Hanmi Financial Corporation Reports Record Net Income of $65.6 Million for 2006
Fourth Quarter Earnings Increase 16.3 Percent to $17.3 Million
LOS ANGELES--(BUSINESS WIRE)--
Hanmi Financial Corporation (NASDAQ:HAFC), the holding company for Hanmi Bank, today reported net income for the three months ended December 31, 2006 of $17.3 million, an increase of 16.3 percent over net income of $14.9 million for the comparable period a year ago. Earnings per share were $0.35 (diluted), an increase of 16.7 percent compared to $0.30 (diluted) for the same period in 2005.
For the year ended December 31, 2006, net income was $65.6 million, an increase of 12.7 percent over net income of $58.2 million for 2005. Earnings per share were $1.33 (diluted), an increase of 13.7 percent compared to $1.17 (diluted) in 2005.
"Supported in part by good expense control and a growing loan portfolio, we are pleased to have completed another year of record income and record earnings per share," said Sung Won Sohn, Ph.D., President and Chief Executive Officer. "These results were achieved despite a marketplace in which throughout the year we experienced intense competition on pricing of both loans and deposits -- an environment that is still with us in the first quarter of 2007."
"Modest fourth-quarter declines in both net interest income before provision for credit losses, to $38.8 million from $39.7 million in the third quarter, and in net interest margin, to 4.59 percent from 4.79 percent in the third quarter, point to the fact that the marketplace remains extremely competitive, notably in terms of cost of funds. For example, our cost of interest-bearing deposits in the fourth quarter was 4.85 percent, 12 basis points higher than in the preceding quarter and fully 119 basis points higher than in the fourth quarter of 2005. By comparison, the yield on the loan portfolio was 8.77 percent in the fourth quarter, 64 basis points higher than in the comparable period a year ago."
"Although we see some mitigation in the upward pressure on rates, we currently anticipate no substantial softening in the competition for loans and deposits, nor in the pressure it will continue to put on the operating results of Hanmi and its competitors," added Dr. Sohn. "Yet our business remains strong, and, as in the past, our focus will be on growing net interest income. To that end, our credit quality remains excellent, our efficiency ratio continues to improve, and our liquidity is such that we believe we can maintain the desired level of asset sensitivity while achieving further growth in the loan portfolio."
FULL-YEAR HIGHLIGHTS
-- Net interest income before provision for credit losses for 2006 increased 10.8 percent to $153.8 million from $138.8 million for 2005.
-- Net interest margin for 2006 decreased to 4.78 percent from 4.83 percent for 2005.
-- Return on average assets for 2006 was 1.82 percent, compared to 1.79 percent for 2005.
-- Return on average shareholders' equity for 2006 was 14.33 percent, compared to 13.94 percent for 2005.
-- The loan portfolio increased by $368.3 million, or 14.9 percent, to $2.84 billion at December 31, 2006 from $2.47 billion at December 31, 2005.
-- Non-performing assets increased by $4.1 million, or 40.3 percent, to $14.2 million at December 31, 2006, compared to $10.1 million at December 31, 2005.
-- Delinquent loans fell to $19.6 million at December 31, 2006 from $21.2 million at December 31, 2005.
-- The provision for credit losses was $7.2 million for 2006, compared to $5.4 million for 2005.
-- The allowance for loan losses was 0.96 percent and 1.00 percent of the gross loan portfolio at December 31, 2006 and December 31, 2005, respectively.
-- Non-interest income was $35.6 million for 2006, compared to $30.4 million for 2005.
-- The efficiency ratio for 2006 improved to 40.11 percent compared to 41.16 percent for 2005.
FOURTH-QUARTER HIGHLIGHTS
-- Net interest income before provision for credit losses for the fourth quarter of 2006 was $38.8 million, compared to $39.7 million for the third quarter of 2006 and $36.4 million for the fourth quarter of 2005.
-- Net interest margin for the fourth quarter of 2006 was 4.59 percent, compared to 4.79 percent for the third quarter of 2006 and 4.75 percent for the fourth quarter of 2005.
-- Return on average assets for the fourth quarter of 2006 was 1.84 percent, compared to 1.90 percent for the third quarter of 2006 and 1.72 percent for the fourth quarter of 2005.
-- Return on average shareholders' equity for the fourth quarter of 2006 was 14.23 percent, compared to 15.08 percent for the third quarter of 2006 and 13.94 percent for the fourth quarter of 2005.
-- The loan portfolio increased by $15.5 million, or 0.5 percent, to $2.84 billion at December 31, 2006 from $2.82 billion at September 30, 2006.
-- Non-performing assets increased by $739,000, or 5.5 percent, to $14.2 million at December 31, 2006, compared to $13.5 million at September 30, 2006.
-- Delinquent loans fell to $19.6 million at December 31, 2006 from $24.1 million at September 30, 2006.
-- The provision for credit losses was $1.6 million for the fourth quarter of 2006, compared to $1.7 million for the third quarter of 2006 and $1.7 million for the fourth quarter of 2005.
-- The allowance for loan losses was 0.96 percent and 0.99 percent of the gross loan portfolio at December 31, 2006 and September 30, 2006, respectively.
-- Non-interest income was $10.8 million for the fourth quarter of 2006, compared to $8.8 million for the third quarter of 2006 and $7.8 million for the fourth quarter of 2005.
-- The efficiency ratio for the fourth quarter of 2006 was 39.59 percent compared to 40.14 percent for the third quarter of 2006 and 41.93 percent for the fourth quarter of 2005.
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES
Net interest income before provision for credit losses was $38.8 million for the fourth quarter of 2006, a decrease of $952,000, or 2.4 percent, compared to $39.7 million for the third quarter of 2006, and an increase of $2.4 million, or 6.5 percent, compared to $36.4 million for the fourth quarter of 2005.
The yield on the loan portfolio was 8.77 percent for the fourth quarter of 2006, a decrease of 12 basis points compared to 8.89 percent for the third quarter of 2006, and an increase of 64 basis points compared to 8.13 percent for the fourth quarter of 2005. The yield on investment securities was 4.46 percent for the fourth quarter of 2006, a decrease of 2 basis points compared to 4.48 percent for the third quarter of 2006, and an increase of 24 basis points compared to 4.22 percent for the fourth quarter of 2005. The yield on average interest-earning assets was 8.18 percent for the fourth quarter of 2006, a decrease of 11 basis points compared to 8.29 percent for the third quarter of 2006, and an increase of 75 basis points compared to 7.43 percent for the fourth quarter of 2005. The cost of interest-bearing liabilities was 4.85 percent for the fourth quarter of 2006, an increase of 12 basis points compared to 4.73 percent for the third quarter of 2006, and an increase of 119 basis points compared to 3.66 percent for the fourth quarter of 2005, as the Company continued to operate in a highly competitive deposit taking environment.
The year-over-year increase of $12.2 million in interest income was primarily due to: 1) an increase in the yield on average interest-earning assets, which increased from 7.43 percent to 8.18 percent, an increase of 75 basis points that provided an additional $4.8 million of interest income compared to the fourth quarter of 2005; and 2) an increase in average interest-earning assets, which increased from $3.04 billion to $3.35 billion, an increase of $311.1 million that provided an additional $7.4 million of interest income compared to the fourth quarter of 2005. The majority of this growth was funded by a $135.1 million, or 4.8 percent, increase in average deposits. Average borrowings also increased by $107.5 million, or 72.5 percent, compared to the fourth quarter of 2005. During 2006, the Company borrowed $130.0 million from the Federal Home Loan Bank for terms of 12 to 24 months to allow it to fund fixed-rate loans, but maintain the desired level of asset sensitivity.
PROVISION FOR CREDIT LOSSES
The provision for credit losses represents the charge against current earnings that is determined by management, through a disciplined credit review process, to be the amount needed to maintain an allowance that is sufficient to absorb estimated probable loan losses inherent in the loan portfolio. The provision for credit losses was $1.6 million for the fourth quarter of 2006, compared to $1.7 million for the third quarter of 2006 and $1.7 million for the fourth quarter of 2005. The slight decrease in the provision for credit losses is attributable to the low historical loss experience associated with the migration analysis that Hanmi Bank employs in its credit review process.
As of December 31, 2006, non-performing loans as a percentage of the total loan portfolio were 0.50 percent, compared to 0.47 percent at September 30, 2006 and 0.41 percent at December 31, 2005. As of December 31, 2006, the allowance for loan losses was 193.9 percent of non-performing loans, compared to 209.8 at September 30, 2006 and 246.4 percent at December 31, 2005, reflecting better collateral coverage for non-performing loans outstanding at December 31, 2006, compared to the prior periods.
NON-INTEREST INCOME
Non-interest income increased by $2.0 million, or 22.8 percent, to $10.8 million for the fourth quarter of 2006, compared to $8.8 million for the third quarter of 2006, and increased by $3.0 million, or 38.7 percent, compared to $7.8 million for the fourth quarter of 2005. The increase in non-interest income is primarily attributable to gain on sales of loans of $3.4 million for the fourth quarter of 2006, compared to $1.4 million for the third quarter of 2006 and $945,000 for the fourth quarter of 2005. Gains represented 7.0 percent, 4.3 percent and 4.6 percent of loan principal sold in the quarters ended December 31, 2006, September 30, 2006 and December 31, 2005, respectively. The remaining non-interest income increased by $39,000, or 0.5 percent, to $7.4 million for the fourth quarter of 2006, and increased by $592,000, or 8.7 percent, compared to $6.8 million for the fourth quarter of 2005.
NON-INTEREST EXPENSES
Non-interest expenses increased by $153,000, or 0.8 percent, to $19.6 million for the fourth quarter of 2006, compared to $19.5 million for the third quarter of 2006, and increased by $1.1 million, or 5.9 percent, compared to $18.5 million for the fourth quarter of 2005. Salaries and employee benefits decreased by $54,000, or 0.5 percent, to $10.3 million for the fourth quarter of 2006, compared to $10.4 million for the third quarter of 2006. The decrease in salaries and employee benefits is primarily due to lower bonus accruals. Advertising and promotion expense increased by $210,000, or 31.6 percent, to $875,000, compared to $665,000 for the third quarter of 2006, due to additional seasonal promotional activities, and other operating expenses decreased by $235,000, or 7.9 percent, to $2.7 million, compared to $3.0 million for the third quarter of 2006.
The efficiency ratio (non-interest expenses divided by the sum of net interest income before provision for credit losses and non-interest income) for the fourth quarter of 2006 was 39.59 percent, compared to 40.14 percent for the third quarter of 2006 and 41.93 percent for the fourth quarter of 2005.
PROVISION FOR INCOME TAXES
The provision for income taxes was $40.6 million at a 38.2 percent effective tax rate for the year ended December 31, 2006, compared to $36.5 million at a 38.5 percent effective tax rate for the year ended December 31, 2005.
FINANCIAL POSITION
Total assets were $3.73 billion at December 31, 2006, an increase of $311.0 million, or 9.1 percent, compared to $3.41 billion at December 31, 2005, and a decrease of $14.6 million from the September 30, 2006 balance of $3.74 billion.
At December 31, 2006, net loans totaled $2.84 billion, an increase of $368.3 million, or 14.9 percent, from $2.47 billion at December 31, 2005. The increase in net loans was primarily attributable to increased loan production in 2006. Real estate loans increased by $67.2 million, or 6.9 percent, to $1.04 billion at December 31, 2006, compared to $974.2 million at December 31, 2005. Commercial and industrial loans grew by $294.9 million, or 20.6 percent, to $1.73 billion at December 31, 2006, compared to $1.43 billion at December 31, 2005.
The growth in total assets was funded by an increase in deposits of $118.6 million, up 4.2 percent to $2.94 billion at December 31, 2006, compared to $2.83 billion at December 31, 2005, and an increase in FHLB advances and other borrowings of $122.7 million, up 264.8 percent to $169.0 million at December 31, 2006, compared to $46.3 million at December 31, 2005. The increase in deposits included increases in time deposits of $100,000 or more of $221.4 million, up 19.1 percent to $1.38 billion, and in other time deposits of $17.7 million, up 6.4 percent to $295.5 million, partially offset by decreases in money market checking accounts of $87.9 million, down 16.7 percent to $438.3 million, in savings accounts of $22.3 million, down 18.4 percent to $99.3 million, and in noninterest-bearing demand deposits of $10.3 million, down 1.4 percent to $728.3 million.
At December 31, 2006, goodwill totaled $207.6 million, a decrease of $1.4 million, or 0.7 percent, from $209.1 million at December 31, 2005 due to a tax refund related to the acquisition of Pacific Union Bank.
ASSET QUALITY
Total non-performing assets, including loans 90 days or more past due and still accruing, non-accrual loans and other real estate owned ("OREO") assets, increased by $739,000, or 5.5 percent, to $14.2 million at December 31, 2006 from $13.5 million at September 30, 2006, and increased by $4.1 million, or 40.3 percent, from $10.1 million at December 31, 2005. Non-performing loans as a percentage of gross loans increased to 0.50 percent at December 31, 2006 from 0.47 percent at September 30, 2006 and 0.41 percent at December 31, 2005. As of December 31, 2006, loans to borrowers in the wholesale trade, retail trade, and accommodation and food services industries made up 25.4 percent, 24.7 percent and 16.1 percent, respectively, of non-performing assets.
At December 31, 2006, non-accrual loans were $14.2 million, up $4.1 million, or 40.4 percent, from $10.1 million at December 31, 2005. There were no OREO assets at December 31, 2006 or December 31, 2005. At December 31, 2006, delinquent loans were $19.6 million, down $4.5 million from $24.1 million at September 30, 2006, and down $1.6 million from $21.2 million at December 31, 2005.
At December 31, 2006, the allowance for loan losses was $27.6 million, and represented management's best estimate of the amount needed to maintain an allowance that the Company believes should be sufficient to absorb estimated probable loan losses inherent in its loan portfolio. In addition, the Company maintained a liability for off-balance sheet exposure, primarily unfunded loan commitments, totaling $2.1 million at December 31, 2006 and December 31, 2005. The allowance for loan losses represented 0.96 percent of gross loans at December 31, 2006, compared to 0.99 percent and 1.00 percent at September 30, 2006 and December 31, 2005, respectively. As of December 31, 2006, the allowance for loan losses was 193.9 percent of non-performing loans, compared to 209.8 percent at September 30, 2006 and 246.4 percent at December 31, 2005.
PRIOR PERIOD RECLASSIFICATIONS AND ADJUSTMENTS
Certain reclassifications were made to the prior periods' presentation to conform to the current period's presentation.
Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" ("SAB No. 108"), permits public companies to record the cumulative effect of adjustments previously considered immaterial under the registrant's prior year policy in assets, liabilities and/or shareholders' equity as of January 1, 2006. Consistent with SAB No. 108, shareholders' equity as of January 1, 2006 has been adjusted in the amount of $776,000 (net of tax effect of $563,000) to reflect the Company's share of losses from certain tax credit partnership investments not recognized previously.
ABOUT HANMI FINANCIAL CORPORATION
Headquartered in Los Angeles, Hanmi Bank, a wholly owned subsidiary of Hanmi Financial Corporation, provides services to the multi-ethnic communities of California, with 22 full-service offices in Los Angeles, Orange, San Francisco, Santa Clara and San Diego counties, and eight loan production offices in California, Colorado, Georgia, Illinois, Texas, Virginia and Washington. Hanmi Bank specializes in commercial, SBA and trade finance lending, and is a recognized community leader. Hanmi Bank's mission is to provide a full range of quality products and premier services to its customers and to maximize shareholder value. Additional information is available at www.hanmifinancial.com.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements, which are included in accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement. These factors include the following: general economic and business conditions in those areas in which we operate; demographic changes; competition for loans and deposits; fluctuations in interest rates; risks of natural disasters related to our real estate portfolio; risks associated with SBA loans; changes in governmental regulation; changes in credit quality; the availability of capital to fund the expansion of our business; and changes in securities markets. In addition, we set forth certain risks in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, which could cause actual results to differ from those projected in our forward-looking statements.
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Thousands)
December September December
31, 30, % 31, %
2006 2006 Change 2005 Change
----------- ----------- ------- ----------- -------
ASSETS
------------------
Cash and Cash
Equivalents $138,501 $164,609 (15.9)% $163,477 (15.3)%
Term Federal Funds
Sold 5,000 -- -- -- --
Investment
Securities 391,579 398,956 (1.8)% 443,912 (11.8)%
Loans:
Loans, Net of
Deferred Loan
Fees 2,864,947 2,850,146 0.5 % 2,494,043 14.9 %
Allowance for
Loan Losses (27,557) (28,276) (2.5)% (24,963) 10.4 %
----------- ----------- ------- ----------- -------
Net Loans 2,837,390 2,821,870 0.5 % 2,469,080 14.9 %
----------- ----------- ------- ----------- -------
Customers'
Liability on
Acceptances 8,403 11,245 (25.3)% 8,432 (0.3)%
Premises and
Equipment, Net 20,075 20,322 (1.2)% 20,784 (3.4)%
Accrued Interest
Receivable 16,919 16,190 4.5 % 14,120 19.8 %
Deferred Income
Taxes 13,064 11,615 12.5 % 9,651 35.4 %
Servicing Asset 4,579 4,266 7.3 % 3,910 17.1 %
Goodwill 207,646 207,646 -- 209,058 (0.7)%
Core Deposit
Intangible 6,312 6,876 (8.2)% 8,691 (27.4)%
Federal Reserve
Bank and Federal
Home Loan Bank
Stock 24,922 24,768 0.6 % 24,587 1.4 %
Bank-Owned Life
Insurance 23,592 23,368 1.0 % 22,713 3.9 %
Other Assets 27,261 28,080 (2.9)% 15,837 72.1 %
----------- ----------- ------- ----------- -------
Total Assets $3,725,243 $3,739,811 (0.4)% $3,414,252 9.1 %
=========== =========== ======= =========== =======
LIABILITIES AND
SHAREHOLDERS'
EQUITY
------------------
Liabilities:
Deposits:
Noninterest-
Bearing $728,348 $756,901 (3.8)% $738,618 (1.4)%
Interest-
Bearing 2,216,367 2,216,880 -- 2,087,496 6.2 %
----------- ----------- ------- ----------- -------
Total Deposits 2,944,715 2,973,781 (1.0)% 2,826,114 4.2 %
Accrued Interest
Payable 22,582 19,191 17.7 % 11,911 89.6 %
Acceptances
Outstanding 8,403 11,245 (25.3)% 8,432 (0.3)%
FHLB Advances and
Other Borrowings 169,037 169,435 (0.2)% 46,331 264.8 %
Junior
Subordinated
Debentures 82,406 82,406 -- 82,406 --
Other Liabilities 10,983 12,392 (11.4)% 12,281 (10.6)%
----------- ----------- ------- ----------- -------
Total
Liabilities 3,238,126 3,268,450 (0.9)% 2,987,475 8.4 %
Shareholders'
Equity 487,117 471,361 3.3 % 426,777 14.1 %
----------- ----------- ------- ----------- -------
Total
Liabilities and
Shareholders'
Equity $3,725,243 $3,739,811 (0.4)% $3,414,252 9.1 %
=========== =========== ======= =========== =======
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
For the Three Months Ended
---------------------------------------------------
Dec. 31, Sept. 30, % Dec. 31, %
2006 2006 Change 2005 Change
----------- ----------- ------------------- -------
INTEREST INCOME:
Interest and Fees
on Loans $63,666 $63,392 0.4 % $51,117 24.5 %
Interest on
Investments 4,762 4,836 (1.5)% 4,848 (1.8)%
Interest on
Federal Funds
Sold 654 436 50.0 % 910 (28.1)%
Interest on Term
Federal Funds
Sold 2 -- -- -- --
----------- ----------- ------------------- -------
Total Interest
Income 69,084 68,664 0.6 % 56,875 21.5 %
----------- ----------- ------------------- -------
INTEREST EXPENSE:
Interest on
Deposits 26,346 25,178 4.6 % 18,381 43.3 %
Interest on FHLB
Advances and
Other Borrowings 2,278 2,084 9.3 % 687 231.6 %
Interest on Junior
Subordinated
Debentures 1,682 1,672 0.6 % 1,403 19.9 %
----------- ----------- ------------------- -------
Total Interest
Expense 30,306 28,934 4.7 % 20,471 48.0 %
----------- ----------- ------------------- -------
NET INTEREST
INCOME BEFORE
PROVISION FOR
CREDIT LOSSES 38,778 39,730 (2.4)% 36,404 6.5 %
Provision for
Credit Losses 1,631 1,682 (3.0)% 1,652 (1.3)%
----------- ----------- ------------------- -------
NET INTEREST
INCOME AFTER
PROVISION FOR
CREDIT LOSSES 37,147 38,048 (2.4)% 34,752 6.9 %
----------- ----------- ------------------- -------
NON-INTEREST
INCOME:
Service Charges
on Deposit
Accounts 4,471 4,249 5.2 % 4,125 8.4 %
Trade Finance
Fees 1,153 1,227 (6.0)% 1,126 2.4 %
Remittance Fees 519 517 0.4 % 577 (10.1)%
Other Service
Charges and Fees 620 591 4.9 % 548 13.1 %
Bank-Owned Life
Insurance Income 225 221 1.8 % 215 4.7 %
Increase in Fair
Value of
Derivatives 351 389 (9.8)% 140 150.7 %
Other Income 83 193 (57.0)% 100 (17.0)%
Gain on Sales of
Loans 3,367 1,400 140.5 % 945 256.3 %
Gain (Loss) on
Sales of
Securities
Available for
Sale -- (3) (100.0)% -- --
----------- ----------- ------------------- -------
Total Non-
Interest
Income 10,789 8,784 22.8 % 7,776 38.7 %
----------- ----------- ------------------- -------
NON-INTEREST
EXPENSES:
Salaries and
Employee
Benefits 10,303 10,357 (0.5)% 9,972 3.3 %
Occupancy and
Equipment 2,658 2,596 2.4 % 2,397 10.9 %
Data Processing 1,304 1,202 8.5 % 1,181 10.4 %
Advertising and
Promotion 875 665 31.6 % 930 (5.9)%
Supplies and
Communications 543 636 (14.6)% 689 (21.2)%
Professional Fees 360 390 (7.7)% 769 (53.2)%
Amortization of
Core Deposit
Intangible 564 585 (3.6)% 645 (12.6)%
Decrease in Fair
Value of
Embedded Option 290 78 271.8 % -- --
Other Operating
Expenses 2,729 2,964 (7.9)% 1,942 40.5 %
Merger-Related
Expenses -- -- -- -- --
----------- ----------- ------------------- -------
Total Non-
Interest
Expenses 19,626 19,473 0.8 % 18,525 5.9 %
----------- ----------- ------------------- -------
INCOME BEFORE
PROVISION FOR
INCOME TAXES 28,310 27,359 3.5 % 24,003 17.9 %
Provision for
Income Taxes 11,000 9,762 12.7 % 9,113 20.7 %
----------- ----------- ------------------- -------
NET INCOME $17,310 $17,597 (1.6)% $14,890 16.3 %
=========== =========== =================== =======
EARNINGS PER
SHARE:
Basic $0.35 $0.36 (2.8)% $0.31 12.9 %
Diluted $0.35 $0.36 (2.8)% $0.30 16.7 %
WEIGHTED-AVERAGE
SHARES
OUTSTANDING:
Basic 48,969,795 48,890,662 48,548,081
Diluted 49,567,778 49,450,601 49,318,671
SHARES OUTSTANDING
AT PERIOD-END 49,076,613 48,991,146 48,658,798
For the Year Ended
--------------------------------
Dec. 31, Dec. 31, %
2006 2005 Change
----------- ----------- --------
INTEREST INCOME:
Interest and Fees on Loans $239,075 $180,845 32.2 %
Interest on Investments 19,710 18,507 6.5 %
Interest on Federal Funds Sold 1,402 1,589 (11.8)%
Interest on Term Federal Funds Sold 2 -- --
----------- ----------- --------
Total Interest Income 260,189 200,941 29.5 %
----------- ----------- --------
INTEREST EXPENSE:
Interest on Deposits 93,036 54,192 71.7 %
Interest on FHLB Advances and Other
Borrowings 6,977 3,017 131.3 %
Interest on Junior Subordinated
Debentures 6,416 4,902 30.9 %
----------- ----------- --------
Total Interest Expense 106,429 62,111 71.4 %
----------- ----------- --------
NET INTEREST INCOME BEFORE PROVISION
FOR CREDIT LOSSES 153,760 138,830 10.8 %
Provision for Credit Losses 7,173 5,395 33.0 %
----------- ----------- --------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 146,587 133,435 9.9 %
----------- ----------- --------
NON-INTEREST INCOME:
Service Charges on Deposit Accounts 17,134 15,782 8.6 %
Trade Finance Fees 4,567 4,269 7.0 %
Remittance Fees 2,056 2,122 (3.1)%
Other Service Charges and Fees 2,359 2,496 (5.5)%
Bank-Owned Life Insurance Income 879 845 4.0 %
Increase in Fair Value of Derivatives 1,074 1,105 (2.8)%
Other Income 616 625 (1.4)%
Gain on Sales of Loans 6,917 3,021 129.0 %
Gain (Loss) on Sales of Securities
Available for Sale 2 117 (98.3)%
----------- ----------- --------
Total Non-Interest Income 35,604 30,382 17.2 %
----------- ----------- --------
NON-INTEREST EXPENSES:
Salaries and Employee Benefits 40,512 36,839 10.0 %
Occupancy and Equipment 10,130 8,978 12.8 %
Data Processing 4,939 4,844 2.0 %
Advertising and Promotion 2,997 2,913 2.9 %
Supplies and Communications 2,391 2,556 (6.5)%
Professional Fees 1,910 2,201 (13.2)%
Amortization of Core Deposit
Intangible 2,379 2,785 (14.6)%
Decrease in Fair Value of Embedded
Option 582 748 (22.2)%
Other Operating Expenses 10,114 7,778 30.0 %
Merger-Related Expenses -- (509) (100.0)%
----------- ----------- --------
Total Non-Interest Expenses 75,954 69,133 9.9 %
----------- ----------- --------
INCOME BEFORE PROVISION FOR INCOME
TAXES 106,237 94,684 12.2 %
Provision for Income Taxes 40,588 36,455 11.3 %
----------- ----------- --------
NET INCOME $65,649 $58,229 12.7 %
=========== =========== ========
EARNINGS PER SHARE:
Basic $1.34 $1.18 13.6 %
Diluted $1.33 $1.17 13.7 %
WEIGHTED-AVERAGE SHARES OUTSTANDING:
Basic 48,850,221 49,174,885
Diluted 49,435,128 49,942,356
SHARES OUTSTANDING AT PERIOD-END 49,076,613 48,658,798
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
SELECTED FINANCIAL DATA (UNAUDITED)
(Dollars in Thousands)
For the Three Months Ended
--------------------------------------------------
Dec. 31, Sept. 30, % Dec. 31, %
2006 2006 Change 2005 Change
--------------------------------------------------
AVERAGE BALANCES:
Average Gross
Loans, Net of
Deferred Loan
Fees $2,881,515 $2,828,972 1.9 % $2,495,309 15.5 %
Average
Investment
Securities 395,313 401,039 (1.4)% 428,488 (7.7)%
Average
Interest-
Earning Assets 3,349,911 3,287,581 1.9 % 3,038,836 10.2 %
Average Total
Assets 3,735,578 3,675,091 1.6 % 3,429,114 8.9 %
Average
Deposits 2,953,226 2,927,956 0.9 % 2,818,099 4.8 %
Average
Borrowings 255,700 241,404 5.9 % 148,233 72.5 %
Average Interest-
Bearing
Liabilities 2,480,902 2,427,883 2.2 % 2,218,902 11.8 %
Average
Shareholders'
Equity 482,486 463,011 4.2 % 423,702 13.9 %
Average
Tangible
Equity 268,201 248,147 8.1 % 205,576 30.5 %
PERFORMANCE RATIOS:
Return on
Average Assets 1.84% 1.90% 1.72%
Return on Average
Shareholders'
Equity 14.23% 15.08% 13.94%
Return on
Average
Tangible Equity 25.61% 28.13% 28.74%
Efficiency
Ratio(a) 39.59% 40.14% 41.93%
Net Interest
Margin 4.59% 4.79% 4.75%
ALLOWANCE FOR LOAN
LOSSES:
Balance at the
Beginning of
Period $28,276 $27,250 3.8 % $24,523 15.3 %
Provision Charged
to Operating
Expense 1,631 1,682 (3.0)% 1,546 5.5 %
Charge-Offs,
Net of
Recoveries (2,350) (656)258.2 % (1,106) 112.5 %
----------------------------- --------------------
Balance at the
End of Period $27,557 $28,276 (2.5)% $24,963 10.4 %
============================= ====================
Allowance for Loan
Losses to Total
Gross Loans 0.96% 0.99% 1.00%
Allowance for Loan
Losses to Total
Non-Performing
Loans 193.9% 209.8% 246.4%
ALLOWANCE FOR OFF-
BALANCE SHEET
ITEMS:
Balance at the
Beginning of
Period $2,130 $2,130 -- $2,024 5.2 %
Provision Charged
to Operating
Expense -- -- -- 106 (100.0)%
----------------------------- --------------------
Balance at the
End of Period $2,130 $2,130 -- $2,130 --
============================= ====================
For the Year Ended
-------------------------------
Dec. 31, Dec. 31, %
2006 2005 Change
-------------------------------
AVERAGE BALANCES:
Average Gross Loans, Net of Deferred
Loan Fees $2,747,922 $2,382,230 15.4 %
Average Investment Securities 414,672 418,750 (1.0)%
Average Interest-Earning Assets 3,214,761 2,871,564 12.0 %
Average Total Assets 3,602,181 3,249,190 10.9 %
Average Deposits 2,881,448 2,632,254 9.5 %
Average Borrowings 221,347 165,482 33.8 %
Average Interest-Bearing Liabilities 2,367,389 2,046,227 15.7 %
Average Shareholders' Equity 458,227 417,813 9.7 %
Average Tangible Equity 242,362 198,527 22.1 %
PERFORMANCE RATIOS:
Return on Average Assets 1.82% 1.79%
Return on Average Shareholders'
Equity 14.33% 13.94%
Return on Average Tangible Equity 27.09% 29.33%
Efficiency Ratio(a) 40.11% 41.16%
Net Interest Margin 4.78% 4.83%
ALLOWANCE FOR LOAN LOSSES:
Balance at the Beginning of Period $24,963 $22,702 10.0 %
Provision Charged to Operating
Expense 7,173 5,065 41.6 %
Charge-Offs, Net of Recoveries (4,579) (2,804) 63.3 %
-------------------------------
Balance at the End of Period $27,557 $24,963 10.4 %
===============================
Allowance for Loan Losses to Total
Gross Loans 0.96% 1.00%
Allowance for Loan Losses to Total
Non-Performing Loans 193.9% 246.4%
ALLOWANCE FOR OFF-BALANCE SHEET ITEMS:
Balance at the Beginning of Period $2,130 $1,800 18.3 %
Provision Charged to Operating
Expense -- 330 (100.0)%
-------------------------------
Balance at the End of Period $2,130 $2,130 --
===============================
(a) Excluding reversal of merger-related expenses totaling $509,000
for the year ended December 31, 2005.
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
SELECTED FINANCIAL DATA (UNAUDITED) (Continued)
(Dollars in Thousands)
Dec. 31, Sept. 30, % Dec. 31, %
2006 2006 Change 2005 Change
----------- ----------- ------- ----------- -------
NON-PERFORMING
ASSETS:
Non-Accrual
Loans $14,213 $13,470 5.5 % $10,122 40.4 %
Loans 90 Days or
More Past Due
and Still
Accruing 2 6 (66.7)% 9 (77.8)%
----------- ----------- ------- ----------- -------
Total Non-
Performing
Loans 14,215 13,476 5.5 % 10,131 40.3 %
Other Real
Estate
Owned -- -- -- -- --
----------- ----------- ------- ----------- -------
Total Non-
Performing
Assets $14,215 $13,476 5.5 % $10,131 40.3 %
=========== =========== ======= =========== =======
Total Non-
Performing
Loans/Total
Gross Loans 0.50% 0.47% 0.41%
Total Non-
Performing
Assets/Total
Assets 0.38% 0.36% 0.30%
Total Non-
Performing
Assets/Allowance
for Loan Losses 51.6% 47.7% 40.6%
DELINQUENT LOANS $19,616 $24,081 (18.5)% $21,188 (7.4)%
=========== =========== ======= =========== =======
LOAN PORTFOLIO:
Real Estate
Loans $1,041,393 $1,014,058 2.7 % $974,172 6.9 %
Commercial and
Industrial
Loans 1,726,434 1,739,476 (0.7)% 1,431,492 20.6 %
Consumer
Loans 100,121 100,180 (0.1)% 92,154 8.6 %
----------- ----------- ------- ----------- -------
Total Gross
Loans 2,867,948 2,853,714 0.5 % 2,497,818 14.8 %
Deferred Loan
Fees (3,001) (3,568) (15.9)% (3,775) (20.5)%
Allowance for
Loan Losses (27,557) (28,276) (2.5)% (24,963) 10.4 %
----------- ----------- ------- ----------- -------
Loans
Receivable,
Net $2,837,390 $2,821,870 0.5 % $2,469,080 14.9 %
=========== =========== ======= =========== =======
LOAN MIX:
Real Estate
Loans 36.3% 35.5% 39.0%
Commercial and
Industrial
Loans 60.2% 61.0% 57.3%
Consumer
Loans 3.5% 3.5% 3.7%
----------- ----------- -----------
Total Gross
Loans 100.0% 100.0% 100.0%
=========== =========== ===========
DEPOSIT PORTFOLIO:
Demand -
Noninterest-
Bearing $728,348 $756,901 (3.8)% $738,618 (1.4)%
Money Market 438,267 434,738 0.8 % 526,171 (16.7)%
Savings 99,254 99,719 (0.5)% 121,574 (18.4)%
Time Deposits
of $100,000
or More 1,383,358 1,393,721 (0.7)% 1,161,950 19.1 %
Other Time
Deposits 295,488 288,702 2.4 % 277,801 6.4 %
----------- ----------- ------- ----------- -------
Total Deposits $2,944,715 $2,973,781 (1.0)% $2,826,114 4.2 %
=========== =========== ======= =========== =======
DEPOSIT MIX:
Demand -
Noninterest-
Bearing 24.7% 25.5% 26.1%
Money Market 14.9% 14.6% 18.6%
Savings 3.4% 3.4% 4.3%
Time Deposits
of $100,000
or More 47.0% 46.9% 41.1%
Other Time
Deposits 10.0% 9.6% 9.9%
----------- ----------- -----------
Total Deposits 100.0% 100.0% 100.0%
=========== =========== ===========
Source: Hanmi Financial Corporation
Released January 30, 2007