Hanmi Reports 2023 First Quarter Results

LOS ANGELES, April 25, 2023 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported financial results for the first quarter of 2023.

Net income for the first quarter of 2023 was $22.0 million, or $0.72 per diluted share, compared with $28.5 million, or $0.93 per diluted share, for the fourth quarter of 2022. The decline primarily reflects lower net interest income and higher credit loss expense. Return on average assets and return on average equity for the first quarter of 2023 were 1.21% and 12.19%, respectively.

CEO Commentary

“Our team delivered excellent first quarter results with a 2% annualized growth in deposits since year-end, a 6% growth in net income since the year ago quarter and, all the while, maintaining high levels of liquidity and exercising disciplined expense management,” said Bonnie Lee, President and Chief Executive Officer of Hanmi. “The new relationships we developed during the quarter led to the growth in deposits, reflecting the strength of our relationship banking strategy.”

“As anticipated, loan production moderated from last year due in part to the high interest rate environment and uncertain macroeconomic conditions. Additionally, we are taking a more selective and prudent approach with our lending as maintaining strong asset quality remains paramount. The industry events in March presented another opportunity for us to partner with our customers as we proactively stepped up communications to offer support in this turbulent environment.”

“Our balance sheet is strong, with ample liquidity, solid credit quality and excellent capital ratios. I am grateful to our team of highly skilled bankers who work tirelessly to build trusted banking relationships with our customers and who continue to deliver strong results to our shareholders.”

First Quarter 2023 Highlights:

  • First quarter net income was $22.0 million, or $0.72 per diluted share, down 22.8% from $28.5 million, or $0.93 per diluted share for the fourth quarter of 2022 and reflects lower net interest income, a larger credit loss expense, and a higher effective tax rate, offset by lower noninterest expenses and higher noninterest income.
  • Loans receivable were $5.98 billion at March 31, 2023, up 0.9% (annualized) from year-end 2022; first quarter loan production was $303.6 million with a weighted average interest rate of 7.19%.
  • Deposits increased 2.1% (annualized) from year-end 2022 to $6.20 billion at March 31, 2023; noninterest-bearing demand deposits were 37.6% of the deposit portfolio at March 31, 2023.
  • Net interest income for the first quarter was $57.9 million, down 10.4% from the fourth quarter, primarily due to higher deposit interest expense.
  • Net interest margin (taxable equivalent) was 3.28% for the first quarter, down 39 basis points from the prior quarter; sequentially, the average yield on loans increased 30 basis points while the cost of interest-bearing deposits increased 103 basis points.
  • Noninterest income for the first quarter was $8.3 million, up 11.8% from the fourth quarter, and noninterest expense was $32.8 million, down 3.1% from the fourth quarter of 2022; the efficiency ratio for the first quarter was 49.54%.
  • Credit loss expense for the first quarter was $2.1 million; the ratio of the allowance for credit losses to loans increased to 1.21% at the end of the first quarter from 1.20% at year-end 2022.
  • Criticized loans declined 10.9% from the fourth quarter of 2022, and stood at 1.9% of loans at quarter-end; nonperforming assets were $20.2 million, or 0.27% of total assets at the end of the first quarter, compared with 0.14% at year-end 2022.
  • Hanmi’s ratio of tangible common equity to tangible assets was 8.77% at March 31, 2023 and it had a preliminary Common equity Tier 1 capital ratio of 11.59% and a Total capital ratio of 14.80%.

For more information about Hanmi, please see the Q1 2023 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 Highlights                          
(Dollars in thousands, except per share data)                          
                           
  As of or for the Three Months Ended   Amount Change
  March 31,   December 31,   September 30,   June 30,   March 31,   Q1-23   Q1-23
  2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
                           
Net income $ 21,991     $ 28,479     $ 27,169     $ 25,050     $ 20,695     $ (6,488 )   $ 1,296
Net income per diluted common share $ 0.72     $ 0.93     $ 0.89     $ 0.82     $ 0.68     $ (0.21 )   $ 0.04
                           
Assets $ 7,434,130     $ 7,378,262     $ 7,128,511     $ 6,955,968     $ 6,737,052     $ 55,868     $ 697,078
Loans receivable $ 5,980,458     $ 5,967,133     $ 5,800,991     $ 5,655,403     $ 5,337,500     $ 13,325     $ 642,958
Deposits $ 6,201,038     $ 6,168,072     $ 6,201,376     $ 5,979,390     $ 5,783,170     $ 32,966     $ 417,868
                           
Return on average assets   1.21 %     1.56 %     1.52 %     1.45 %     1.22 %     -0.35       -0.01
Return on average stockholders' equity   12.19 %     15.90 %     15.58 %     14.92 %     12.74 %     -3.71       -0.55
                           
Net interest margin   3.28 %     3.67 %     3.66 %     3.55 %     3.10 %     -0.39       0.18
Efficiency ratio(1)   49.54 %     46.99 %     46.22 %     46.05 %     53.29 %     2.55       -3.75
                           
Tangible common equity to tangible assets(2)   8.77 %     8.50 %     8.40 %     8.74 %     9.07 %     0.27       -0.30
Tangible common equity per common share(2) $ 21.30     $ 20.54     $ 19.60     $ 19.91     $ 20.02       0.76       1.28
                           
                           
(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 for the first quarter decreased $6.7 million to $57.9 million from $64.6 million for the fourth quarter of 2022, down 10.4%. The decrease was primarily due to an increase in the cost of interest-bearing deposits, partially offset by an increase in interest-earning asset yields. Average loans were $5.94 billion for the first quarter, compared with $5.88 billion for the fourth quarter of 2022. The yield on average loans for the first quarter increased 30 basis points to 5.51% from 5.21% for the fourth quarter. The cost of interest-bearing deposits increased 103 basis points to 2.73% from 1.70% for the fourth quarter of 2022. Average interest-bearing deposits were $3.79 billion for the first quarter, compared to $3.49 billion for the fourth quarter. First quarter loan prepayment fees were $0.4 million compared with $0.1 million for the fourth quarter. Net interest margin (taxable-equivalent) for the first quarter was 3.28% compared with 3.67% for the fourth quarter of 2022.

  As of or For the Three Months Ended (in thousands)   Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-23   Q1-23
Net Interest Income 2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
                           
Interest and fees on loans receivable(1) $ 80,923     $ 77,123     $ 66,976     $ 59,855     $ 53,924     4.9 %   50.1 %
Interest on securities   4,025       3,633       3,271       2,930       2,516     10.8 %   60.0 %
Dividends on FHLB stock   289       289       245       242       248     0.0 %   16.5 %
Interest on deposits in other banks   2,066       1,194       958       193       216     73.0 %   856.5 %
Total interest and dividend income $ 87,303     $ 82,239     $ 71,450     $ 63,220     $ 56,904     6.2 %   53.4 %
                           
Interest on deposits   25,498       14,900       6,567       2,457       2,013     71.1 %   1166.7 %
Interest on borrowings   2,369       1,192       349       370       337     98.7 %   603.0 %
Interest on subordinated debentures   1,583       1,586       1,448       1,349       3,598     -0.2 %   -56.0 %
Total interest expense   29,450       17,678       8,364       4,176       5,948     66.6 %   395.1 %
Net interest income $ 57,853     $ 64,561     $ 63,086     $ 59,044     $ 50,956     -10.4 %   13.5 %
                           
(1) Includes loans held for sale.                          
                           
  For the Three Months Ended (in thousands)   Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-23   Q1-23
Average Earning Assets and Interest-bearing Liabilities 2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
Loans receivable(1) $ 5,944,399     $ 5,877,298     $ 5,696,587     $ 5,572,504     $ 5,231,672     1.1 %   13.6 %
Securities(2)   980,712       966,299       956,989       945,291       930,505     1.5 %   5.4 %
FHLB stock   16,385       16,385       16,385       16,385       16,385     0.0 %   0.0 %
Interest-bearing deposits in other banks   192,902       138,476       181,401       136,473       494,887     39.3 %   -61.0 %
Average interest-earning assets $ 7,134,398     $ 6,998,458     $ 6,851,362     $ 6,670,653     $ 6,673,449     1.9 %   6.9 %
                           
Demand: interest-bearing $ 109,391     $ 119,106     $ 121,269     $ 122,771     $ 124,892     -8.2 %   -12.4 %
Money market and savings   1,453,569       1,781,834       2,079,490       2,139,488       2,106,008     -18.4 %   -31.0 %
Time deposits   2,223,615       1,585,798       1,120,149       894,345       937,044     40.2 %   137.3 %
Average interest-bearing deposits   3,786,575       3,486,738       3,320,908       3,156,604       3,167,944     8.6 %   19.5 %
Borrowings   268,056       197,554       123,370       140,245       130,556     35.7 %   105.3 %
Subordinated debentures   129,483       129,335       129,176       129,029       213,171     0.1 %   -39.3 %
Average interest-bearing liabilities $ 4,184,114     $ 3,813,627     $ 3,573,454     $ 3,425,878     $ 3,511,671     9.7 %   19.1 %
                           
Average Noninterest Bearing Deposits                          
Demand deposits - noninterest bearing $ 2,324,413     $ 2,593,948     $ 2,717,810     $ 2,716,297     $ 2,634,398     -10.4 %   -11.8 %
                           
(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   Yield/Rate Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-23   Q1-23
Average Yields and Rates 2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
Loans receivable(1)   5.51 %     5.21 %     4.67 %     4.31 %     4.18 %   0.30     1.33  
Securities(2)   1.67 %     1.47 %     1.40 %     1.27 %     1.11 %   0.20     0.56  
FHLB stock   7.16 %     7.00 %     5.93 %     5.93 %     6.14 %   0.16     1.02  
Interest-bearing deposits in other banks   4.34 %     3.42 %     2.09 %     0.57 %     0.18 %   0.92     4.16  
Interest-earning assets   4.96 %     4.67 %     4.15 %     3.80 %     3.46 %   0.29     1.50  
                           
Interest-bearing deposits   2.73 %     1.70 %     0.78 %     0.31 %     0.26 %   1.03     2.47  
Borrowings   3.58 %     2.55 %     1.24 %     1.10 %     1.05 %   1.03     2.53  
Subordinated debentures   4.89 %     4.67 %     4.37 %     4.14 %     6.75 %   0.22     -1.86  
Interest-bearing liabilities   2.85 %     1.84 %     0.93 %     0.49 %     0.69 %   1.01     2.16  
                           
Net interest margin (taxable equivalent basis)   3.28 %     3.67 %     3.66 %     3.55 %     3.10 %   -0.39     0.18  
                           
Cost of deposits   1.69 %     0.97 %     0.43 %     0.17 %     0.14 %   0.72     1.55  
                           
(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.                  
                           

Credit loss expense for the first quarter was $2.1 million and included a $2.2 million provision for loan losses and a $0.1 million recovery for off-balance sheet items. For the fourth quarter of 2022, credit loss expense was $0.1 million and included a $0.2 million provision for loan losses and a $0.1 million provision for off-balance sheet items. The fourth quarter also included a recovery of an SBA guarantee repair loss allowance of less than $0.1 million.

Noninterest income for the first quarter increased $0.8 million to $8.3 million from $7.5 million for the fourth quarter of 2022. The increase reflected the absence of the fourth quarter $0.3 million valuation adjustment to bank-owned life insurance and a $0.9 million increase in all other operating income. All other operating income increased, primarily from $0.6 million of loan customer interest rate swap fee income. The volume of SBA loans sold in the first quarter declined to $29.7 million from $40.9 million for the fourth quarter of 2022 due to the higher interest rate environment while trade premiums increased to 7.85% for the first quarter from 5.99% for the fourth quarter.

  For the Three Months Ended (in thousands)   Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-23   Q1-23
Noninterest Income 2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
Service charges on deposit accounts $ 2,579   $ 2,742     $ 2,996   $ 2,875   $ 2,875   -5.9 %   -10.3 %
Trade finance and other service charges and fees   1,258     1,115       1,132     1,416     1,142   12.8 %   10.2 %
Servicing income   742     725       635     663     734   2.3 %   1.1 %
Bank-owned life insurance income (expense)   270     (97 )     245     246     244   378.4 %   10.7 %
All other operating income   1,618     1,039       1,656     1,336     1,004   55.7 %   61.2 %
Service charges, fees & other   6,467     5,524       6,664     6,536     5,999   17.1 %   7.8 %
                           
Gain on sale of SBA loans   1,869     1,933       2,250     2,774     2,521   -3.3 %   -25.9 %
Total noninterest income $ 8,336   $ 7,457     $ 8,914   $ 9,310   $ 8,520   11.8 %   -2.2 %
                           

Noninterest expense for the first quarter declined $1.0 million to $32.8 million from $33.8 million for the fourth quarter of 2022. The decrease reflected $0.4 million in lower professional fees and a $1.1 million decrease in other operating expenses, driven by a recovery of the fourth quarter 2022 servicing valuation adjustment. Additionally, expenses on real estate owned and repossessed personal property decreased $0.3 million during the first quarter. These decreases were partially offset by a $0.3 million increase in salaries and benefits and a $0.7 million increase in occupancy and equipment expenses, mostly due to normalization of property tax expenses in the absence of prior quarter adjustments. The efficiency ratio for the first quarter increased to 49.54%, from 46.99% for the prior quarter due to the lower revenue.

  For the Three Months Ended (in thousands)   Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-23   Q1-23
  2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
Noninterest Expense                          
Salaries and employee benefits $ 20,610     $ 20,279     $ 19,365     $ 18,779   $ 17,717     1.6 %   16.3 %
Occupancy and equipment   4,412       3,668       4,736       4,597     4,646     20.3 %   -5.0 %
Data processing   3,253       3,431       3,352       3,114     3,236     -5.2 %   0.5 %
Professional fees   1,335       1,783       1,249       1,231     1,430     -25.1 %   -6.6 %
Supplies and communication   676       683       710       581     665     -1.0 %   1.7 %
Advertising and promotion   833       974       1,186       660     817     -14.5 %   2.0 %
All other operating expenses   1,957       3,041       2,698       2,463     3,186     -35.6 %   -38.6 %
Subtotal   33,076       33,859       33,296       31,425     31,697     -2.3 %   4.4 %
                           
Other real estate owned expense (income)   (201 )     (70 )     2       50     12     187.1 %   -1775.0 %
Repossessed personal property expense (income)   (84 )     55       (23 )     -     (17 )   -165.5 %   394.1 %
Total noninterest expense $ 32,791     $ 33,844     $ 33,275     $ 31,475   $ 31,692     -3.1 %   3.5 %
                                                 

Hanmi recorded a provision for income taxes of $9.3 million for the first quarter, compared with $9.6 million in the fourth quarter of 2022 and representing an effective tax rate of 29.7%, compared with 25.3% for the fourth quarter. The increase in the first quarter effective tax rate primarily reflects the absence of a state tax valuation reserve released during the fourth quarter of 2022.

Financial Position
Total assets at March 31, 2023 increased 0.8%, or $55.9 million, to $7.43 billion from $7.38 billion at December 31, 2022. The increase reflected a $12.6 million increase in loans receivable, a $33.8 million increase in cash and due from banks, and a $24.9 million increase in securities available for sale.

Loans receivable, before the allowance for credit losses, were $5.98 billion at quarter-end, up slightly from December 31, 2022. Loans held for sale, representing the guaranteed portion of SBA 7(a) loans, were $3.7 million at the end of the first quarter, compared with $8.0 million at the end of the prior quarter.

  As of (in thousands)   Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-23   Q1-23
  2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
Loan Portfolio                          
Commercial real estate loans $ 3,784,178     $ 3,833,397     $ 3,853,947     $ 3,829,656     $ 3,771,453     -1.3 %   0.3 %
Residential/consumer loans   817,919       734,473       649,591       521,576       432,805     11.4 %   89.0 %
Commercial and industrial loans   778,145       804,475       732,030       766,813       633,107     -3.3 %   22.9 %
Leases   600,216       594,788       565,423       537,358       500,135     0.9 %   20.0 %
Loans receivable   5,980,458       5,967,133       5,800,991       5,655,403       5,337,500     0.2 %   12.0 %
Loans held for sale   3,652       8,043       10,044       18,528       15,617     -54.6 %   -76.6 %
Total $ 5,984,110     $ 5,975,176     $ 5,811,035     $ 5,673,931     $ 5,353,117     0.1 %   11.8 %
                           
                           
  As of    
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,        
  2023   2022   2022   2022   2022        
Composition of Loan Portfolio                          
Commercial real estate loans   63.2 %     64.2 %     66.3 %     67.5 %     70.5 %        
Residential/consumer loans   13.7 %     12.3 %     11.2 %     9.2 %     8.1 %        
Commercial and industrial loans   13.0 %     13.5 %     12.6 %     13.5 %     11.8 %        
Leases   10.0 %     9.9 %     9.7 %     9.5 %     9.3 %        
Loans receivable   99.9 %     99.9 %     99.8 %     99.7 %     99.7 %        
Loans held for sale   0.1 %     0.1 %     0.2 %     0.3 %     0.3 %        
Total   100.0 %     100.0 %     100.0 %     100.0 %     100.0 %        
                           

New loan production was $303.6 million for the first quarter, at an average rate of 7.19% while $124.9 million of loans paid off during the quarter at an average rate of 7.27%.

Commercial real estate loan production for the first quarter was $75.5 million. Commercial and industrial loan production was $27.1 million, SBA loan production was $34.5 million, equipment finance production was $69.3 million and residential mortgage loan production was $97.2 million.

  For the Three Months Ended (in thousands)
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
  2023   2022   2022   2022   2022
New Loan Production                  
Commercial real estate loans $ 75,528     $ 86,500     $ 132,870     $ 271,006     $ 233,295  
Commercial and industrial loans   27,055       137,902       88,015       96,187       98,432  
SBA loans   34,472       53,209       44,898       67,900       42,632  
Leases receivable   69,307       89,193       86,092       95,371       71,487  
Residential/consumer loans   97,201       106,955       140,432       111,766       61,023  
subtotal   303,563       473,759       492,307       642,230       506,869  
                   
                   
Payoffs   (124,923 )     (121,409 )     (139,883 )     (230,536 )     (181,026 )
Amortization   (102,675 )     (91,333 )     (80,294 )     (94,543 )     (96,852 )
Loan sales   (30,002 )     (50,550 )     (45,418 )     (41,937 )     (29,577 )
Net line utilization   (30,401 )     (43,124 )     (78,927 )     43,295       (12,620 )
Charge-offs & OREO   (2,237 )     (1,201 )     (2,197 )     (606 )     (835 )
                   
Loans receivable-beginning balance   5,967,133       5,800,991       5,655,403       5,337,500       5,151,541  
Loans receivable-ending balance $ 5,980,458     $ 5,967,133     $ 5,800,991     $ 5,655,403     $ 5,337,500  
                   

Deposits were $6.20 billion at the end of the first quarter, up $33.0 million, or 0.5%, from $6.17 billion at the end of the prior quarter. The change was primarily driven by a $424.0 million increase in time deposits, partially offset by a $174.2 million decline in money market and savings deposits and a $205.5 million decrease in noninterest-bearing demand deposits. Noninterest-bearing demand deposits represented 37.6% of total deposits at quarter-end and the loan-to-deposit ratio was 96.4%.

  As of (in thousands)   Percentage Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-23   Q1-23
  2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
Deposit Portfolio                          
Demand: noninterest-bearing $ 2,334,083     $ 2,539,602     $ 2,771,498     $ 2,782,737     $ 2,678,726     -8.1 %   -12.9 %
Demand: interest-bearing   104,245       115,573       125,408       123,614       126,907     -9.8 %   -17.9 %
Money market and savings   1,382,472       1,556,690       2,056,793       2,102,161       2,080,969     -11.2 %   -33.6 %
Time deposits   2,380,238       1,956,207       1,247,677       970,878       896,568     21.7 %   165.5 %
Total deposits $ 6,201,038     $ 6,168,072     $ 6,201,376     $ 5,979,390     $ 5,783,170     0.5 %   7.2 %
                           
                           
  As of    
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,        
  2023   2022   2022   2022   2022        
Composition of Deposit Portfolio                          
Demand: noninterest-bearing   37.6 %     41.2 %     44.7 %     46.5 %     46.3 %        
Demand: interest-bearing   1.7 %     1.9 %     2.0 %     2.1 %     2.2 %        
Money market and savings   22.3 %     25.2 %     33.2 %     35.2 %     36.0 %        
Time deposits   38.4 %     31.7 %     20.1 %     16.2 %     15.5 %        
Total deposits   100.0 %     100.0 %     100.0 %     100.0 %     100.0 %        
                           

Stockholders’ equity at March 31, 2023 was $662.2 million, compared with $637.5 million at December 31, 2022. The increase was primarily due to $14.4 million of first quarter net income net of dividends as well as a $9.9 million reduction in unrealized after-tax loss due to changes in the value of the securities portfolio resulting from decreases in intermediate-term interest rates during the first quarter. Tangible common stockholders’ equity was $651.0 million, or 8.77% of tangible assets, at March 31, 2023, compared with $626.3 million, or 8.50% of tangible assets at the end of the fourth quarter of 2022. Tangible book value per share increased to $21.30 at March 31, 2023, up from $20.54 at year-end 2022. Refer to “Non-GAAP Financial measures” for greater detail.

Hanmi and the Bank exceeded the minimum regulatory capital requirements and the Bank continues to exceed the minimum for the “well capitalized” category. At March 31, 2023, Hanmi’s preliminary Common equity Tier 1 capital ratio was 11.59% and its Total risk-based capital ratio was 14.80%, compared with 11.37% and 14.49%, respectively, at the end of the fourth quarter of 2022.

  As of   Ratio Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-23   Q1-23
  2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
Regulatory Capital ratios(1)                          
Hanmi Financial                          
Total risk-based capital 14.80 %   14.49 %   14.38 %   14.31 %   14.73 %   0.31   0.07
Tier 1 risk-based capital 11.94 %   11.71 %   11.55 %   11.42 %   11.71 %   0.23   0.23
Common equity tier 1 capital 11.59 %   11.37 %   11.21 %   11.07 %   11.34 %   0.22   0.25
Tier 1 leverage capital ratio 10.09 %   10.07 %   9.99 %   9.94 %   9.70 %   0.02   0.39
Hanmi Bank                          
Total risk-based capital 14.15 %   13.86 %   13.76 %   13.70 %   14.19 %   0.29   -0.04
Tier 1 risk-based capital 13.06 %   12.85 %   12.73 %   12.64 %   13.09 %   0.21   -0.03
Common equity tier 1 capital 13.06 %   12.85 %   12.73 %   12.64 %   13.09 %   0.21   -0.03
Tier 1 leverage capital ratio 11.06 %   11.07 %   11.02 %   11.00 %   10.84 %   -0.01   0.22
                           
(1) Preliminary ratios for March 31, 2023                          

Asset Quality
Loans 30 to 89 days past due and still accruing were 0.26% of loans at the end of the first quarter, compared with 0.13% at the end of the prior quarter. A $6.7 million past due and accruing loan at March 31, 2023, subsequent to the end of the first quarter, resolved its delinquency.

Special mention loans were $64.3 million at the end of the first quarter, down from $79.0 million at December 31, 2022. The $14.7 million decrease in special mention loans included downgrades to classified loans of $10.0 million, and payoffs of $4.6 million.

Classified loans were $47.3 million at March 31, 2023, up from $46.2 million at the end of the prior quarter. The $1.1 million increase was primarily driven by the downgrade of one loan in the amount of $10.0 million, offset by loan upgrades of $8.8 million.

Nonperforming loans were $20.1 million at March 31, 2023, up from $9.8 million at the end of the prior quarter, primarily due to a $10.0 million loan placed on nonaccrual during the first quarter of 2023. As a percentage of the loan portfolio, nonperforming loans were 0.34% at quarter-end, compared with 0.17% at the end of the fourth quarter of 2022. Nonperforming loans included a $10.0 million commercial and industrial loan in the health-care industry secured by real estate and business assets for which there was a specific allowance of $2.5 million.

Nonperforming assets were $20.2 million at the end of the first quarter, up from $10.0 million at the end of the fourth quarter of 2022. As a percentage of total assets, nonperforming assets were 0.27% at quarter-end, compared with 0.14% at year-end 2022.

Gross charge-offs for the first quarter were $2.2 million, compared with $1.2 million for the fourth quarter of 2022. First quarter 2023 gross charge-offs consisted of $1.6 million of equipment financing agreements and $0.6 million of commercial and industrial and SBA loans. Recoveries of previously charged-off loans for the first quarter were $0.8 million, compared with $0.9 million for the prior quarter. Recoveries during the first quarter consisted of $0.5 million of equipment financing agreements and $0.3 million in commercial and industrial and SBA loans.

As a result, there were net charge-offs of $1.5 million for the first quarter, compared with net charge-offs of $0.3 million for the prior quarter. For the first quarter, net charge-offs represented 0.10% of average loans on an annualized basis, compared with net charge-offs of 0.02% of average loans for the fourth quarter of 2022 on an annualized basis.

The allowance for credit losses was $72.2 million at March 31, 2023, up from $71.5 million at December 31, 2022. The ratio of the allowance for credit losses to loans was relatively unchanged at 1.21% at the end of the first quarter, from 1.20% at the end of the fourth quarter. Specific allowances for loans increased $2.9 million, while the allowance for quantitative and qualitative considerations decreased $2.2 million.

  As of or for the Three Months Ended (in thousands)   Amount Change
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Q1-23   Q1-23
  2023   2022   2022   2022   2022   vs. Q4-22   vs. Q1-22
Asset Quality Data and Ratios                          
                           
Delinquent loans:                          
Loans, 30 to 89 days past due and still accruing $ 15,377     $ 7,492     $ 4,936     $ 4,174     $ 5,493     $ 7,885     $ 9,884  
Delinquent loans to total loans   0.26 %     0.13 %     0.09 %     0.07 %     0.10 %     0.13       0.16  
                           
Criticized loans:                          
Special mention $ 64,340     $ 79,013     $ 122,952     $ 80,453     $ 140,958     $ (14,673 )   $ (76,618 )
Classified   47,288       46,192       47,740       53,007       57,402       1,096       (10,114 )
Total criticized loans $ 111,628     $ 125,205     $ 170,692     $ 133,460     $ 198,360     $ (13,577 )   $ (86,732 )
                           
Nonperforming assets:                          
Nonaccrual loans $ 20,050     $ 9,846     $ 11,592     $ 11,044     $ 11,470     $ 10,204     $ 8,580  
Loans 90 days or more past due and still accruing   -       -       -       -       -       -       -  
Nonperforming loans   20,050       9,846       11,592       11,044       11,470       10,204       8,580  
Other real estate owned, net   117       117       792       675       675       -       (558 )
Nonperforming assets $ 20,167     $ 9,963     $ 12,384     $ 11,719     $ 12,145     $ 10,204     $ 8,022  
                           
Nonperforming loans to total loans   0.34 %     0.17 %     0.20 %     0.20 %     0.21 %        
Nonperforming assets to assets   0.27 %     0.14 %     0.17 %     0.17 %     0.18 %        
                           
Allowance for credit losses:                          
Balance at beginning of period $ 71,523     $ 71,584     $ 73,067     $ 71,512     $ 72,557          
Credit loss expense (recovery) on loans   2,181       221       (374 )     1,640       (1,147 )        
Net loan (charge-offs) recoveries   (1,455 )     (282 )     (1,109 )     (85 )     102          
Balance at end of period $ 72,249     $ 71,523     $ 71,584     $ 73,067     $ 71,512          
                           
Net loan charge-offs (recoveries) to average loans(1)   0.10 %     0.02 %     0.08 %     0.01 %     -0.01 %        
Allowance for credit losses to loans   1.21 %     1.20 %     1.23 %     1.29 %     1.34 %        
                           
Allowance for credit losses related to off-balance sheet items:                          
Balance at beginning of period $ 3,115     $ 3,250     $ 2,313     $ 2,358     $ 2,586          
Credit loss expense (recovery) on off-balance sheet items   (48 )     (135 )     937       (45 )     (228 )        
Balance at end of period $ 3,067     $ 3,115     $ 3,250     $ 2,313     $ 2,358          
                           
Unused commitments to extend credit $ 924,371     $ 780,543     $ 746,354     $ 613,804     $ 626,615          
                           
(1) Annualized                          
                           

Corporate Developments
On January 26, 2023, Hanmi’s Board of Directors declared a cash dividend on its common stock for the first quarter of 2023 of $0.25 per share. The dividend was paid on February 23, 2023, to stockholders of record as of the close of business on February 6, 2023.

Earnings Conference Call
Hanmi Bank will host its first quarter 2023 earnings conference call today, April 25, 2023 at 2:00 p.m. PST (5:00 p.m. EST) to discuss these results. This call will also be webcast. To access the call, please dial 1-877-407-9039 before 2:00 p.m. PST, using access code Hanmi Bank. 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, including any potential recessionary conditions;
  • 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;
  • risks associated with Small Business Administration loans;
  • failure to attract or retain key employees;
  • our ability to access cost-effective funding;
  • changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;
  • 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 and changes in the monetary policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
  • 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; and
  • cyber security and fraud risks 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, 2022, 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

Consolidated Balance Sheets                            
(In thousands)                            
  March 31,   December 31,     Percentage   March 31,           Percentage
    2023       2022     Change Change     2022       Change     Change
Assets                            
Cash and due from banks $ 386,201     $ 352,421     $ 33,780   9.6 %   $ 312,491     $ 73,710     23.6 %
Securities available for sale, at fair value   878,701       853,838       24,863   2.9 %     876,980       1,721     0.2 %
Loans held for sale, at the lower of cost or fair value   3,652       8,043       (4,391 ) -54.6 %     15,617       (11,965 )   -76.6 %
Loans receivable, net of allowance for credit losses   5,908,209       5,895,610       12,599   0.2 %     5,265,988       642,221     12.2 %
Accrued interest receivable   19,004       18,537       467   2.5 %     12,289       6,715     54.6 %
Premises and equipment, net   22,625       22,850       (225 ) -1.0 %     24,410       (1,785 )   -7.3 %
Customers' liability on acceptances   41       328       (287 ) -87.5 %     182       (141 )   -77.5 %
Servicing assets   7,541       7,176       365   5.1 %     7,202       339     4.7 %
Goodwill and other intangible assets, net   11,193       11,225       (32 ) -0.3 %     11,353       (160 )   -1.4 %
Federal Home Loan Bank ("FHLB") stock, at cost   16,385       16,385       -   0.0 %     16,385       -     0.0 %
Bank-owned life insurance   55,814       55,544       270   0.5 %     55,149       665     1.2 %
Prepaid expenses and other assets   124,764       136,305       (11,541 ) -8.5 %     139,006       (14,242 )   -10.2 %
Total assets $ 7,434,130     $ 7,378,262     $ 55,868   0.8 %   $ 6,737,052     $ 697,078     10.3 %
                             
Liabilities and Stockholders' Equity                            
Liabilities:                            
Deposits:                            
Noninterest-bearing $ 2,334,083     $ 2,539,602     $ (205,519 ) -8.1 %   $ 2,678,726     $ (344,643 )   -12.9 %
Interest-bearing   3,866,955       3,628,470       238,485   6.6 %     3,104,444       762,511     24.6 %
Total deposits   6,201,038       6,168,072       32,966   0.5 %     5,783,170       417,868     7.2 %
Accrued interest payable   20,512       7,792       12,720   163.2 %     966       19,546     2023.4 %
Bank's liability on acceptances   41       328       (287 ) -87.5 %     182       (141 )   -77.5 %
Borrowings   350,000       350,000       -   0.0 %     125,000       225,000     180.0 %
Subordinated debentures   129,558       129,409       149   0.1 %     128,967       591     0.5 %
Accrued expenses and other liabilities   70,816       85,146       (14,330 ) -16.8 %     77,315       (6,499 )   -8.4 %
Total liabilities   6,771,965       6,740,747       31,218   0.5 %     6,115,600       656,365     10.7 %
                             
Stockholders' equity:                            
Common stock   33       33       -   0.0 %     33       -     0.0 %
Additional paid-in capital   584,884       583,410       1,474   0.3 %     581,337       3,547     0.6 %
Accumulated other comprehensive income   (79,059 )     (88,985 )     9,926   11.2 %     (44,819 )     (34,240 )   -76.4 %
Retained earnings   283,910       269,542       14,368   5.3 %     210,788       73,122     34.7 %
Less treasury stock   (127,603 )     (126,485 )     (1,118 ) -0.9 %     (125,887 )     (1,716 )   -1.4 %
Total stockholders' equity   662,165       637,515       24,650   3.9 %     621,452       40,713     6.6 %
Total liabilities and stockholders' equity $ 7,434,130     $ 7,378,262       55,868   0.8 %   $ 6,737,052     $ 697,078     10.3 %
                             

 

 

Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except share and per share data)
  Three Months Ended
  March 31,   December 31,   Percentage March 31,   Percentage
  2023   2022   Change 2022   Change
Interest and dividend income:                
Interest and fees on loans receivable $ 80,923   $ 77,123   4.9 % $ 53,924     50.1 %
Interest on securities   4,025     3,633   10.8 %   2,516     60.0 %
Dividends on FHLB stock   289     289   0.0 %   248     16.5 %
Interest on deposits in other banks   2,066     1,194   73.0 %   216     856.5 %
Total interest and dividend income   87,303     82,239   6.2 %   56,904     53.4 %
Interest expense:                
Interest on deposits   25,498     14,900   71.1 %   2,013     1166.7 %
Interest on borrowings   2,369     1,192   98.7 %   337     603.0 %
Interest on subordinated debentures   1,583     1,586   -0.2 %   3,598     -56.0 %
Total interest expense   29,450     17,678   66.6 %   5,948     395.1 %
Net interest income before credit loss expense   57,853     64,561   -10.4 %   50,956     13.5 %
Credit loss expense (recovery)   2,133     52   4001.9 %   (1,375 )   164.5 %
Net interest income after credit loss expense   55,720     64,509   -13.6 %   52,331     6.5 %
Noninterest income:                
Service charges on deposit accounts   2,579     2,742   -5.9 %   2,875     -10.3 %
Trade finance and other service charges and fees   1,258     1,115   12.8 %   1,142     10.2 %
Gain on sale of Small Business Administration ("SBA") loans   1,869     1,933   -3.3 %   2,521     -25.9 %
Other operating income   2,630     1,667   57.8 %   1,982     32.7 %
Total noninterest income   8,336     7,457   11.8 %   8,520     -2.2 %
Noninterest expense:                
Salaries and employee benefits   20,610     20,279   1.6 %   17,717     16.3 %
Occupancy and equipment   4,412     3,668   20.3 %   4,646     -5.0 %
Data processing   3,253     3,431   -5.2 %   3,236     0.5 %
Professional fees   1,335     1,783   -25.1 %   1,430     -6.6 %
Supplies and communications   676     683   -1.0 %   665     1.7 %
Advertising and promotion   833     974   -14.5 %   817     2.0 %
Other operating expenses   1,672     3,026   -44.7 %   3,181     -47.4 %
Total noninterest expense   32,791     33,844   -3.1 %   31,692     3.5 %
Income before tax   31,265     38,122   -18.0 %   29,159     7.2 %
Income tax expense   9,274     9,643   -3.8 %   8,464     9.6 %
Net income $ 21,991   $ 28,479   -22.8 % $ 20,695     6.3 %
                   
Basic earnings per share: $ 0.72   $ 0.93     $ 0.68      
Diluted earnings per share: $ 0.72   $ 0.93     $ 0.68      
                 
Weighted-average shares outstanding:                
Basic   30,347,325     30,346,343       30,254,212      
Diluted   30,430,745     30,442,175       30,377,580      
Common shares outstanding   30,555,287     30,485,621       30,468,458      
                 
                 
                 

Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(Dollars in thousands)
  Three Months Ended
  March 31, 2023   December 31, 2022   March 31, 2022
      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) $ 5,944,399     $ 80,923 5.51 %   $ 5,877,298     $ 77,123 5.21 %   $ 5,231,672     $ 53,924 4.18 %
Securities(2)   980,712       4,025 1.67 %     966,299       3,633 1.53 %     930,505       2,516 1.11 %
FHLB stock   16,385       289 7.16 %     16,385       289 7.00 %     16,385       248 6.14 %
Interest-bearing deposits in other banks   192,902       2,066 4.34 %     138,476       1,194 3.42 %     494,887       216 0.18 %
Total interest-earning assets   7,134,398       87,303 4.96 %     6,998,458       82,239 4.67 %     6,673,449       56,904 3.46 %
                             
Noninterest-earning assets:                            
Cash and due from banks   65,088             70,203             62,968        
Allowance for credit losses   (71,452 )           (71,976 )           (73,177 )      
Other assets   239,121             255,493             229,952        
                             
Total assets $ 7,367,155           $ 7,252,178           $ 6,893,192        
                             
Liabilities and Stockholders' Equity                            
Interest-bearing liabilities:                            
Deposits:                            
Demand: interest-bearing $ 109,391     $ 29 0.11 %   $ 119,106     $ 32 0.11 %   $ 124,892     $ 17 0.06 %
Money market and savings   1,453,569       7,315 2.04 %     1,781,834       6,187 1.38 %     2,106,008       1,189 0.23 %
Time deposits   2,223,615       18,154 3.31 %     1,585,798       8,681 2.17 %     937,044       807 0.35 %
Total interest-bearing deposits   3,786,575       25,498 2.73 %     3,486,738       14,900 1.70 %     3,167,944       2,013 0.26 %
Borrowings   268,056       2,369 3.58 %     197,554       1,269 2.55 %     130,556       337 1.05 %
Subordinated debentures   129,483       1,583 4.89 %     129,335       1,509 4.67 %     213,171       3,598 6.75 %
Total interest-bearing liabilities   4,184,114       29,450 2.85 %     3,813,627       17,678 1.84 %     3,511,671       5,948 0.69 %
                             
Noninterest-bearing liabilities and equity:                            
Demand deposits: noninterest-bearing   2,324,413             2,593,948             2,634,398        
Other liabilities   127,112             134,074             88,367        
Stockholders' equity   731,516             710,529             658,756        
                             
Total liabilities and stockholders' equity $ 7,367,155           $ 7,252,178           $ 6,893,192        
                             
Net interest income (tax equivalent basis)     $ 57,853         $ 64,561         $ 50,956  
                             
Cost of deposits       1.69 %         0.97 %         0.14 %
Net interest spread (taxable equivalent basis)       2.10 %         2.83 %         2.77 %
Net interest margin (taxable equivalent basis)       3.28 %         3.67 %         3.10 %
                             
                             
                             
(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.          
                             

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)
                   
  March 31,   December 31,   September 30,   June 30,   March 31,
Hanmi Financial Corporation 2023   2022   2022   2022   2022
Assets $ 7,434,130     $ 7,378,262     $ 7,128,511     $ 6,955,968     $ 6,737,052  
Less goodwill and other intangible assets   (11,193 )     (11,225 )     (11,267 )     (11,310 )     (11,353 )
Tangible assets $ 7,422,937     $ 7,367,037     $ 7,117,244     $ 6,944,658     $ 6,725,699  
                   
Stockholders' equity(1) $ 662,165     $ 637,515     $ 608,893     $ 618,296     $ 621,452  
Less goodwill and other intangible assets   (11,193 )     (11,225 )     (11,267 )     (11,310 )     (11,353 )
Tangible stockholders' equity(1) $ 650,972     $ 626,290     $ 597,626     $ 606,986     $ 610,099  
                   
Stockholders' equity to assets   8.91 %     8.64 %     8.54 %     8.89 %     9.22 %
Tangible common equity to tangible assets(1)   8.77 %     8.50 %     8.40 %     8.74 %     9.07 %
                   
Common shares outstanding   30,555,287       30,485,621       30,484,004       30,482,990       30,468,458  
Tangible common equity per common share $ 21.30     $ 20.54     $ 19.60     $ 19.91     $ 20.02  
                   
                   
(1) There were no preferred shares outstanding at the periods indicated.                
                   

Primary Logo

Source: Hanmi Bank