • a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;
  • the failure to maintain current technologies;
  • the inability to successfully implement future information technology enhancements;
  • difficult business and economic conditions that can adversely affect our industry and business, including competition, fraudulent activity and negative publicity;
  • risks associated with Small Business Administration loans;
  • failure to attract or retain key employees;
  • our ability to access cost-effective funding;
  • fluctuations in real estate values;
  • changes in accounting policies and practices;
  • changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums;
  • the continuing impact of the COVID-19 pandemic on our business and results of operation;
  • the 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;
  • strategic transactions we may enter into;
  • the adequacy of our allowance for credit losses;
  • our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses;
  • changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements;
  • our ability to control expenses;
  • changes in securities markets; and
  • risks as it relates to cyber security against our information technology and those of our third-party providers and vendors.

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, 2021, 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

Larry Clark, CFA
Investor Relations
Financial Profiles, Inc.
lclark@finprofiles.com
310-622-8223

Hanmi Financial Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)       
     
                     
  June 30,   March 31,   Percentage   June 30,   Percentage  
    2022       2022     Change     2021     Change  
Assets                    
Cash and due from banks $ 217,237     $ 312,491     -30.5 %   $ 697,789     -68.9 %  
Securities available for sale, at fair value   860,221       876,980     -1.9 %     862,119     -0.2 %  
Loans held for sale, at the lower of cost or fair value   18,528       15,617     18.6 %     36,030     -48.6 %  
Loans receivable, net of allowance for credit losses   5,582,335       5,265,988     6.0 %     4,736,720     17.9 %  
Accrued interest receivable   14,044       12,289     14.3 %     14,397     -2.5 %  
Premises and equipment, net   24,207       24,410     -0.8 %     26,225     -7.7 %  
Customers' liability on acceptances   616       182     238.5 %     1,907     -67.7 %  
Servicing assets   7,353       7,202     2.1 %     6,199     18.6 %  
Goodwill and other intangible assets, net   11,310       11,353     -0.4 %     11,504     -1.7 %  
Federal Home Loan Bank ("FHLB") stock, at cost   16,385       16,385     0.0 %     16,385     0.0 %  
Bank-owned life insurance   55,395       55,149     0.4 %     54,402     1.8 %  
Prepaid expenses and other assets   148,337       139,006     6.7 %     115,179     28.8 %  
Total assets $ 6,955,968     $ 6,737,052     3.2 %   $ 6,578,856     5.7 %  
                     
Liabilities and Stockholders' Equity                    
Liabilities:                    
Deposits:                    
Noninterest-bearing $ 2,782,737     $ 2,678,726     3.9 %   $ 2,354,671     18.2 %  
Interest-bearing   3,196,653       3,104,444     3.0 %     3,275,159     -2.4 %  
Total deposits   5,979,390       5,783,170     3.4 %     5,629,830     6.2 %  
Accrued interest payable   986       966     2.1 %     1,855     -46.8 %  
Bank's liability on acceptances   616       182     238.5 %     1,907     -67.7 %  
Borrowings   145,000       125,000     16.0 %     150,000     -3.3 %  
Subordinated debentures   129,113       128,967     0.1 %     119,243     8.3 %  
Accrued expenses and other liabilities   82,567       77,315     6.8 %     73,044     13.0 %  
Total liabilities   6,337,672       6,115,600     3.6 %     5,975,879     6.1 %  
                     
Stockholders' equity:                    
Common stock   33       33     0.0 %     33     0.0 %  
Additional paid-in capital   582,018       581,337     0.1 %     579,595     0.4 %  
Accumulated other comprehensive income   (66,568 )     (44,819 )   -48.5 %     (2,859 )   -2228.3 %  
Retained earnings   229,135       210,788     8.7 %     146,651     56.2 %  
Less treasury stock   (126,322 )     (125,887 )   -0.3 %     (120,443 )   -4.9 %  
Total stockholders' equity   618,296       621,452     -0.5 %     602,977     2.5 %  
Total liabilities and stockholders' equity $ 6,955,968     $ 6,737,052     3.2 %   $ 6,578,856     5.7 %  
                     

Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except share and per share data)       
     
                     
  Three Months Ended  
  June 30,   March 31,   Percentage   June 30,   Percentage  
    2022     2022     Change     2021     Change  
Interest and dividend income:                    
Interest and fees on loans receivable $ 59,855   $ 53,924     11.0 %   $ 52,785     13.4 %  
Interest on securities   2,930     2,516     16.5 %     1,404     108.7 %  
Dividends on FHLB stock   242     248     -2.4 %     242     0.0 %  
Interest on deposits in other banks   193     216     -10.6 %     176     9.7 %  
Total interest and dividend income   63,220     56,904     11.1 %     54,607     15.8 %  
Interest expense:                    
Interest on deposits   2,457     2,013     22.1 %     3,003     -18.2 %  
Interest on borrowings   370     337     9.8 %     447     -17.2 %  
Interest on subordinated debentures   1,349     3,598     -62.5 %     1,585     -14.9 %  
Total interest expense   4,176     5,948     -29.8 %     5,035     -17.1 %  
Net interest income before credit loss expense   59,044     50,956     15.9 %     49,572     19.1 %  
Credit loss expense (recovery)   1,596     (1,375 )   216.1 %     (3,327 )   -148.0 %  
Net interest income after credit loss expense   57,448     52,331     9.8 %     52,899     8.6 %  
Noninterest income:                    
Service charges on deposit accounts   2,875     2,875     0.0 %     2,344     22.7 %  
Trade finance and other service charges and fees   1,416     1,142     24.0 %     1,259     12.5 %  
Gain on sale of Small Business Administration ("SBA") loans   2,774     2,521     10.0 %     3,508     -20.9 %  
Other operating income   2,245     1,982     13.3 %     1,775     26.5 %  
Total noninterest income   9,310     8,520     9.3 %     8,886     4.8 %  
Noninterest expense:                    
Salaries and employee benefits   18,779     17,717     6.0 %       18,302     2.6 %  
Occupancy and equipment   4,597     4,646     -1.1 %     4,602     -0.1 %  
Data processing   3,114     3,236     -3.8 %     2,915     6.8 %  
Professional fees   1,231     1,430     -13.9 %     1,413     -12.9 %  
Supplies and communications   581     665     -12.6 %     733     -20.7 %  
Advertising and promotion   660     817     -19.2 %     374     76.5 %  
Other operating expenses   2,513     3,181     -21.0 %     2,444     2.8 %  
Total noninterest expense   31,475     31,692     -0.7 %     30,783     2.2 %  
Income before tax   35,283     29,159     21.0 %     31,002     13.8 %  
Income tax expense   10,233     8,464     20.9 %       8,880     15.2 %  
Net income $ 25,050   $ 20,695     21.0 %     $ 22,122     13.2 %  
                       
Basic earnings per share: $ 0.82   $ 0.68         $ 0.72        
Diluted earnings per share: $ 0.82   $ 0.68         $ 0.72        
                     
Weighted-average shares outstanding:                    
Basic   30,296,897     30,254,212           30,442,993        
Diluted   30,412,348     30,377,580           30,520,456        
Common shares outstanding   30,482,990     30,468,458           30,697,652        
                     
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)       
       
(Dollars in thousands, except share and per share data)          
  Six Months Ended          
  June 30,   June 30,   Percentage          
    2022     2021     Change          
Interest and dividend income:                    
Interest and fees on loans receivable $ 113,779   $ 103,400     10.0 %          
Interest on securities   5,447     2,544     114.1 %          
Dividends on FHLB stock   490     448     9.4 %          
Interest on deposits in other banks   408     272     50.0 %          
Total interest and dividend income   120,124     106,664     12.6 %          
Interest expense:                    
Interest on deposits   4,470     6,953     -35.7 %          
Interest on borrowings   707     933     -24.2 %          
Interest on subordinated debentures   4,947     3,204     54.4 %          
Total interest expense   10,124     11,090     -8.7 %          
Net interest income before credit loss expense   110,000     95,574     15.1 %          
Credit loss expense (recovery)   220     (1,217 )   -118.1 %          
Net interest income after credit loss expense   109,780     96,791     13.4 %          
Noninterest income:                    
Service charges on deposit accounts   5,750     4,599     25.0 %          
Trade finance and other service charges and fees   2,558     2,280     12.2 %          
Gain on sale of Small Business Administration ("SBA") loans   5,295     7,633     -30.6 %          
Other operating income   4,226     4,081     3.6 %          
Total noninterest income   17,829     18,593     -4.1 %          
Noninterest expense:                    
Salaries and employee benefits   36,496     35,122     3.9 %          
Occupancy and equipment   9,243     9,198     0.5 %          
Data processing   6,351     5,841     8.7 %          
Professional fees   2,661     2,860     -7.0 %          
Supplies and communications   1,245     1,489     -16.4 %          
Advertising and promotion   1,477     732     101.8 %          
Other operating expenses   5,694     5,074     12.2 %          
Total noninterest expense   63,167     60,316     4.7 %          
Income before tax   64,442     55,068     17.0 %          
Income tax expense   18,697     16,386     14.1 %          
Net income $ 45,745   $ 38,682     18.3 %          
                       
Basic earnings per share: $ 1.50   $ 1.26                
Diluted earnings per share: $ 1.50   $ 1.26                
                     
Weighted-average shares outstanding:                    
Basic   30,271,761     30,452,320                
Diluted   30,391,273     30,526,120                
Common shares outstanding   30,482,990     30,697,652                
                     

Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(Dollars in thousands)           
       
                               
  Three Months Ended  
  June 30, 2022   March 31, 2022   June 30, 2021  
      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 receivable(1) $ 5,572,504     $ 59,855 4.31 %   $ 5,231,672     $ 53,924 4.18 %   $ 4,753,297     $ 52,787 4.45 %  
Securities(2)   945,291       2,930 1.27 %     930,505       2,586 1.11 %     812,805       1,404 0.69 %  
FHLB stock   16,385       242 5.93 %     16,385       248 6.14 %     16,385       242 5.93 %  
Interest-bearing deposits in other banks   136,473       193 0.57 %     494,887       216 0.18 %     659,934       176 0.11 %  
Total interest-earning assets   6,670,653       63,220 3.80 %     6,673,449       56,974 3.46 %     6,242,421       54,609 3.51 %  
                               
Noninterest-earning assets:                              
Cash and due from banks   67,859             62,968             61,560          
Allowance for credit losses   (73,896 )           (73,177 )           (88,049 )        
Other assets   255,095             229,952             220,779          
                               
Total assets $ 6,919,711           $ 6,893,192           $ 6,436,711          
                               
Liabilities and Stockholders' Equity                              
Interest-bearing liabilities:                              
Deposits:                              
Demand: interest-bearing $ 122,771     $ 18 0.06 %   $ 124,892     $ 17 0.06 %   $ 112,252     $ 23 0.08 %  
Money market and savings   2,139,488       1,570 0.29 %     2,106,008       1,189 0.23 %     2,032,102       1,298 0.26 %  
Time deposits   894,345       869 0.39 %     937,044       807 0.35 %     1,136,903       1,682 0.59 %  
Total interest-bearing deposits   3,156,604       2,457 0.31 %     3,167,944       2,013 0.26 %     3,281,257       3,003 0.37 %  
Borrowings   140,245       384 1.10 %     130,556       337 1.05 %     150,091       447 1.19 %  
Subordinated debentures   129,029       1,335 4.14 %     213,171       3,598 6.75 %     119,170       1,585 5.32 %  
Total interest-bearing liabilities   3,425,878       4,176 0.49 %     3,511,671       5,948 0.69 %     3,550,518       5,035 0.57 %  
                               
Noninterest-bearing liabilities and equity:                              
Demand deposits: noninterest-bearing   2,716,297             2,634,398             2,223,172          
Other liabilities   104,084             88,367             67,771          
Stockholders' equity   673,452             658,756             595,250          
                               
Total liabilities and stockholders' equity $ 6,919,711           $ 6,893,192           $ 6,436,711          
                               
Net interest income (tax equivalent basis)     $ 59,044         $ 51,026         $ 49,574    
                               
Cost of deposits       0.17 %         0.14 %         0.22 %  
Net interest spread (taxable equivalent basis)       3.31 %         2.77 %         2.94 %  
Net interest margin (taxable equivalent basis)       3.55 %         3.10 %         3.19 %  
                               
                               
                               
(1)Includes average loans held for sale    
(2)Income calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.            
                               
                               
Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(Dollars in thousands)              
 
  Six Months Ended            
  June 30, 2022   June 30, 2021            
      Interest Average       Interest Average            
  Average   Income / Yield /   Average   Income / Yield /            
  Balance   Expense Rate   Balance   Expense Rate            
Assets                              
Interest-earning assets:                              
Loans receivable (1) $ 5,403,029     $ 113,779 4.25 %   $ 4,798,311     $ 103,399 4.35 %            
Securities (2)   937,939       5,447 1.19 %     793,521       2,544 0.64 %            
FHLB stock   16,385       490 6.03 %     16,385       448 5.52 %            
Interest-bearing deposits in other banks   314,690       408 0.26 %     528,498       272 0.10 %            
Total interest-earning assets   6,672,043       120,124 3.63 %     6,136,715       106,663 3.51 %            
                               
Noninterest-earning assets:                              
Cash and due from banks   65,427             59,127                    
Allowance for credit losses   (73,538 )           (88,860 )                  
Other assets   242,593             227,436                    
                               
Total assets $ 6,906,525           $ 6,334,418                    
                               
Liabilities and Stockholders' Equity                              
Interest-bearing liabilities:                              
Deposits:                              
Demand: interest-bearing $ 123,826     $ 35 0.06 %   $ 107,642     $ 37 0.07 %            
Money market and savings   2,122,840       2,758 0.26 %     1,999,737       2,776 0.28 %            
Time deposits   915,577       1,677 0.37 %     1,187,427       4,148 0.70 %            
Total interest-bearing deposits   3,162,243       4,470 0.29 %     3,294,806       6,961 0.43 %            
Borrowings   135,427       726 1.08 %     150,046       923 1.24 %            
Subordinated debentures   170,868       4,928 5.77 %     119,105       3,204 5.38 %            
Total interest-bearing liabilities   3,468,538       10,124 0.59 %     3,563,957       11,088 0.63 %            
                               
Noninterest-bearing liabilities and equity:                              
Demand deposits: noninterest-bearing   2,675,574             2,107,828                    
Other liabilities   96,269             74,391                    
Stockholders' equity   666,144             588,242                    
                               
Total liabilities and stockholders' equity $ 6,906,525           $ 6,334,418                    
                               
Net interest income (tax equivalent basis)     $ 110,000         $ 95,575              
                               
Cost of deposits       0.15 %         0.26 %            
Net interest spread (taxable equivalent basis)       3.04 %         2.88 %            
Net interest margin (taxable equivalent basis)       3.32 %         3.14 %            
                               
                               
(1) Includes average 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 common 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 substitute 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)       
   
                   
                   
  June 30,   March 31,   December 31,   September 30,   June 30,
Hanmi Financial Corporation   2022       2022       2021       2021       2021  
Assets $ 6,955,968     $ 6,737,052     $ 6,858,587     $ 6,776,533     $ 6,578,856  
Less goodwill and other intangible assets   (11,310 )     (11,353 )     (11,395 )     (11,450 )     (11,504 )
Tangible assets $ 6,944,658     $ 6,725,699     $ 6,847,192     $ 6,765,083     $ 6,567,352  
                   
Stockholders' equity (1) $ 618,296     $ 621,452     $ 643,417     $ 619,055     $ 602,977  
Less goodwill and other intangible assets   (11,310 )     (11,353 )     (11,395 )     (11,450 )     (11,504 )
Tangible stockholders' equity (1) $ 606,986     $ 610,099     $ 632,022     $ 607,605     $ 591,473  
                   
Stockholders' equity to assets   8.89 %     9.22 %     9.38 %     9.14 %     9.17 %
Tangible common equity to tangible assets (1)   8.74 %     9.07 %     9.23 %     8.98 %     9.01 %
                   
Common shares outstanding   30,482,990       30,468,458       30,407,261       30,441,601       30,697,652  
Tangible common equity per common share $ 19.91     $ 20.02     $ 20.79     $ 19.96     $ 19.27  
                   
                   
(1)       There were no preferred shares outstanding at the periods indicated.        
                   

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Source: Hanmi Bank