UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended March 31, 2006
or
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the Transition Period From To
Commission File Number: 000-30421
HANMI FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
|
|
|
Delaware
|
|
95-4788120 |
|
|
|
(State or Other Jurisdiction of Incorporation or Organization)
|
|
(I.R.S. Employer Identification No.) |
|
|
|
3660 Wilshire Boulevard, Penthouse Suite A |
|
|
Los Angeles, California
|
|
90010 |
|
|
|
(Address of Principal Executive Offices)
|
|
(Zip Code) |
(213) 382-2200
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
Indicate by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of accelerated filer and
large accelerated filer in Exchange Act Rule 12b-2.
Large Accelerated Filer o Accelerated Filer þ Non-Accelerated Filer o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
As of May 1, 2006, there were 48,872,578 outstanding shares of the issuers Common Stock.
HANMI FINANCIAL CORPORATION
QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2006
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and Due From Banks |
|
$ |
97,780 |
|
|
$ |
103,477 |
|
Federal Funds Sold and Securities Purchased Under Agreements to Resell |
|
|
|
|
|
|
60,000 |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
|
97,780 |
|
|
|
163,477 |
|
Federal Reserve Bank Stock |
|
|
12,350 |
|
|
|
12,350 |
|
Federal Home Loan Bank Stock |
|
|
12,380 |
|
|
|
12,237 |
|
Securities Held to Maturity, at Amortized Cost (Fair Value: 2006 $1,039;
2005 $1,051) |
|
|
1,039 |
|
|
|
1,049 |
|
Securities Available for Sale, at Fair Value |
|
|
429,845 |
|
|
|
442,863 |
|
Loans Receivable, Net of Allowance for Loan Losses of $26,703 and $24,963
at March 31, 2006 and December 31, 2005, Respectively |
|
|
2,640,725 |
|
|
|
2,468,015 |
|
Loans Held for Sale, at the Lower of Cost or Fair Value |
|
|
1,357 |
|
|
|
1,065 |
|
Customers Liability on Acceptances |
|
|
14,010 |
|
|
|
8,432 |
|
Premises and Equipment, Net |
|
|
20,565 |
|
|
|
20,784 |
|
Accrued Interest Receivable |
|
|
14,398 |
|
|
|
14,120 |
|
Other Real Estate Owned |
|
|
545 |
|
|
|
|
|
Deferred Income Taxes |
|
|
9,344 |
|
|
|
9,651 |
|
Servicing Asset |
|
|
4,035 |
|
|
|
3,910 |
|
Goodwill |
|
|
209,058 |
|
|
|
209,058 |
|
Core Deposit Intangible |
|
|
8,066 |
|
|
|
8,691 |
|
Bank-Owned Life Insurance |
|
|
22,932 |
|
|
|
22,713 |
|
Other Assets |
|
|
16,555 |
|
|
|
15,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
3,514,984 |
|
|
$ |
3,414,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Noninterest-Bearing |
|
$ |
748,530 |
|
|
$ |
738,618 |
|
Interest-Bearing: |
|
|
|
|
|
|
|
|
Savings |
|
|
114,336 |
|
|
|
121,574 |
|
Money Market Checking |
|
|
495,365 |
|
|
|
526,171 |
|
Time Deposits of $100,000 or More |
|
|
1,188,982 |
|
|
|
1,161,950 |
|
Other Time Deposits |
|
|
271,653 |
|
|
|
277,801 |
|
|
|
|
|
|
|
|
Total Deposits |
|
|
2,818,866 |
|
|
|
2,826,114 |
|
Accrued Interest Payable |
|
|
12,734 |
|
|
|
11,911 |
|
Acceptances Outstanding |
|
|
14,010 |
|
|
|
8,432 |
|
Other Borrowed Funds |
|
|
131,533 |
|
|
|
46,331 |
|
Junior Subordinated Debentures |
|
|
82,406 |
|
|
|
82,406 |
|
Other Liabilities |
|
|
16,231 |
|
|
|
12,281 |
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
3,075,780 |
|
|
|
2,987,475 |
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
Common Stock, $.001 Par Value; Authorized 200,000,000 Shares; Issued
50,019,216 Shares (48,856,216 Outstanding) at March 31, 2006 and Issued
49,821,798 Shares (48,658,798 Outstanding) at December 31, 2005 |
|
|
50 |
|
|
|
50 |
|
Additional Paid-In Capital |
|
|
341,027 |
|
|
|
339,991 |
|
Unearned Compensation |
|
|
|
|
|
|
(1,150 |
) |
Accumulated Other Comprehensive Loss Unrealized Loss on Securities
Available for Sale, Interest-Only Strips and Interest Rate Swaps, Net of
Income Taxes of ($2,947) and ($1,671) at March 31, 2006 and December 31,
2005, Respectively |
|
|
(5,886 |
) |
|
|
(4,383 |
) |
Retained Earnings |
|
|
124,054 |
|
|
|
112,310 |
|
|
|
|
|
|
|
|
|
|
|
459,245 |
|
|
|
446,818 |
|
Less Treasury Stock, at Cost; 1,163,000 Shares at March 31, 2006 and
December 31, 2005 |
|
|
(20,041 |
) |
|
|
(20,041 |
) |
|
|
|
|
|
|
|
Total Shareholders Equity |
|
|
439,204 |
|
|
|
426,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
$ |
3,514,984 |
|
|
$ |
3,414,252 |
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
1
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
INTEREST INCOME: |
|
|
|
|
|
|
|
|
Interest and Fees on Loans |
|
$ |
52,637 |
|
|
$ |
38,226 |
|
Interest on Investments |
|
|
5,099 |
|
|
|
4,648 |
|
Interest on Federal Funds Sold |
|
|
289 |
|
|
|
335 |
|
|
|
|
|
|
|
|
Total Interest Income |
|
|
58,025 |
|
|
|
43,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
Interest on Deposits |
|
|
19,591 |
|
|
|
9,811 |
|
Interest on Borrowings |
|
|
2,089 |
|
|
|
1,536 |
|
|
|
|
|
|
|
|
Total Interest Expense |
|
|
21,680 |
|
|
|
11,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES |
|
|
36,345 |
|
|
|
31,862 |
|
Provision for Credit Losses |
|
|
2,960 |
|
|
|
136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES |
|
|
33,385 |
|
|
|
31,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-INTEREST INCOME: |
|
|
|
|
|
|
|
|
Service Charges on Deposit Accounts |
|
|
4,231 |
|
|
|
3,730 |
|
Trade Finance Fees |
|
|
1,071 |
|
|
|
945 |
|
Remittance Fees |
|
|
488 |
|
|
|
468 |
|
Other Service Charges and Fees |
|
|
534 |
|
|
|
579 |
|
Bank-Owned Life Insurance Income |
|
|
218 |
|
|
|
205 |
|
Increase in Fair Value of Derivatives |
|
|
225 |
|
|
|
419 |
|
Other Income |
|
|
643 |
|
|
|
621 |
|
Gain on Sales of Loans |
|
|
839 |
|
|
|
308 |
|
Gain on Sales of Securities Available for Sale |
|
|
5 |
|
|
|
82 |
|
|
|
|
|
|
|
|
Total Non-Interest Income |
|
|
8,254 |
|
|
|
7,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-INTEREST EXPENSES: |
|
|
|
|
|
|
|
|
Salaries and Employee Benefits |
|
|
9,161 |
|
|
|
9,167 |
|
Occupancy and Equipment |
|
|
2,318 |
|
|
|
2,231 |
|
Data Processing |
|
|
1,215 |
|
|
|
1,165 |
|
Professional Fees |
|
|
668 |
|
|
|
479 |
|
Advertising and Promotion |
|
|
646 |
|
|
|
694 |
|
Supplies and Communication |
|
|
636 |
|
|
|
579 |
|
Amortization of Core Deposit Intangible |
|
|
625 |
|
|
|
732 |
|
Decrease in Fair Value of Embedded Options |
|
|
102 |
|
|
|
573 |
|
Other Operating Expenses |
|
|
2,068 |
|
|
|
1,785 |
|
|
|
|
|
|
|
|
Total Non-Interest Expenses |
|
|
17,439 |
|
|
|
17,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
24,200 |
|
|
|
21,678 |
|
Income Taxes |
|
|
9,398 |
|
|
|
8,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
14,802 |
|
|
$ |
13,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.30 |
|
|
$ |
0.27 |
|
Diluted |
|
$ |
0.30 |
|
|
$ |
0.27 |
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
Basic |
|
|
48,714,435 |
|
|
|
49,460,375 |
|
Diluted |
|
|
49,318,397 |
|
|
|
50,247,408 |
|
|
|
|
|
|
|
|
|
|
DIVIDENDS DECLARED PER SHARE |
|
$ |
0.06 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
2
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock - Number of Shares |
|
|
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Treasury |
|
|
Total |
|
|
|
|
|
|
|
Treasury |
|
|
|
|
|
|
Common |
|
|
Paid-in |
|
|
Unearned |
|
|
Comprehensive |
|
|
Retained |
|
|
Stock, |
|
|
Shareholders |
|
|
|
Issued |
|
|
Stock |
|
|
Outstanding |
|
|
Stock |
|
|
Capital |
|
|
Compensation |
|
|
Income (Loss) |
|
|
Earnings |
|
|
at Cost |
|
|
Equity |
|
BALANCE DECEMBER 31, 2004 |
|
|
49,330,704 |
|
|
|
|
|
|
|
49,330,704 |
|
|
$ |
49 |
|
|
$ |
334,932 |
|
|
$ |
|
|
|
$ |
1,035 |
|
|
$ |
63,894 |
|
|
$ |
|
|
|
$ |
399,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercises of Stock Options |
|
|
190,973 |
|
|
|
|
|
|
|
190,973 |
|
|
|
1 |
|
|
|
1,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,311 |
|
Restricted Stock Award |
|
|
100,000 |
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
1,815 |
|
|
|
(1,815 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-Based Compensation Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
393 |
|
Tax Benefit from Exercises of Stock Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
333 |
|
Cash Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,481 |
) |
|
|
|
|
|
|
(2,481 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,332 |
|
|
|
|
|
|
|
13,332 |
|
Change in Unrealized Loss on Securities
Available for Sale, Interest-Only Strips
and Interest Rate Swaps, Net of Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,348 |
) |
|
|
|
|
|
|
|
|
|
|
(4,348 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE MARCH 31, 2005 |
|
|
49,621,677 |
|
|
|
|
|
|
|
49,621,677 |
|
|
$ |
50 |
|
|
$ |
338,390 |
|
|
$ |
(1,422 |
) |
|
$ |
(3,313 |
) |
|
$ |
74,745 |
|
|
$ |
|
|
|
$ |
408,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE DECEMBER 31, 2005 |
|
|
49,821,798 |
|
|
|
(1,163,000 |
) |
|
|
48,658,798 |
|
|
$ |
50 |
|
|
$ |
339,991 |
|
|
$ |
(1,150 |
) |
|
$ |
(4,383 |
) |
|
$ |
112,310 |
|
|
$ |
(20,041 |
) |
|
$ |
426,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Adjustment Share-Based
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(916 |
) |
|
|
1,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234 |
|
Exercises of Stock Options and Stock Warrants |
|
|
197,418 |
|
|
|
|
|
|
|
197,418 |
|
|
|
|
|
|
|
1,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,522 |
|
Share-Based Compensation Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 |
|
Tax Benefit from Exercises of Stock Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
329 |
|
Cash Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,058 |
) |
|
|
|
|
|
|
(3,058 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,802 |
|
|
|
|
|
|
|
14,802 |
|
Change in Unrealized Loss on Securities
Available for Sale, Interest-Only Strips
and Interest Rate Swaps, Net of Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,503 |
) |
|
|
|
|
|
|
|
|
|
|
(1,503 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE MARCH 31, 2006 |
|
|
50,019,216 |
|
|
|
(1,163,000 |
) |
|
|
48,856,216 |
|
|
$ |
50 |
|
|
$ |
341,027 |
|
|
$ |
|
|
|
$ |
(5,886 |
) |
|
$ |
124,054 |
|
|
$ |
(20,041 |
) |
|
$ |
439,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
3
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
14,802 |
|
|
$ |
13,332 |
|
Adjustments to Reconcile Net Income to Net Cash and Cash Equivalents Provided
By Operating Activities: |
|
|
|
|
|
|
|
|
Depreciation and Amortization of Premises and Equipment |
|
|
709 |
|
|
|
685 |
|
Amortization of Premiums and Accretion of Discounts on Investments, Net |
|
|
83 |
|
|
|
168 |
|
Amortization of Core Deposit Intangible |
|
|
625 |
|
|
|
732 |
|
Share-Based Compensation Expense |
|
|
101 |
|
|
|
393 |
|
Provision for Credit Losses |
|
|
2,960 |
|
|
|
136 |
|
Federal Home Loan Bank Stock Dividend |
|
|
(143 |
) |
|
|
|
|
Gain on Sales of Securities Available for Sale |
|
|
(5 |
) |
|
|
(82 |
) |
Increase in Fair Value of Derivatives |
|
|
(225 |
) |
|
|
(419 |
) |
Decrease in Fair Value of Embedded Options |
|
|
102 |
|
|
|
573 |
|
Gain on Sales of Loans |
|
|
(839 |
) |
|
|
(308 |
) |
Loss on Sales of Premises and Equipment |
|
|
16 |
|
|
|
15 |
|
Tax Benefit from Exercises of Stock Options |
|
|
|
|
|
|
333 |
|
Deferred Tax Benefit |
|
|
(1,574 |
) |
|
|
(6,279 |
) |
Origination of Loans Held for Sale |
|
|
(22,374 |
) |
|
|
(1,204 |
) |
Proceeds from Sales of Loans Held for Sale |
|
|
22,921 |
|
|
|
5,320 |
|
Increase in Accrued Interest Receivable |
|
|
(278 |
) |
|
|
(1,403 |
) |
Increase in Cash Surrender Value of Bank-Owned Life Insurance |
|
|
(219 |
) |
|
|
(205 |
) |
(Increase) Decrease in Other Assets |
|
|
(6,966 |
) |
|
|
795 |
|
Increase (Decrease) in Accrued Interest Payable |
|
|
823 |
|
|
|
(462 |
) |
Increase in Other Liabilities |
|
|
13,304 |
|
|
|
12,225 |
|
|
|
|
|
|
|
|
Net Cash and Cash Equivalents Provided By Operating Activities |
|
|
23,823 |
|
|
|
24,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from Matured or Called Securities Available for Sale |
|
|
11,082 |
|
|
|
41,121 |
|
Proceeds from Matured or Called Securities Held to Maturity |
|
|
10 |
|
|
|
9 |
|
Proceeds from Sales of Securities Available for Sale |
|
|
5,000 |
|
|
|
1,442 |
|
Net (Increase) Decrease in Loans Receivable |
|
|
(175,670 |
) |
|
|
996 |
|
Purchases of Securities Available for Sale |
|
|
(6,183 |
) |
|
|
(47,238 |
) |
Purchases of Premises and Equipment |
|
|
(506 |
) |
|
|
(1,737 |
) |
|
|
|
|
|
|
|
Net Cash and Cash Equivalents Used In Investing Activities |
|
|
(166,267 |
) |
|
|
(5,407 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
(Decrease) Increase in Deposits |
|
|
(7,248 |
) |
|
|
16,091 |
|
Proceeds from Exercises of Stock Options and Stock Warrants |
|
|
1,522 |
|
|
|
1,311 |
|
Tax Benefit from Exercises of Stock Options |
|
|
329 |
|
|
|
|
|
Cash Dividends Paid |
|
|
(3,058 |
) |
|
|
(2,481 |
) |
Increase (Decrease) in Other Borrowed Funds |
|
|
85,202 |
|
|
|
(2,182 |
) |
|
|
|
|
|
|
|
Net Cash and Cash Equivalents Provided By Financing Activities |
|
|
76,747 |
|
|
|
12,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
(65,697 |
) |
|
|
31,677 |
|
Cash and Cash Equivalents Beginning of Period |
|
|
163,477 |
|
|
|
127,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS END OF PERIOD |
|
$ |
97,780 |
|
|
$ |
158,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
Interest Paid |
|
$ |
10,221 |
|
|
$ |
10,885 |
|
Income Taxes Paid |
|
$ |
1,900 |
|
|
$ |
500 |
|
|
|
|
|
|
|
|
|
|
Supplemental Schedule of Non-Cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Transfer of Loans to Other Real Estate Owned |
|
$ |
545 |
|
|
$ |
|
|
Accrued Dividends |
|
$ |
3,001 |
|
|
$ |
2,481 |
|
See Accompanying Notes to Consolidated Financial Statements.
4
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2006 AND 2005
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Hanmi Financial Corporation (Hanmi Financial, we or us) is a Delaware corporation that
is the holding company for Hanmi Bank (the Bank) and is subject to the Bank Holding Company Act
of 1956, as amended.
Hanmi Bank, our primary subsidiary, is a commercial bank licensed by the California Department
of Financial Institutions. The Banks deposit accounts are insured under the Federal Deposit
Insurance Act up to applicable limits thereof. The Bank is a member of the Federal Reserve System.
Our primary operations are related to traditional banking activities, including the acceptance
of deposits and the lending and investing of money through operation of the Bank. The Bank is a
community bank conducting general business banking with its primary market encompassing the
multi-ethnic populations of Los Angeles, Orange, San Diego, San Francisco and Santa Clara counties of the State of California.
The Banks full-service offices are located in business areas where many of the businesses are run
by immigrants and other minority groups. The Banks client base reflects the multi-ethnic
composition of these communities. As of March 31, 2006, the Bank maintained a branch network of 22 locations, serving
individuals and small- to medium-sized businesses in its primary market. The
Bank also has five loan production offices in California, Georgia, Illinois, Virginia and
Washington.
In the opinion of management, the consolidated financial statements of Hanmi Financial
Corporation and subsidiary reflect all adjustments of a normal recurring nature that are necessary
for a fair presentation of the results for the interim period ended March 31, 2006, but are not
necessarily indicative of the results that will be reported for the entire year. In the opinion of
management, the aforementioned consolidated financial statements are in conformity with accounting
principles generally accepted in the United States of America
(GAAP). The interim information should be
read in conjunction with our 2005 Annual Report on Form 10-K.
Descriptions of our significant accounting policies are included in Note 1 Summary of
Significant Accounting Policies in our 2005 Annual Report on Form 10-K. Certain reclassifications
were made to the prior periods presentation to conform to the current periods presentation.
On January 20, 2005, our Board of Directors declared a two-for-one stock split, to be effected
in the form of a 100 percent common stock dividend. The new shares were distributed on February 15,
2005 to shareholders of record on the close of business on January 31, 2005.
Stock-Based Compensation
We adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based
Payment (SFAS No. 123(R)), on January 1, 2006 using the modified prospective method. Under
this method, awards that are granted, modified or settled after December 31, 2005 are measured and
accounted for in accordance with SFAS No. 123(R). Also under this method, expense is recognized for
services attributed to the current period for unvested awards that were granted prior to January 1,
2006, based upon the fair value determined at the grant date under SFAS No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123). Prior to the adoption of SFAS No. 123(R), we accounted
for stock compensation under the intrinsic value method permitted by Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB Opinion No. 25) and
related interpretations. Accordingly, we previously recognized no compensation cost for employee
stock options that were granted with an exercise price equal to the market value of the underlying
common stock on the date of grant.
5
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The following table illustrates the effect on net income and earnings per share if we had
applied the fair value recognition provisions of SFAS No. 123 in 2005.
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2005 |
|
|
|
(Dollars in Thousands, |
|
|
|
Except Per Share Data) |
|
Net Income As Reported |
|
$ |
13,332 |
|
|
|
|
|
|
Add Share-Based Employee Compensation Expense Included in Reported
Net Income, Net of Related Tax Effects |
|
|
242 |
|
|
|
|
|
|
Deduct Total Share-Based Employee Compensation Expense Associated with
Stock Options Determined Under Fair Value Method for All Option Awards,
Net of Related Tax Effects |
|
|
(527 |
) |
|
|
|
|
|
|
|
|
|
Net Income Pro Forma |
|
$ |
13,047 |
|
|
|
|
|
|
|
|
|
|
Earnings Per Share As Reported: |
|
|
|
|
Basic |
|
$ |
0.27 |
|
Diluted |
|
$ |
0.27 |
|
|
|
|
|
|
Earnings Per Share Pro Forma: |
|
|
|
|
Basic |
|
$ |
0.26 |
|
Diluted |
|
$ |
0.26 |
|
SFAS No. 123(R) requires that cash flows resulting from the realization of tax deductions
in excess of the compensation cost recognized (excess tax benefits) are to be classified as
financing cash flows. Before the adoption of SFAS No. 123(R), we presented all tax benefits
realized from the exercise of stock options as operating cash flows in the Consolidated Statements
of Cash Flows. For the three months ended March 31, 2006 and 2005, excess tax benefits of $329,000 and
$333,000, respectively, are shown as financing cash inflows and operating cash inflows,
respectively, in the Consolidated Statements of Cash Flows.
In
November 2005, the Financial Accounting Standards Board
(FASB) issued Staff Position No. FAS 123R-3,
Transition Election Related to Accounting for the Tax
Effects of the Share-Based Payment Awards. We have adopted
the alternative transition method prescribed by Staff Position
No. FAS 123R-3.
In addition, SFAS No. 123(R) requires that any unearned compensation related to awards granted
prior to the adoption of SFAS No. 123(R) must be eliminated against the appropriate equity
accounts. As a result, the presentation of Shareholders Equity was revised to reflect the
transfer of the balance previously reported in Unearned Compensation to Additional Paid-In Capital.
6
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (Continued)
NOTE 2 EMPLOYEE STOCK-BASED COMPENSATION
At March 31, 2006, we had two stock incentive plans, the Year 2000 Stock Option Plan and the
2004 CEO Stock Option Plan (collectively, the Plans), which provide for the granting of non-qualified and incentive stock
options and restricted stock awards to employees (including officers and directors).
Year 2000 Stock Option Plan
Under the Year 2000 Stock Option Plan, we may grant options for up to 5,430,742 shares of
common stock. As of March 31, 2006, 3,071,027 shares were still available for issuance.
All stock options granted under the Year 2000 Stock Option Plan have an exercise price equal
to the fair market value of the underlying common stock on the date of grant. Stock options granted
under the Year 2000 Stock Option Plan generally vest based on five years of continuous service and
expire ten years from the date of grant. Certain option and share awards provide for accelerated
vesting if there is a change in control (as defined in the Plans). New shares of common stock may
be issued or treasury shares may be utilized upon the exercise of stock options.
For the three months ended March 31, 2006 and 2005, the estimated weighted-average fair value
of options granted under the Year 2000 Stock Option Plan was $5.54 per share and $5.49 per share,
respectively. The weighted-average fair value of options granted was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average assumptions:
dividend yield of 1.35 percent and 1.07 percent in 2006 and 2005, respectively; expected volatility
of 31.9 percent and 33.0 percent in 2006 and 2005, respectively; expected term of 4.9 years and 4.1
years in 2006 and 2005, respectively; and risk-free interest rates of 4.61 percent and 4.11 percent
in 2006 and 2005, respectively.
Expected volatility is determined based on the historical daily volatility of our stock price
over a period equal to the expected term of the options granted. The expected term of the options
represents the period of time that options granted are expected to be outstanding based primarily
on the historical exercise behavior attributable to previous option grants. The risk-free interest
rate is based on the U.S. Treasury yield curve at the time of grant for a period equal to the
expected term of the options granted.
The grant date fair value of options granted under the Year 2000 Stock Option Plan during the
three months ended March 31, 2006 and 2005 was $50,000 and $250,000, respectively. The total
intrinsic value of options exercised during the three months ended March 31, 2006 and 2005 was $1.5
million and $3.4 million, respectively. Cash received from options exercised totaled $426,000 and
$1.3 million for the three months ended March 31, 2006 and 2005, respectively. The actual tax
benefit realized from tax deductions on options exercised during the three months ended March 31,
2006 and 2005 was $329,000 and $333,000, respectively.
7
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (Continued)
NOTE 2 EMPLOYEE STOCK-BASED COMPENSATION (Continued)
The following is a summary of the transactions under the Year 2000 Stock Option Plan for the
three months ended March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Exercise |
|
|
|
Number |
|
|
Price Per |
|
|
|
of Shares |
|
|
Share |
|
Options Outstanding January 1, 2006 |
|
|
1,173,712 |
|
|
$ |
10.55 |
|
Options Granted |
|
|
9,000 |
|
|
$ |
17.74 |
|
Options Cancelled/Expired |
|
|
(32,470 |
) |
|
$ |
13.65 |
|
Options Exercised |
|
|
(82,026 |
) |
|
$ |
5.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding March 31, 2006 |
|
|
1,068,216 |
|
|
$ |
10.93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Exercisable March 31, 2006 |
|
|
539,887 |
|
|
$ |
8.58 |
|
|
|
|
|
|
|
|
|
The following is a summary of the transactions for non-vested stock options under the
Year 2000 Stock Option Plan for the three months ended March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Grant Date |
|
|
|
Number |
|
|
Fair Value |
|
|
|
of Shares |
|
|
Per Share |
|
Non-Vested Stock Options Outstanding January 1, 2006 |
|
|
652,710 |
|
|
$ |
4.07 |
|
Non-Vested Options Granted |
|
|
9,000 |
|
|
$ |
5.54 |
|
Non-Vested Options Cancelled/Expired |
|
|
(32,470 |
) |
|
$ |
4.06 |
|
Non-Vested Options Vested |
|
|
(100,911 |
) |
|
$ |
3.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested Options Outstanding March 31, 2006 |
|
|
528,329 |
|
|
$ |
4.16 |
|
|
|
|
|
|
|
|
|
As of March 31, 2006, the total compensation cost not yet recognized under the Year 2000
Stock Option Plan was $1.3 million with a weighted-average
recognition period of 2.8 years.
As of March 31, 2006, stock options outstanding under the Year 2000 Stock Option Plan were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
Exercise |
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
Exercise |
|
|
Remaining |
|
Exercise |
|
Number |
|
|
Intrinsic |
|
|
Price Per |
|
|
Contractual |
|
|
Number |
|
|
Intrinsic |
|
|
Price Per |
|
|
Contractual |
|
Price Range |
|
Outstanding |
|
|
Value |
|
|
Share |
|
|
Life |
|
|
Outstanding |
|
|
Value |
|
|
Share |
|
|
Life |
|
(Dollars in Thousands, Except Per Share Data) |
|
$ 3.27 to $ 3.99 |
|
|
156,666 |
|
|
$ |
592 |
|
|
$ |
3.78 |
|
|
4.5 years |
|
|
156,666 |
|
|
$ |
592 |
|
|
$ |
3.78 |
|
|
4.5 years |
$ 4.00 to $ 7.99 |
|
|
260,572 |
|
|
|
1,840 |
|
|
$ |
7.06 |
|
|
5.1 years |
|
|
182,419 |
|
|
|
1,290 |
|
|
$ |
7.07 |
|
|
4.9 years |
$ 8.00 to $11.99 |
|
|
2,624 |
|
|
|
27 |
|
|
$ |
10.44 |
|
|
0.1 years |
|
|
2,624 |
|
|
|
27 |
|
|
$ |
10.44 |
|
|
0.1 years |
$12.00 to $15.99 |
|
|
558,800 |
|
|
|
7,641 |
|
|
$ |
13.67 |
|
|
8.0 years |
|
|
189,067 |
|
|
|
2,555 |
|
|
$ |
13.51 |
|
|
7.9 years |
$16.00 to $19.10 |
|
|
89,554 |
|
|
|
1,578 |
|
|
$ |
17.62 |
|
|
9.1 years |
|
|
9,111 |
|
|
|
170 |
|
|
$ |
18.66 |
|
|
8.9 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,068,216 |
|
|
$ |
11,678 |
|
|
$ |
10.93 |
|
|
6.9 years |
|
|
539,887 |
|
|
$ |
4,634 |
|
|
$ |
8.58 |
|
|
5.9 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (Continued)
NOTE 2 EMPLOYEE STOCK-BASED COMPENSATION (Continued)
2004 CEO Stock Option Plan
Under the 2004 CEO Stock Option Plan, a total of 350,000 stock options were granted to our
Chief Executive Officer. As of March 31, 2006, there were no additional shares available for
issuance.
All stock options granted under the 2004 CEO Stock Option Plan have an exercise price equal to
the fair market value of the underlying common stock on the date of grant. Stock options granted
under the 2004 CEO Stock Option Plan vest based on six years of continuous service and expire ten
years from the date of grant. Certain option and share awards provide for accelerated vesting if
there is a change in control (as defined in the Plans). New shares of common stock may be issued or
treasury shares may be utilized upon the exercise of stock options.
There were no stock options granted under the 2004 CEO Stock Option Plan during the three
months ended March 31, 2006 and 2005.
The following is a summary of the transactions under the 2004 CEO Stock Option Plan for the
three months ended March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise |
|
|
|
Number |
|
|
Price Per |
|
|
|
of Shares |
|
|
Share |
|
Options Outstanding January 1, 2006 |
|
|
350,000 |
|
|
$ |
17.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding March 31, 2006 |
|
|
350,000 |
|
|
$ |
17.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Exercisable March 31, 2006 |
|
|
58,333 |
|
|
$ |
17.17 |
|
|
|
|
|
|
|
|
|
The following is a summary of the transactions for non-vested stock options under the
2004 CEO Stock Option Plan for the three months ended March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
|
Number |
|
|
Fair Value |
|
|
|
of Shares |
|
|
Per Share |
|
Non-Vested Stock Options Outstanding January 1, 2006 |
|
|
350,000 |
|
|
$ |
4.82 |
|
Non-Vested Options Vested |
|
|
(58,333 |
) |
|
$ |
4.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested Options Outstanding March 31, 2006 |
|
|
291,667 |
|
|
$ |
4.82 |
|
|
|
|
|
|
|
|
|
As of March 31, 2006, the total compensation cost not yet recognized under the 2004 CEO
Stock Option Plan was $1.1 million with a recognition period of
3.8 years.
As of March 31, 2006, stock options outstanding under the 2004 CEO Stock Option Plan were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
|
|
|
|
|
|
Exercise |
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
Exercise |
|
|
Remaining |
|
Number |
|
Intrinsic |
|
|
Price Per |
|
|
Contractual |
|
|
Number |
|
|
Intrinsic |
|
|
Price Per |
|
|
Contractual |
|
Outstanding |
|
Value |
|
|
Share |
|
|
Life |
|
|
Outstanding |
|
|
Value |
|
|
Share |
|
|
Life |
|
(Dollars in Thousands, Except Per Share Data) |
|
350,000 |
|
$ |
6,008 |
|
|
$ |
17.17 |
|
|
8.6 years |
|
|
58,333 |
|
|
$ |
1,001 |
|
|
$ |
17.17 |
|
|
8.6 years |
9
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (Continued)
NOTE 3 EARNINGS PER SHARE
Earnings per share (EPS) is calculated on both a basic and a diluted basis. Basic EPS
excludes dilution and is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted from the issuance of common stock that then
shared in earnings, excluding common shares in treasury.
The following table presents a reconciliation of the components used to derive basic and
diluted EPS for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Per |
|
|
|
Income |
|
|
Shares |
|
|
Share |
|
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
|
|
(Dollars in Thousands, Except Per Share Data) |
|
Three Months Ended March 31, 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS Income Available to Common Shareholders |
|
$ |
14,802 |
|
|
|
48,714,435 |
|
|
$ |
0.30 |
|
Effect of Dilutive Securities Options and Warrants |
|
|
|
|
|
|
603,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS Income Available to Common Shareholders |
|
$ |
14,802 |
|
|
|
49,318,397 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2005: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS Income Available to Common Shareholders |
|
$ |
13,332 |
|
|
|
49,460,375 |
|
|
$ |
0.27 |
|
Effect of Dilutive Securities Options and Warrants |
|
|
|
|
|
|
787,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS Income Available to Common Shareholders |
|
$ |
13,332 |
|
|
|
50,247,408 |
|
|
$ |
0.27 |
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2006 and 2005, there were 49,554 and 125,554 options, respectively,
outstanding that were not included in the computation of diluted EPS because their exercise price
was greater than the quarterly average market price of the common shares and, therefore, the effect
would be anti-dilutive.
NOTE 4 OFF-BALANCE SHEET COMMITMENTS
As part of the service
to our small- and medium-sized business customers, Hanmi Bank
issues formal loan commitments and lines of credit. These commitments can be either secured or
unsecured. They may be in the form of revolving lines of credit for seasonal working capital needs
or may take the form of commercial letters of credit and standby letters of credit. Commercial
letters of credit facilitate import trade. Standby letters of credit are conditional commitments
issued by Hanmi Bank to guarantee the performance of a customer to a third party.
The following table shows the distribution of the Hanmi Banks undisbursed loan commitments as
of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
(In Thousands) |
|
Commitments to Extend Credit |
|
$ |
584,685 |
|
|
$ |
555,736 |
|
Commercial Letters of Credit |
|
|
61,715 |
|
|
|
58,036 |
|
Standby Letters of Credit |
|
|
30,825 |
|
|
|
42,768 |
|
Unused Credit Card Lines |
|
|
16,241 |
|
|
|
14,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Undisbursed Loan Commitments |
|
$ |
693,466 |
|
|
$ |
671,432 |
|
|
|
|
|
|
|
|
10
HANMI FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (Continued)
NOTE 5 RECENTLY ISSUED ACCOUNTING STANDARDS
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and
SFAS No. 140 (SFAS No. 155). This Statement:
|
|
|
permits fair value remeasurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation; |
|
|
|
|
clarifies which interest-only strips and principal-only strips are not subject to SFAS
No. 133; |
|
|
|
|
establishes a requirement to evaluate interests in securitized financial assets to
identify interests that are freestanding derivatives or hybrid financial instruments that
contain an embedded derivative requiring bifurcation; |
|
|
|
|
clarifies that concentrations of credit risks in the form of subordinations are not
embedded derivatives; and |
|
|
|
|
amends SFAS No. 140 to eliminate the prohibition on a Qualified Special Purpose Entity
from holding a derivative financial instrument that pertains to a beneficial interest other
than another derivative financial instrument. |
SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning
of an entitys first fiscal year that begins after September 15, 2006. Early adoption of this
statement is allowed. We have not determined the financial impact of the adoption of SFAS No. 155
or whether we will adopt SFAS No. 155 in 2006.
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets,
which amends the guidance in SFAS No. 140. SFAS No. 156 requires that an entity separately
recognize a servicing asset or a servicing liability when it undertakes an obligation to service a
financial asset under a servicing contract in certain situations. Such servicing assets or
servicing liabilities are required to be measured initially at fair value, if practicable. SFAS No.
156 also allows an entity to measure its servicing assets and servicing liabilities subsequently
using either the amortization method, which existed under SFAS No. 140, or the fair value
measurement method. SFAS No. 156 will be effective in the fiscal year beginning January 1, 2007. We
do not expect the adoption of SFAS No. 156 to have a material impact on our financial condition or
results of operations.
11
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is managements discussion and analysis of the major factors that influenced our
financial condition and results of operations for the three months ended March 31, 2006. This
analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended
December 31, 2005 and with the unaudited consolidated financial statements and notes thereto set
forth in this Report.
CRITICAL ACCOUNTING POLICIES
We have established various accounting policies that govern the application of accounting
principles generally accepted in the United States of America in the preparation of our financial
statements. Our significant accounting policies are described in the Notes to Consolidated
Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2005.
Certain accounting policies require us to make significant estimates and assumptions that have a
material impact on the carrying value of certain assets and liabilities, and we consider these
critical accounting policies. We use estimates and assumptions based on historical experience and
other factors that we believe to be reasonable under the circumstances. Actual results could differ
significantly from these estimates and assumptions, which could have a material impact on the
carrying value of assets and liabilities at the balance sheet dates and our results of operations
for the reporting periods. Management has discussed the development and selection of these critical
accounting policies with the Audit Committee of Hanmi Financials Board of Directors.
We believe the allowance for loan losses and allowance for off-balance sheet items are
critical accounting policies that require significant estimates and assumptions that are
particularly susceptible to significant change in the preparation of our financial statements. See
Financial Condition Allowance for Loan Losses and Allowance for Off-Balance Sheet Items and
Results of Operations Provision for Credit Losses for a description of the methodology used to
determine the allowance for loan losses and allowance for off-balance sheet items.
SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
(Dollars in Thousands, Except Per Share Data) |
|
AVERAGE BALANCES: |
|
|
|
|
|
|
|
|
Average Gross Loans, Net of Deferred Loan Fees |
|
$ |
2,547,421 |
|
|
$ |
2,239,174 |
|
Average Securities |
|
$ |
437,676 |
|
|
$ |
420,774 |
|
Average Interest-Earning Assets |
|
$ |
3,036,300 |
|
|
$ |
2,736,771 |
|
Average Total Assets |
|
$ |
3,423,419 |
|
|
$ |
3,103,486 |
|
Average Deposits |
|
$ |
2,810,313 |
|
|
$ |
2,519,229 |
|
Average Interest-Bearing Liabilities |
|
$ |
2,215,781 |
|
|
$ |
1,926,399 |
|
Average Shareholders Equity |
|
$ |
434,220 |
|
|
$ |
406,067 |
|
Average Tangible Equity (1) |
|
$ |
216,723 |
|
|
$ |
185,222 |
|
Common Shares Outstanding |
|
|
48,856,216 |
|
|
|
49,621,677 |
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA: |
|
|
|
|
|
|
|
|
Earnings Per Share Basic |
|
$ |
0.30 |
|
|
$ |
0.27 |
|
Earnings Per Share Diluted |
|
$ |
0.30 |
|
|
$ |
0.27 |
|
Book Value Per Share (2) |
|
$ |
8.99 |
|
|
$ |
8.23 |
|
Tangible Book Value Per Share (3) |
|
$ |
4.55 |
|
|
$ |
3.79 |
|
Cash Dividends Per Share |
|
$ |
0.06 |
|
|
$ |
0.05 |
|
|
|
|
(1) |
|
Average tangible equity is calculated by subtracting average goodwill and average
core deposit intangible assets from average shareholders equity. |
|
(2) |
|
Shareholders equity divided by common shares outstanding. |
|
(3) |
|
Tangible equity divided by common shares outstanding. |
12
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
SELECTED PERFORMANCE RATIOS: |
|
|
|
|
|
|
|
|
Return on Average Assets (4) (5) |
|
|
1.75 |
% |
|
|
1.74 |
% |
Return on Average Shareholders Equity (4) (6) |
|
|
13.83 |
% |
|
|
13.32 |
% |
Return on Average Tangible Equity (4) (7) |
|
|
27.70 |
% |
|
|
29.19 |
% |
Net Interest Spread (8) |
|
|
3.78 |
% |
|
|
4.01 |
% |
Net Interest Margin (9) |
|
|
4.85 |
% |
|
|
4.72 |
% |
Efficiency Ratio (10) |
|
|
39.10 |
% |
|
|
44.38 |
% |
Dividend Payout Ratio (11) |
|
|
20.27 |
% |
|
|
18.61 |
% |
Average Shareholders Equity to Average Total Assets |
|
|
12.68 |
% |
|
|
13.08 |
% |
|
|
|
|
|
|
|
|
|
SELECTED CAPITAL RATIOS: (12) |
|
|
|
|
|
|
|
|
Total Risk-Based Capital Ratio: |
|
|
|
|
|
|
|
|
Hanmi Financial |
|
|
11.97 |
% |
|
|
12.34 |
% |
Hanmi Bank |
|
|
11.87 |
% |
|
|
12.16 |
% |
Tier 1 Risk-Based Capital Ratio: |
|
|
|
|
|
|
|
|
Hanmi Financial |
|
|
10.94 |
% |
|
|
11.32 |
% |
Hanmi Bank |
|
|
10.84 |
% |
|
|
11.13 |
% |
Tier 1 Leverage Ratio: |
|
|
|
|
|
|
|
|
Hanmi Financial |
|
|
9.57 |
% |
|
|
9.41 |
% |
Hanmi Bank |
|
|
9.49 |
% |
|
|
9.25 |
% |
|
|
|
|
|
|
|
|
|
SELECTED ASSET QUALITY RATIOS: |
|
|
|
|
|
|
|
|
Non-Performing Loans to Total Gross Loans (13) |
|
|
0.38 |
% |
|
|
0.31 |
% |
Non-Performing Assets to Total Assets (14) |
|
|
0.31 |
% |
|
|
0.22 |
% |
Net Loan Charge-Offs to Average Total Gross Loans (15) |
|
|
0.19 |
% |
|
|
0.01 |
% |
Allowance for Loan Losses to Total Gross Loans |
|
|
1.00 |
% |
|
|
1.00 |
% |
Allowance for Loan Losses to Non-Performing Loans |
|
|
259.5 |
% |
|
|
327.9 |
% |
|
|
|
(4) |
|
Calculation based upon annualized net income. |
|
(5) |
|
Net income divided by average total assets. |
|
(6) |
|
Net income divided by average shareholders equity. |
|
(7) |
|
Net income divided by average tangible equity. |
|
(8) |
|
Average yield earned on interest-earning assets less average rate paid on
interest-bearing liabilities. |
|
(9) |
|
Net interest income before provision for credit losses divided by average
interest-earning assets. |
|
(10) |
|
Total non-interest expenses divided by the sum of net interest income before
provision for credit losses and total non-interest income. |
|
(11) |
|
Dividends declared divided by net income. |
|
(12) |
|
The required ratios for a well-capitalized institution, as defined by regulations
of the Board of Governors of the Federal Reserve System, are 10 percent for Total Risk-Based
Capital Ratio (total capital divided by risk-weighted assets); 6 percent for Tier 1 Risk-Based
Capital Ratio (Tier 1 capital divided by risk-weighted assets); and 5 percent for Tier 1
Leverage Ratio (Tier 1 capital divided by average assets). |
|
(13) |
|
Non-performing loans consist of non-accrual loans, loans past due 90 days or more
and restructured loans. |
|
(14) |
|
Non-performing assets consist of non-performing loans (see footnote (13) above) and
other real estate owned. |
|
(15) |
|
Calculation based upon annualized net loan charge-offs. |
13
Non-GAAP Financial Measures
Return on Average Tangible Equity Return on average tangible equity is supplemental
financial information determined by a method other than in accordance with GAAP. This non-GAAP measure is used by
management in the analysis of Hanmi Financials performance. Average tangible equity is calculated
by subtracting average goodwill and average core deposit intangible assets from average
shareholders equity. Banking and financial institution regulators also exclude goodwill and
intangibles from shareholders 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 financial results of Hanmi Financial, as it provides a method to assess managements success in
utilizing tangible capital. This disclosure should not be viewed as a substitution for results
determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance
measures that may be presented by other companies.
The following table reconciles this non-GAAP performance measure to the GAAP performance
measure for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
(Dollars in Thousands) |
|
Average Shareholders Equity |
|
$ |
434,220 |
|
|
$ |
406,067 |
|
Less Average Goodwill and Core Deposit Intangible Assets |
|
|
(217,497 |
) |
|
|
(220,845 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Tangible Equity |
|
$ |
216,723 |
|
|
$ |
185,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Average Shareholders Equity |
|
|
13.83 |
% |
|
|
13.32 |
% |
Effect of Average Goodwill and Core Deposit Intangible Assets |
|
|
13.87 |
% |
|
|
15.87 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Average Tangible Equity |
|
|
27.70 |
% |
|
|
29.19 |
% |
|
|
|
|
|
|
|
Tangible Book Value Per Share Tangible book value per share is supplemental financial
information determined by a method other than in accordance with GAAP. This non-GAAP measure is
used by management in the analysis of Hanmi Financials performance. Tangible book value per share
is calculated by subtracting goodwill and core deposit intangible assets from total shareholders
equity and dividing the difference by the number of shares of common stock outstanding. 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 financial
results of Hanmi Financial, as it provides a method to assess managements success in utilizing
tangible capital. This disclosure should not be viewed as a substitution for results determined in
accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be
presented by other companies.
The following table reconciles this non-GAAP performance measure to the GAAP performance
measure for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
(Dollars in Thousands, Except Per Share Data) |
|
Total Shareholders Equity |
|
$ |
439,204 |
|
|
$ |
408,450 |
|
Less Goodwill and Core Deposit Intangible Assets |
|
|
(217,124 |
) |
|
|
(220,446 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible Equity |
|
$ |
222,080 |
|
|
$ |
188,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book Value Per Share |
|
$ |
8.99 |
|
|
$ |
8.23 |
|
Effect of Goodwill and Core Deposit Intangible Assets |
|
|
(4.44 |
) |
|
|
(4.44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible Book Value Per Share |
|
$ |
4.55 |
|
|
$ |
3.79 |
|
|
|
|
|
|
|
|
14
FORWARD-LOOKING STATEMENTS
Some of the statements under Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this Form 10-Q constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. 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. For additional information concerning these factors, see our Form 10-K
filed with the Securities and Exchange Commission on March 16, 2006 under Risk Factors, Interest
Rate Risk Management and Liquidity and Capital Resources. We undertake no obligation to update
these forward-looking statements to reflect events or circumstances that occur after the date on
which such statements were made.
RESULTS OF OPERATIONS
Overview
For the three months ended March 31, 2006, net income was $14.8 million, or $0.30 per diluted
share, compared to $13.3 million, or $0.27 per diluted share, for the three months ended March 31,
2005. The 11.0 percent increase in net income for 2006 as compared to 2005 was attributable to
increases in net interest margin and average interest-earning assets. Net interest income before
provision for credit losses increased $4.5 million, or 14.1 percent, due to ongoing growth in the
loan portfolio. The net interest margin was 4.85 percent for the three months ended March 31, 2006,
compared to 4.72 percent for the same period of 2005.
Our results of operations are significantly affected by the provision for credit losses. The
provision for credit losses was $3.0 million and $136,000 for the three months ended March 31, 2006
and 2005, respectively, reflecting changes in the classification of certain credits as well as
growth in the loan portfolio in the respective quarters.
Non-interest
income increased by $897,000, or 12.2 percent, mainly due to an increase in
service charges on deposit accounts and higher gain on sales of loans. Non-interest expenses
increased by $34,000, or 0.2 percent, due to effective expense control and a comparatively lower decrease in fair
value of embedded options. 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 first quarter
of 2006 was 39.10 percent, compared to 44.38 percent for the same quarter in 2005.
The annualized return on average assets was 1.75 percent for the three months ended March 31,
2006, compared to 1.74 percent for the same period of 2005. The annualized return on average
shareholders equity was 13.83 percent for the three months ended March 31, 2006, and return on
average tangible equity was 27.70 percent, compared to 13.32 percent and 29.19 percent,
respectively, for the same period in 2005.
15
Net Interest Income Before Provision for Credit Losses
Our earnings depend largely upon the difference between the interest income received from the
loan portfolio and other interest-earning assets and the interest paid on deposits and borrowings.
The difference is net interest income. Net interest income, when expressed as a percentage of
average total interest-earning assets, is referred to as the net interest margin. Net interest
income is affected by the change in the level and mix of interest-earning assets and
interest-bearing liabilities, referred to as volume changes. Net interest income is also affected
by changes in the yields earned on assets and rates paid on liabilities, referred to as rate
changes. Interest rates charged on loans are affected principally by the demand for such loans, the
supply of money available for lending purposes and competitive factors. Those factors are, in turn,
affected by general economic conditions and other factors beyond our control, such as Federal
economic policies, the general supply of money in the economy, income tax policies, governmental
budgetary matters and the actions of the Federal Reserve Bank.
For the three months ended March 31, 2006 and 2005, net interest income before provision for
credit losses was $36.3 million and $31.9 million, respectively. The net interest spread and net
interest margin for the three months ended March 31, 2006 were 3.78 percent and 4.85 percent,
respectively, compared to 4.01 percent and 4.72 percent, respectively, for the three months ended
March 31, 2005.
Average interest-earning assets increased 10.9 percent to $3,036.3 million for the three
months ended March 31, 2006 from $2,736.8 million for the same period in 2005. Average gross loans
increased 13.8 percent to $2,547.4 million for the three months ended March 31, 2006 from $2,239.2
million for the same period in 2005, and average investment securities increased 4.0 percent to
$437.7 million for the three months ended March 31, 2006 from $420.8 million for the same period in
2005. Total loan interest income increased by 37.7 percent for the three months ended March 31,
2006 due to the increase in average gross loans outstanding and the increase in the average yield
on loans from 6.92 percent for the three months ended March 31, 2005 to 8.38 percent for the same
period in 2006. The average interest rate charged on loans increased 146 basis points, reflecting
the increase in the average Wall Street Journal Prime Rate of 199 basis points from 5.44 percent
for the three months ended March 31, 2005 to 7.43 percent for the same period in 2006. The yield on
average interest-earning assets increased by 135 basis points from 6.40 percent for the three
months ended March 31, 2005 to 7.75 percent for the three months ended March 31, 2006, reflecting a
shift in the mix of interest-earning assets from 81.8 percent loans, 15.4 percent securities and
2.8 percent other interest-earning assets for the three months ended March 31, 2005 to 83.9 percent
loans, 14.4 percent securities and 1.7 percent other interest-earning assets for the same period in
2006.
The majority of interest-earning assets growth was funded by a $291.1 million, or 11.6
percent, increase in average total deposits. Total average interest-bearing liabilities grew by
15.0 percent to $2,215.8 million for the three months ended March 31, 2006 compared to $1,926.4
million for the same period in 2005. The average interest rate paid for interest-bearing
liabilities increased by 158 basis points from 2.39 percent for the three months ended March 31,
2005 to 3.97 percent for the three months ended March 31, 2006. In the second half of 2005, due to
competitive pricing, the Bank increased its rates on certificates of deposit to maintain
relationships with valued customers and to fund loan growth.
16
The following table presents the average balances of assets, liabilities and shareholders
equity; the amount of interest income or interest expense; the average yield or rate for each
category of interest-earning assets and interest-bearing liabilities; and the net interest spread
and the net interest margin for the periods indicated. All average balances are daily average
balances.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2006 |
|
|
March 31, 2005 |
|
|
|
|
|
|
|
Interest |
|
|
Average |
|
|
|
|
|
|
Interest |
|
|
Average |
|
|
|
Average |
|
|
Income/ |
|
|
Yield/ |
|
|
Average |
|
|
Income/ |
|
|
Yield/ |
|
|
|
Balance |
|
|
Expense |
|
|
Rate |
|
|
Balance |
|
|
Expense |
|
|
Rate |
|
|
|
(Dollars in Thousands) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Loans, Net (1) |
|
$ |
2,547,421 |
|
|
$ |
52,637 |
|
|
|
8.38 |
% |
|
$ |
2,239,174 |
|
|
$ |
38,226 |
|
|
|
6.92 |
% |
Municipal Securities (2) |
|
|
73,770 |
|
|
|
778 |
|
|
|
6.49 |
% |
|
|
74,050 |
|
|
|
776 |
|
|
|
6.54 |
% |
Obligations of Other U.S. Government Agencies |
|
|
126,498 |
|
|
|
1,303 |
|
|
|
4.12 |
% |
|
|
96,217 |
|
|
|
934 |
|
|
|
3.94 |
% |
Other Debt Securities |
|
|
237,308 |
|
|
|
2,692 |
|
|
|
4.54 |
% |
|
|
250,507 |
|
|
|
2,665 |
|
|
|
4.31 |
% |
Equity Securities |
|
|
24,610 |
|
|
|
325 |
|
|
|
5.28 |
% |
|
|
21,961 |
|
|
|
273 |
|
|
|
5.04 |
% |
Federal Funds Sold |
|
|
26,593 |
|
|
|
289 |
|
|
|
4.35 |
% |
|
|
54,862 |
|
|
|
335 |
|
|
|
2.48 |
% |
Interest-Earning Deposits |
|
|
100 |
|
|
|
1 |
|
|
|
4.15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest-Earning Assets |
|
|
3,036,300 |
|
|
|
58,025 |
|
|
|
7.75 |
% |
|
|
2,736,771 |
|
|
|
43,209 |
|
|
|
6.40 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
|
94,501 |
|
|
|
|
|
|
|
|
|
|
|
84,659 |
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses |
|
|
(25,011 |
) |
|
|
|
|
|
|
|
|
|
|
(22,730 |
) |
|
|
|
|
|
|
|
|
Other Assets |
|
|
317,629 |
|
|
|
|
|
|
|
|
|
|
|
304,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Noninterest-Earning Assets |
|
|
387,119 |
|
|
|
|
|
|
|
|
|
|
|
366,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
3,423,419 |
|
|
|
|
|
|
|
|
|
|
$ |
3,103,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market Checking |
|
$ |
519,628 |
|
|
|
3,714 |
|
|
|
2.90 |
% |
|
$ |
592,211 |
|
|
|
3,008 |
|
|
|
2.06 |
% |
Savings |
|
|
117,761 |
|
|
|
482 |
|
|
|
1.66 |
% |
|
|
150,261 |
|
|
|
556 |
|
|
|
1.50 |
% |
Time Deposits of $100,000 or More |
|
|
1,167,270 |
|
|
|
12,784 |
|
|
|
4.44 |
% |
|
|
797,141 |
|
|
|
5,002 |
|
|
|
2.54 |
% |
Other Time Deposits |
|
|
272,760 |
|
|
|
2,611 |
|
|
|
3.88 |
% |
|
|
234,662 |
|
|
|
1,245 |
|
|
|
2.15 |
% |
Other Borrowed Funds |
|
|
138,362 |
|
|
|
2,089 |
|
|
|
6.12 |
% |
|
|
152,124 |
|
|
|
1,536 |
|
|
|
4.09 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest-Bearing Liabilities |
|
|
2,215,781 |
|
|
|
21,680 |
|
|
|
3.97 |
% |
|
|
1,926,399 |
|
|
|
11,347 |
|
|
|
2.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-Bearing Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposits |
|
|
732,894 |
|
|
|
|
|
|
|
|
|
|
|
744,954 |
|
|
|
|
|
|
|
|
|
Other Liabilities |
|
|
40,524 |
|
|
|
|
|
|
|
|
|
|
|
26,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Noninterest-Bearing Liabilities |
|
|
773,418 |
|
|
|
|
|
|
|
|
|
|
|
771,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
2,989,199 |
|
|
|
|
|
|
|
|
|
|
|
2,697,419 |
|
|
|
|
|
|
|
|
|
Shareholders Equity |
|
|
434,220 |
|
|
|
|
|
|
|
|
|
|
|
406,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
3,423,419 |
|
|
|
|
|
|
|
|
|
|
$ |
3,103,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income |
|
|
|
|
|
$ |
36,345 |
|
|
|
|
|
|
|
|
|
|
$ |
31,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Spread (3) |
|
|
|
|
|
|
|
|
|
|
3.78 |
% |
|
|
|
|
|
|
|
|
|
|
4.01 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin (4) |
|
|
|
|
|
|
|
|
|
|
4.85 |
% |
|
|
|
|
|
|
|
|
|
|
4.72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Loans are net of deferred fees and related direct costs, but excluding the
allowance for loan losses. Non-accrual loans are included in the average loan balance. Loan
fees have been included in the calculation of interest income. Loan fees were $1.3 million and
$1.5 million for the three months ended March 31, 2006 and 2005, respectively. |
|
(2) |
|
Yields on tax-exempt income have been computed on a tax-equivalent basis,
using an effective marginal rate of 35 percent. |
|
(3) |
|
Represents the average rate earned on interest-earning assets less the
average rate paid on interest-bearing liabilities. |
|
(4) |
|
Represents annualized net interest income as a percentage of average
interest-earning assets. |
17
The table below shows changes in interest income and interest expense and the amounts
attributable to variations in interest rates and volumes for the periods indicated. The variances
attributable to simultaneous volume and rate changes have been allocated to the change due to
volume and the change due to rate categories in proportion to the relationship of the absolute
dollar amount attributable solely to the change in volume and to the change in rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, 2006 vs. 2005 |
|
|
|
|
Increases (Decreases) |
|
|
|
|
Due to Change in |
|
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|
|
|
(In Thousands) |
|
Interest Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Loans, Net |
|
$ |
5,700 |
|
|
$ |
8,711 |
|
|
$ |
14,411 |
|
Municipal Securities |
|
|
(2 |
) |
|
|
4 |
|
|
|
2 |
|
Obligations of Other U.S. Government Agencies |
|
|
301 |
|
|
|
68 |
|
|
|
369 |
|
Other Debt Securities |
|
|
(142 |
) |
|
|
169 |
|
|
|
27 |
|
Equity Securities |
|
|
33 |
|
|
|
19 |
|
|
|
52 |
|
Federal Funds Sold |
|
|
(227 |
) |
|
|
181 |
|
|
|
(46 |
) |
Interest-Earning Deposits |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Total Interest Income |
|
|
5,664 |
|
|
|
9,152 |
|
|
|
14,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Money Market Checking |
|
|
(404 |
) |
|
|
1,110 |
|
|
|
706 |
|
Savings |
|
|
(129 |
) |
|
|
55 |
|
|
|
(74 |
) |
Time Deposits of $100,000 or More |
|
|
2,988 |
|
|
|
4,794 |
|
|
|
7,782 |
|
Other Time Deposits |
|
|
229 |
|
|
|
1,137 |
|
|
|
1,366 |
|
Other Borrowed Funds |
|
|
(150 |
) |
|
|
703 |
|
|
|
553 |
|
|
|
|
|
|
|
|
|
|
|
Total Interest Expense |
|
|
2,534 |
|
|
|
7,799 |
|
|
|
10,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Net Interest Income |
|
$ |
3,130 |
|
|
$ |
1,353 |
|
|
$ |
4,483 |
|
|
|
|
|
|
|
|
|
|
|
Provision for Credit Losses
For the three months ended March 31, 2006, the provision for credit losses was $3.0 million,
compared to $136,000 for the three months ended March 31, 2005. The allowance for loan losses
remained at 1.00 percent of total gross loans at March 31, 2006 and 2005, with the increase in the
dollar amount allowed for credit losses due to changes in the classification of certain credits as
well as growth in the loan portfolio, including growth in loan types that historically have experienced
charge-offs. Non-performing assets increased from $10.1 million, or 0.30 percent of total assets,
as of December 31, 2005 to $10.8 million, or 0.31% of total assets, as of March 31, 2006. The
$175.6 million, or 7.0 percent, increase in the loan portfolio and the $705,000, or 7.0 percent,
increase in non-performing assets required the provision to increase to $3.0 million for the three
months ended March 31, 2006 to maintain the necessary allowance level.
18
Non-Interest Income
The following table sets forth the various components of non-interest income for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2006 |
|
|
2005 |
|
|
Amount |
|
|
Percentage |
|
|
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
|
|
Service Charges on Deposit Accounts |
|
$ |
4,231 |
|
|
$ |
3,730 |
|
|
$ |
501 |
|
|
|
13.4 |
% |
Trade Finance Fees |
|
|
1,071 |
|
|
|
945 |
|
|
|
126 |
|
|
|
13.3 |
% |
Remittance Fees |
|
|
488 |
|
|
|
468 |
|
|
|
20 |
|
|
|
4.3 |
% |
Other Service Charges and Fees |
|
|
534 |
|
|
|
579 |
|
|
|
(45 |
) |
|
|
(7.8 |
%) |
Bank-Owned Life Insurance Income |
|
|
218 |
|
|
|
205 |
|
|
|
13 |
|
|
|
6.3 |
% |
Increase in Fair Value of Derivatives |
|
|
225 |
|
|
|
419 |
|
|
|
(194 |
) |
|
|
(46.3 |
%) |
Other Income |
|
|
643 |
|
|
|
621 |
|
|
|
22 |
|
|
|
3.5 |
% |
Gain on Sales of Loans |
|
|
839 |
|
|
|
308 |
|
|
|
531 |
|
|
|
172.4 |
% |
Gain on Sales of Securities Available for Sale |
|
|
5 |
|
|
|
82 |
|
|
|
(77 |
) |
|
|
(93.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Interest Income |
|
$ |
8,254 |
|
|
$ |
7,357 |
|
|
$ |
897 |
|
|
|
12.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income is earned from three major sources: service charges on deposit
accounts, fees generated from international trade finance and gain on sales of loans. For the three
months ended March 31, 2006, non-interest income was $8.3 million, an increase of 12.2 percent from
$7.4 million for the three months ended March 31, 2005. The overall increase in non-interest income
is primarily due to expansion in the Banks loan and deposit portfolios.
Service charges on deposit accounts increased by $501,000, or 13.4 percent, from $3.7 million
for the three months ended March 31, 2005 to $4.2 million for three months ended March 31, 2006.
Service charge income on deposit accounts increased due to higher deposit volume and number of
accounts. Average deposits increased by 11.6 percent from $2,519.2 million for three months ended
March 31, 2006 to $2,810.3 million for the three months ended March 31, 2006. Service charges are
regularly reviewed to maximize service charge income while still maintaining a competitive
position.
Fees generated from international trade finance increased by $126,000, or 13.3 percent, from
$945,000 for the three months ended March 31, 2005 to $1.1 million for the three months ended March
31, 2006 due to higher volume. Trade finance fees related primarily to import and export letters of
credit.
The changes in the fair value of derivatives are caused by movements in the indexes to which
interest rates on certain certificates of deposit are tied. In 2005 and 2004, the Bank offered
certificates of deposit tied to either the Standard & Poors 500 Index or a basket of Asian
currencies. The Bank entered into swap transactions to hedge the market risk associated with such
certificates of deposit. The swaps and the related derivatives embedded in the certificates of
deposit are accounted for at fair value. The increase in the fair value of the swaps of $225,000
and $419,000 recorded in non-interest income for the three months ended March 31, 2006 and 2005,
respectively, are partially offset by changes in the fair value of the embedded derivatives
recorded in non-interest expenses.
Gain on sales of loans increased by $531,000, or 172.4 percent, from $308,000 for the three
months ended March 31, 2005 to $839,000 for the three months ended March 31, 2006. The increase in
gain on sales of loans resulted primarily from an increase of $10.9 million, or 186.6 percent, in
sales activity for SBA loans. The guaranteed portion of a substantial percentage of SBA loans is
sold in the secondary markets, and servicing rights are retained.
19
Non-Interest Expenses
The following table sets forth the breakdown of non-interest expenses for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2006 |
|
|
2005 |
|
|
Amount |
|
|
Percentage |
|
|
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
|
|
Salaries and Employee Benefits |
|
$ |
9,161 |
|
|
$ |
9,167 |
|
|
$ |
(6 |
) |
|
|
(0.1 |
%) |
Occupancy and Equipment |
|
|
2,318 |
|
|
|
2,231 |
|
|
|
87 |
|
|
|
3.9 |
% |
Data Processing |
|
|
1,215 |
|
|
|
1,165 |
|
|
|
50 |
|
|
|
4.3 |
% |
Professional Fees |
|
|
668 |
|
|
|
479 |
|
|
|
189 |
|
|
|
39.5 |
% |
Advertising and Promotion |
|
|
646 |
|
|
|
694 |
|
|
|
(48 |
) |
|
|
(6.9 |
%) |
Supplies and Communications |
|
|
636 |
|
|
|
579 |
|
|
|
57 |
|
|
|
9.8 |
% |
Amortization of Core Deposit Intangible |
|
|
625 |
|
|
|
732 |
|
|
|
(107 |
) |
|
|
(14.6 |
%) |
Decrease in Fair Value of Embedded Options |
|
|
102 |
|
|
|
573 |
|
|
|
(471 |
) |
|
|
(82.2 |
%) |
Other Operating Expenses |
|
|
2,068 |
|
|
|
1,785 |
|
|
|
283 |
|
|
|
15.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Interest Expenses |
|
$ |
17,439 |
|
|
$ |
17,405 |
|
|
$ |
34 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2006 and 2005, non-interest expenses were $17.4
million. 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 first quarter of 2006 was 39.10
percent, compared to 44.38 percent for the same quarter in 2005. The improvement in the efficiency
ratio was due to effective expense control and a comparatively lower decrease in fair value of embedded options.
Salaries and employee benefits were $9.2 million for the three months ended March 31, 2006 and
2005. Salaries, incentive compensation and employee benefits increased $464,000, net of a decrease in share-based compensation
of $292,000, which increase was offset
by a $474,000 increase in salaries and employee benefits capitalized as direct loan originating
costs.
Professional fees were $668,000 for the three months ended March 31, 2006, representing an
increase of $189,000, or 39.5 percent, compared to $479,000 for the three months ended March 31,
2005. The increase was caused primarily by increased regulatory compliance consulting fees.
Core deposit premium amortization decreased to $625,000 for the three months ended March 31,
2006, representing a decrease of $107,000, or 14.6 percent, compared to $732,000 for the three
months ended March 31, 2005. The decrease is due to the core deposit premium being amortized using
the level yield amortization method.
Other operating expenses for the three months ended March 31, 2006 increased $283,000, or 15.9
percent, to $2.1 million from $1.8 million for the three months ended March 31, 2005. The increase
is primarily attributable to amortization expense of $243,000 related to the termination in the
fourth quarter of 2005 of interest rate swaps that had unrealized losses.
Income Taxes
For the three months ended March 31, 2006, income taxes of $9.4 million were recognized on
pre-tax income of $24.2 million, representing an effective tax rate of 38.8 percent, compared to
income taxes of $8.3 million recognized on pre-tax income of $21.7 million, representing an
effective tax rate of 38.5 percent, for the three months ended March 31, 2005.
20
FINANCIAL CONDITION
Summary of Changes in Balance Sheets March 31, 2006 Compared to December 31, 2005
As of March 31, 2006, total assets were $3.51 billion, an increase of $100.7 million, or 3.0
percent, from the December 31, 2005 balance of $3.41 billion. The increase in assets was mainly
funded by overnight Federal funds purchased and FHLB advances, which increased by $85.2 million, or
183.9 percent, to $131.5 million at March 31, 2006 from $46.3 million at December 31, 2005. As of
March 31, 2006 and December 31, 2005, loans receivable, net of deferred loan fees and allowance for loan losses,
and loans held for sale totaled $2.64 billion and $2.47 billion, respectively, an increase of
$173.0 million, or 7.0 percent. Investment securities decreased $13.0 million, or 2.9 percent, to
$430.9 million at March 31, 2006 from $443.9 million at December 31, 2005.
Investment Portfolio
Securities are classified as held to maturity or available for sale in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments
in Debt and Equity Securities. Those securities that we have the ability and intent to hold to
maturity are classified as held to maturity securities. All other securities are classified as
available for sale. There were no trading securities at March 31, 2006 or December 31, 2005.
Securities classified as held to maturity are stated at cost, adjusted for amortization of premiums
and accretion of discounts, and available for sale securities are stated at fair value. The
securities currently held consist primarily of U.S. agency securities, mortgage-backed securities,
collateralized mortgage obligations and municipal bonds.
As of March 31, 2006, held to maturity securities totaled $1.0 million and available for sale
securities totaled $429.8 million, compared to $1.0 million and $442.9 million, respectively, at
December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006 |
|
|
December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
Amortized |
|
|
Fair |
|
|
Gain |
|
|
Amortized |
|
|
Fair |
|
|
Gain |
|
|
|
Cost |
|
|
Value |
|
|
(Loss) |
|
|
Cost |
|
|
Value |
|
|
(Loss) |
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
|
|
|
|
|
|
|
|
Held to Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds |
|
$ |
692 |
|
|
$ |
692 |
|
|
$ |
|
|
|
$ |
692 |
|
|
$ |
692 |
|
|
$ |
|
|
Mortgage-Backed Securities |
|
|
347 |
|
|
|
347 |
|
|
|
|
|
|
|
357 |
|
|
|
359 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Held to Maturity |
|
$ |
1,039 |
|
|
$ |
1,039 |
|
|
$ |
|
|
|
$ |
1,049 |
|
|
$ |
1,051 |
|
|
$ |
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-Backed Securities |
|
$ |
143,163 |
|
|
$ |
139,628 |
|
|
$ |
(3,535 |
) |
|
$ |
149,311 |
|
|
$ |
147,268 |
|
|
$ |
(2,043 |
) |
U.S. Government Agency Securities |
|
|
129,638 |
|
|
|
127,274 |
|
|
|
(2,364 |
) |
|
|
129,589 |
|
|
|
127,813 |
|
|
|
(1,776 |
) |
Collateralized Mortgage Obligations |
|
|
79,506 |
|
|
|
77,407 |
|
|
|
(2,099 |
) |
|
|
83,068 |
|
|
|
81,456 |
|
|
|
(1,612 |
) |
Municipal Bonds |
|
|
71,252 |
|
|
|
72,660 |
|
|
|
1,408 |
|
|
|
71,536 |
|
|
|
73,220 |
|
|
|
1,684 |
|
Corporate Bonds |
|
|
8,199 |
|
|
|
7,922 |
|
|
|
(277 |
) |
|
|
8,235 |
|
|
|
8,053 |
|
|
|
(182 |
) |
Other Securities |
|
|
4,999 |
|
|
|
4,954 |
|
|
|
(45 |
) |
|
|
4,999 |
|
|
|
5,053 |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Available for Sale |
|
$ |
436,757 |
|
|
$ |
429,845 |
|
|
$ |
(6,912 |
) |
|
$ |
446,738 |
|
|
$ |
442,863 |
|
|
$ |
(3,875 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
The amortized cost and estimated fair value of investment securities at March 31, 2006,
by contractual maturity, are shown below. Although mortgage-backed securities and collateralized
mortgage obligations have contractual maturities through 2036, expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale |
|
|
Held to Maturity |
|
|
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
Fair |
|
|
|
Cost |
|
|
Value |
|
|
Cost |
|
|
Value |
|
|
|
|
|
|
|
(In Thousands) |
|
|
|
|
|
Within One Year |
|
$ |
14,986 |
|
|
$ |
14,882 |
|
|
$ |
|
|
|
$ |
|
|
Over One Year Through Five Years |
|
|
129,546 |
|
|
|
126,951 |
|
|
|
|
|
|
|
|
|
Over Five Years Through Ten Years |
|
|
8,050 |
|
|
|
8,153 |
|
|
|
692 |
|
|
|
692 |
|
Over Ten Years |
|
|
61,506 |
|
|
|
62,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,088 |
|
|
|
212,810 |
|
|
|
692 |
|
|
|
692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-Backed Securities |
|
|
143,163 |
|
|
|
139,628 |
|
|
|
347 |
|
|
|
347 |
|
Collateralized Mortgage Obligations |
|
|
79,506 |
|
|
|
77,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,669 |
|
|
|
217,035 |
|
|
|
347 |
|
|
|
347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
436,757 |
|
|
$ |
429,845 |
|
|
$ |
1,039 |
|
|
$ |
1,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Portfolio
All loans are carried at face amount, less principal repayments collected, net of deferred
loan fees and the allowance for loan losses. Interest on all loans is accrued daily on a simple
interest basis. Once a loan is placed on non-accrual status, the accrual of interest is
discontinued and previously accrued interest is reversed. Loans are placed on non-accrual status
when principal and interest on a loan is past due 90 days or more, unless a loan is both well
secured and in the process of collection.
The following table shows the loan composition by type, including loans held for sale, as of
the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
Increase (Decrease) |
|
|
|
2006 |
|
|
2005 |
|
|
Amount |
|
|
Percentage |
|
|
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
|
|
Real Estate Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Property |
|
$ |
766,248 |
|
|
$ |
733,650 |
|
|
$ |
32,598 |
|
|
|
4.4 |
% |
Construction |
|
|
169,422 |
|
|
|
152,080 |
|
|
|
17,342 |
|
|
|
11.4 |
% |
Residential Property (1) |
|
|
85,356 |
|
|
|
88,442 |
|
|
|
(3,086 |
) |
|
|
(3.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Real Estate Loans |
|
|
1,021,026 |
|
|
|
974,172 |
|
|
|
46,854 |
|
|
|
4.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Term Loans |
|
|
994,089 |
|
|
|
945,210 |
|
|
|
48,879 |
|
|
|
5.2 |
% |
Commercial Lines of Credit |
|
|
240,115 |
|
|
|
224,271 |
|
|
|
15,844 |
|
|
|
7.1 |
% |
SBA Loans |
|
|
195,885 |
|
|
|
155,491 |
|
|
|
40,394 |
|
|
|
26.0 |
% |
International Loans |
|
|
128,446 |
|
|
|
106,520 |
|
|
|
21,926 |
|
|
|
20.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial and Industrial Loans |
|
|
1,558,535 |
|
|
|
1,431,492 |
|
|
|
127,043 |
|
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Loans |
|
|
93,828 |
|
|
|
92,154 |
|
|
|
1,674 |
|
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans Gross |
|
|
2,673,389 |
|
|
|
2,497,818 |
|
|
|
175,571 |
|
|
|
7.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Loan Fees |
|
|
(4,604 |
) |
|
|
(3,775 |
) |
|
|
(829 |
) |
|
|
22.0 |
% |
Allowance for Loan Losses |
|
|
(26,703 |
) |
|
|
(24,963 |
) |
|
|
(1,740 |
) |
|
|
7.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans Receivable |
|
$ |
2,642,082 |
|
|
$ |
2,469,080 |
|
|
$ |
173,002 |
|
|
|
7.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount includes loans held for sale, at the lower of cost or
market, of $1.4 million and
$1.1 million at March 31, 2006 and December 31, 2005, respectively. |
22
At March 31, 2006 and December 31, 2005, loans, net of deferred loan fees, allowance for
loan losses and loans held for sale, totaled $2.64 billion and $2.47 billion, respectively. Real
estate loans, composed of commercial property, residential property and construction loans,
increased $46.9 million, or 4.8 percent, to $1,021.0 million at March 31, 2006 from $974.2 million
at December 31, 2005, representing 38.2 percent and 39.0 percent, respectively, of the total loan
portfolio. Total commercial and industrial loans, composed of domestic commercial property and
lines of credit, trade financing and SBA loans, increased $127.0 million, or 8.9 percent, to $1.56
billion at March 31, 2006 from $1.43 billion at December 31, 2005, representing 58.3 percent and
57.3 percent, respectively, of the total loan portfolio. Consumer loans increased $1.7 million, or
1.8 percent, to $93.8 million at March 31, 2006 from $92.2 million at December 31, 2005.
As of March 31, 2006, there was $323.5 million of loans outstanding, or 12.10 percent of total
gross loans outstanding, to borrowers who were involved in the accommodation/hospitality industry.
There was no other concentration of loans to any one type of industry exceeding 10 percent of total
gross loans.
Non-Performing Assets
Non-performing assets consist of loans on non-accrual status, loans 90 days or more past due
and still accruing interest, loans restructured where the terms of repayment have been renegotiated
resulting in a reduction or deferral of interest or principal, and other real estate owned
(OREO). Loans are generally placed on non-accrual status when they become 90 days past due unless
management believes the loan is adequately collateralized and in the process of collection. Loans
may be restructured by management when a borrower has experienced some change in financial status,
causing an inability to meet the original repayment terms, and where we believe the borrower
eventually will overcome those circumstances and repay the loan in full. OREO consists of
properties acquired by foreclosure or similar means that management intends to offer for sale.
Managements classification of a loan as non-accrual is an indication that there is reasonable
doubt as to the full collectibility of principal or interest on the loan; at this point, we stop
recognizing income from the interest on the loan and reverse any uncollected interest that had been
accrued but unpaid. These loans may or may not be collateralized, but collection efforts are
continuously pursued.
The table below shows the composition of non-performing assets as of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
Increase |
|
|
|
2006 |
|
|
2005 |
|
|
Amount |
|
|
Percentage |
|
|
|
|
(Dollars in Thousands) |
|
Non-Accrual Loans |
|
$ |
10,282 |
|
|
$ |
10,122 |
|
|
$ |
160 |
|
|
|
1.6 |
% |
Loans 90 Days or More Past Due and
Still Accruing |
|
|
9 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Performing Loans |
|
|
10,291 |
|
|
|
10,131 |
|
|
|
160 |
|
|
|
1.6 |
% |
Other Real Estate Owned |
|
|
545 |
|
|
|
|
|
|
|
545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Performing Assets |
|
$ |
10,836 |
|
|
$ |
10,131 |
|
|
$ |
705 |
|
|
|
7.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
Provisions to the allowance for loan losses are made quarterly to recognize probable loan
losses. The quarterly provision is based on the allowance need, which is calculated using a formula
designed to provide adequate allowances for anticipated losses. The formula is composed of various
components. The allowance is determined by assigning specific allowances for all classified loans.
All loans that are not classified are then given certain allocations according to type with larger
percentages applied to loans deemed to be of a higher risk. These percentages are determined based
on the prior loss history by type of loan, adjusted for current economic factors.
23
The allowance for loan losses and allowance for off-balance sheet items are maintained at
levels that management believes are adequate to absorb probable loan losses inherent in various
financial instruments. The adequacy of each of the allowance and the reserve is determined through
periodic evaluations of the loan portfolio and other pertinent factors, which are inherently
subjective as the process calls for various significant estimates and assumptions. Among other
factors, the estimates involve the amounts and timing of expected future cash flows and fair value
of collateral on impaired loans, estimated losses on loans based on historical loss experience,
various qualitative factors, and uncertainties in estimating losses and inherent risks in the
various credit portfolios, which may be subject to substantial change.
On a quarterly basis, we utilize a classification migration model and individual loan review
analysis tools as starting points for determining the adequacy of the allowance for loan losses and
allowance for off-balance sheet items. Our loss migration analysis tracks twelve quarters of loan
losses to determine historical loss experience in every classification category (i.e., pass,
special mention, substandard and doubtful) for each loan type, except consumer loans
(automobile, mortgage and credit cards), which are analyzed as homogeneous loan pools. The
individual loan review analysis is the other part of the allowance allocation process, applying
specific monitoring policies and procedures in analyzing the existing loan portfolios. Further
assignments are made based on general and specific economic conditions, as well as performance
trends within specific portfolio segments and individual concentrations of credit.
As of March 31, 2006, the allowance for loan losses was $26.7 million, an increase of $1.7
million, or 7.0 percent, compared to $25.0 million at December 31, 2005. The increase in the
allowance for loan losses reflects changes in the classification of certain credits as well as
growth in the loan portfolio, including loan types that historically have experienced charge-offs.
As of March 31, 2006 and December 31, 2005, the allowance for off-balance sheet items was $2.1
million.
The loan loss estimation is based on historical losses, and specific allocations of the
allowance are performed on a quarterly basis. Adjustments to allowance allocations for specific
segments of the loan portfolio may be made as a result thereof, based on the accuracy of forecasted
loss amounts and other loan-related or policy-related issues.
24
We determine the appropriate overall allowance for loan losses and allowance for off-balance
sheet items based on the foregoing analysis, taking into account managements judgment. The
allowance methodology is reviewed on a periodic basis and modified as appropriate. Based on this
analysis, including the aforementioned factors, we believe that the allowance for loan losses and
allowance for off-balance sheet items are adequate as of March 31, 2006 and December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
(Dollars in Thousands) |
|
Allowance for Loan Losses: |
|
|
|
|
|
|
|
|
Balance at Beginning of Period |
|
$ |
24,963 |
|
|
$ |
24,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual Charge-Offs |
|
|
(1,328 |
) |
|
|
(1,356 |
) |
Recoveries on Loans Previously Charged Off |
|
|
108 |
|
|
|
250 |
|
|
|
|
|
|
|
|
Net Loan Charge-Offs |
|
|
(1,220 |
) |
|
|
(1,106 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision Charged to Operating Expenses |
|
|
2,960 |
|
|
|
1,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period |
|
$ |
26,703 |
|
|
$ |
24,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Off-Balance Sheet Items: |
|
|
|
|
|
|
|
|
Balance at Beginning of Period |
|
$ |
2,130 |
|
|
$ |
2,024 |
|
Provision Charged to Operating Expenses |
|
|
|
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period |
|
$ |
2,130 |
|
|
$ |
2,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
Net Loan Charge-Offs to Average Total Gross Loans (1) |
|
|
0.19 |
% |
|
|
0.18 |
% |
Net Loan Charge-Offs to Total Gross Loans at End of Period (1) |
|
|
0.19 |
% |
|
|
0.18 |
% |
Allowance for Loan Losses to Average Total Gross Loans |
|
|
1.05 |
% |
|
|
1.00 |
% |
Allowance for Loan Losses to Total Gross Loans at End of Period |
|
|
1.00 |
% |
|
|
1.00 |
% |
Net Loan Charge-Offs to Allowance for Loan Losses (1) |
|
|
18.53 |
% |
|
|
17.58 |
% |
Net Loan Charge-Offs to Provision Charged to Operating Expenses |
|
|
41.22 |
% |
|
|
66.95 |
% |
Allowance for Loan Losses to Non-Performing Loans |
|
|
259.5 |
% |
|
|
246.4 |
% |
|
|
|
|
|
|
|
|
|
Balances: |
|
|
|
|
|
|
|
|
Average Total Gross Loans Outstanding During Period |
|
$ |
2,551,228 |
|
|
$ |
2,498,947 |
|
Total Gross Loans Outstanding at End of Period |
|
$ |
2,673,389 |
|
|
$ |
2,497,818 |
|
Non-Performing Loans at End of Period |
|
$ |
10,291 |
|
|
$ |
10,131 |
|
|
|
|
(1) |
|
Net loan charge-offs annualized to calculate the ratios. |
We concentrate the majority of our interest-earning assets in loans. In all forms of
lending, there are inherent risks. We concentrate the preponderance of our loan portfolio in either
commercial loans or real estate loans. A small part of the portfolio is represented by installment
loans, primarily for the purchase of automobiles. While we believe that our underwriting criteria
are prudent, outside factors can adversely impact credit quality.
A portion of the portfolio is represented by loans guaranteed by the SBA, which further
reduces the potential for loss. We also utilize credit review in an effort to maintain loan
quality. Loans are reviewed throughout the year with special attention given to new loans and those
loans that are classified as special mention and worse. In addition to our internal grading
system, loans criticized by this credit review are downgraded with appropriate allowances added if
required.
As indicated above, we formally assess the adequacy of the allowance on a quarterly basis by:
|
|
|
reviewing the adversely graded, delinquent or otherwise questionable loans; |
|
|
|
|
generating an estimate of the loss potential in each such loan; |
|
|
|
|
adding a risk factor for industry, economic or other external factors; and |
|
|
|
|
evaluating the present status of each loan. |
25
Although management believes the allowance is adequate to absorb losses as they arise, no
assurance can be given that we will not sustain losses in any given period, which could be
substantial in relation to the size of the allowance.
Deposits
The following table shows the composition of deposits by type as of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
Increase (Decrease) |
|
|
|
2006 |
|
|
2005 |
|
|
Amount |
|
|
Percentage |
|
|
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Noninterest-Bearing |
|
$ |
748,530 |
|
|
$ |
738,618 |
|
|
$ |
9,912 |
|
|
|
1.3 |
% |
Interest-Bearing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market Checking |
|
|
495,365 |
|
|
|
526,171 |
|
|
|
(30,806 |
) |
|
|
(5.9 |
%) |
Savings |
|
|
114,336 |
|
|
|
121,574 |
|
|
|
(7,238 |
) |
|
|
(6.0 |
%) |
Time Deposits of $100,000 or More |
|
|
1,188,982 |
|
|
|
1,161,950 |
|
|
|
27,032 |
|
|
|
2.3 |
% |
Other Time Deposits |
|
|
271,653 |
|
|
|
277,801 |
|
|
|
(6,148 |
) |
|
|
(2.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deposits |
|
$ |
2,818,866 |
|
|
$ |
2,826,114 |
|
|
$ |
(7,248 |
) |
|
|
(0.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits increased $9.9 million, or 1.3 percent, to $748.5 million at March 31,
2006 from $738.6 million at December 31, 2005. This increase was due to continued efforts to
increase the net interest margin by changing the deposit composition mix between interest-bearing
and noninterest-bearing accounts. Money market checking, savings and other time deposits decreased
$30.8 million, or 5.9 percent, $7.2 million, or 6.0 percent, and $6.1 million, or 2.2 percent,
respectively, to $495.4 million, $114.3 million and $271.7 million, respectively, at March 31, 2006
from $526.2 million, $121.6 million and $277.8 million, respectively, at December 31, 2005. These
accounts decreased because customers shifted their balances into higher yielding certificates of
deposit. Time deposits of $100,000 or more increased $27.0 million, or 2.3 percent, to $1.19
billion at March 31, 2006 from $1.16 billion at December 31, 2005. This growth reflects the shift
away from low-yielding accounts that normally occurs as interest rates rise and depositors take
advantage of the greater interest rate differentials available in the market.
Other Borrowed Funds
Other borrowed funds consist of advances from the Federal Home Loan Bank of San Francisco
(FHLB) and overnight Federal funds. At March 31, 2006 and December 31, 2005, advances from the
FHLB were $93.4 million and $43.5 million, respectively. Overnight Federal funds totaled $38.0
million at March 31, 2006. There were no overnight Federal funds as of December 31, 2005. Among the
advances from the FHLB and overnight Federal funds, short-term borrowings with a remaining maturity of less than one year were
$93.1 million, and the weighted-average interest rate thereon was 4.86 percent.
INTEREST RATE RISK MANAGEMENT
Interest rate risk indicates our exposure to market interest rate fluctuations. The movement
of interest rates directly and inversely affects the economic value of fixed-income assets, which
is the present value of future cash flow discounted by the current interest rate. Under the same
conditions, the higher the current interest rate, the higher the denominator of discounting.
Interest rate risk management is intended to decrease or increase the level of our exposure to
fluctuations in market interest rate. The level of interest rate risk can be managed through the
changing of gap positions and the volume of fixed-income assets and so forth. For successful
management of interest rate risk, we use various methods to measure existing and future interest
rate risk exposures. In addition to regular reports used in business operations, repricing gap
analysis, stress testing and simulation modeling are the main measurement techniques used to
quantify interest rate risk exposure.
26
The following table shows the status of the gap position as of March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After Three |
|
|
After One |
|
|
|
|
|
|
|
|
|
|
|
|
|
Within |
|
|
Months |
|
|
Year But |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
Three |
|
|
But Within |
|
|
Within Five |
|
|
After Five |
|
|
Interest- |
|
|
|
|
|
|
Months |
|
|
One Year |
|
|
Years |
|
|
Years |
|
|
Sensitive |
|
|
Total |
|
|
|
(Dollars in Thousands) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
97,780 |
|
|
$ |
97,780 |
|
FRB and FHLB Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,730 |
|
|
|
|
|
|
|
24,730 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate |
|
|
10,584 |
|
|
|
25,983 |
|
|
|
225,655 |
|
|
|
120,739 |
|
|
|
|
|
|
|
382,961 |
|
Floating Rate |
|
|
6,179 |
|
|
|
|
|
|
|
33,919 |
|
|
|
7,825 |
|
|
|
|
|
|
|
47,923 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate |
|
|
35,926 |
|
|
|
36,335 |
|
|
|
271,471 |
|
|
|
202,451 |
|
|
|
|
|
|
|
546,183 |
|
Floating Rate |
|
|
1,955,669 |
|
|
|
13,525 |
|
|
|
147,730 |
|
|
|
|
|
|
|
|
|
|
|
2,116,924 |
|
Non-Accrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,282 |
|
|
|
10,282 |
|
Deferred Loan Fees and
Allowance for Loan Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,307 |
) |
|
|
(31,307 |
) |
Other Assets |
|
|
|
|
|
|
22,932 |
|
|
|
|
|
|
|
7,461 |
|
|
|
289,115 |
|
|
|
319,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
2,008,358 |
|
|
$ |
98,775 |
|
|
$ |
678,775 |
|
|
$ |
363,206 |
|
|
$ |
365,870 |
|
|
$ |
3,514,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposits |
|
$ |
72,911 |
|
|
$ |
195,178 |
|
|
$ |
412,879 |
|
|
$ |
67,562 |
|
|
$ |
|
|
|
$ |
748,530 |
|
Savings |
|
|
17,927 |
|
|
|
35,787 |
|
|
|
53,562 |
|
|
|
7,060 |
|
|
|
|
|
|
|
114,336 |
|
Money Market Checking |
|
|
66,072 |
|
|
|
163,916 |
|
|
|
210,109 |
|
|
|
55,268 |
|
|
|
|
|
|
|
495,365 |
|
Time Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate |
|
|
580,612 |
|
|
|
718,873 |
|
|
|
15,253 |
|
|
|
237 |
|
|
|
|
|
|
|
1,314,975 |
|
Floating Rate |
|
|
145,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145,660 |
|
Other Borrowed Funds |
|
|
88,108 |
|
|
|
5,000 |
|
|
|
33,372 |
|
|
|
5,053 |
|
|
|
|
|
|
|
131,533 |
|
Junior Subordinated Debentures |
|
|
82,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,406 |
|
Other Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,975 |
|
|
|
42,975 |
|
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439,204 |
|
|
|
439,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareholders Equity |
|
$ |
1,053,696 |
|
|
$ |
1,118,754 |
|
|
$ |
725,175 |
|
|
$ |
135,180 |
|
|
$ |
482,179 |
|
|
$ |
3,514,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repricing Gap |
|
$ |
954,662 |
|
|
$ |
(1,019,979 |
) |
|
$ |
(46,400 |
) |
|
$ |
228,026 |
|
|
$ |
(116,309 |
) |
|
|
|
|
Cumulative Repricing Gap |
|
$ |
954,662 |
|
|
$ |
(65,317 |
) |
|
$ |
(111,717 |
) |
|
$ |
116,309 |
|
|
$ |
|
|
|
|
|
|
Cumulative Repricing Gap as a
Percentage of Total Assets |
|
|
27.16 |
% |
|
|
(1.86 |
%) |
|
|
(3.18 |
%) |
|
|
3.31 |
% |
|
|
|
|
|
|
|
|
Cumulative Repricing Gap as a
Percentage of Interest-
Earning Assets |
|
|
30.61 |
% |
|
|
(2.09 |
%) |
|
|
(3.58 |
%) |
|
|
3.73 |
% |
|
|
|
|
|
|
|
|
The repricing gap analysis measures the static timing of repricing risk of assets and
liabilities, i.e., a point-in-time analysis measuring the difference between assets maturing or
repricing in a period and liabilities maturing or repricing within the same time period. Assets are
assigned to maturity and repricing categories based on their expected repayment or repricing dates,
and liabilities are assigned based on their repricing or maturity dates. Core deposits that have no
maturity dates (demand deposits, savings and money market checking) are assigned to categories
based on expected decay rates.
27
On March 31, 2006, the cumulative repricing gap as a percentage of interest-earning assets in
the less-than-three month period was 30.61 percent. This was a slight decrease from the previous
quarters figure of 32.25 percent. The decrease was caused by growth in the fixed rate loan
portfolio, including an increase of $129.4 million in fixed rate loans maturing after three months,
funded by a $60.0 million decrease in Federal funds sold and securities purchased under
agreements to resell, and an $85.2 million increase in other borrowed funds, offset by a decrease of
$119.8 million in fixed-rate certificates of deposit maturing in less than three months as we
increased the duration of our certificates of deposit portfolio. The cumulative repricing gap as a
percentage of interest-earning assets in the three to twelve-month period also decreased, reaching
(2.09) percent, reflecting the decrease in short-term liquid assets and increase in other borrowed
funds. In terms of fixed and floating gap positions, which are used internally to control repricing
risk, the accumulated fixed gap position between assets and liabilities as a percentage of
interest-earning assets was (8.22) percent. The floating gap position in the less-than-one year
period was 4.04 percent.
The following table summarizes the status of the gap position as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than Three Months |
|
|
Three to Twelve Months |
|
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
(Dollars in Thousands) |
|
Cumulative Repricing Gap |
|
$ |
954,662 |
|
|
$ |
972,608 |
|
|
$ |
(65,317 |
) |
|
$ |
94,299 |
|
Percentage of Total Assets |
|
|
27.16 |
% |
|
|
28.49 |
% |
|
|
(1.86 |
%) |
|
|
2.76 |
% |
Percentage of Interest-Earning Assets |
|
|
30.61 |
% |
|
|
32.25 |
% |
|
|
(2.09 |
%) |
|
|
3.13 |
% |
The spread between interest income on interest-earning assets and interest expense on
interest-bearing liabilities is the principal component of net interest income, and interest rate
changes substantially affect our financial performance. We emphasize capital protection through
stable earnings rather than maximizing yield. In order to achieve stable earnings, we prudently
manage our assets and liabilities and closely monitor the percentage changes in net interest income
and equity value in relation to limits established within our guidelines.
From time to time, the Bank has offered certificate of deposit (CD) products that have
offered customers CD rates that are tied to market indexes, including the Standard & Poors 500
Index and a basket of foreign currencies. In order to hedge the market risk associated with the
embedded options inherent in them, the Bank has entered into equity and currency swap contracts
that are accounted for at market value. Management believes these swaps effectively hedge the
economic risk associated with these CD products, but the swaps do not qualify for hedge accounting
treatment under GAAP. The currency swap and related CDs matured during the three months ended
March 31, 2006.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity of the Bank is defined as the ability to supply cash as quickly as needed without
causing a severe deterioration in its profitability. The Banks liquidity consists primarily of available cash positions, Federal funds sold and short-term investments categorized as
trading and/or available for sale securities, which can be disposed of without significant capital
losses in the ordinary course of business, plus borrowing capacities, which include Federal
funds lines, repurchase agreements and FHLB advances.
Therefore, maintenance of high quality loans and securities that can be used for collateral in
repurchase agreements or other secured borrowings is an important feature of our liquidity
management.
Liquidity risk
may increase when the Bank has few short-duration securities available for sale
and/or is not capable of raising funds as quickly as necessary at acceptable rates in the capital
or money markets. A heavy and sudden increase in cash demands for loans and/or deposits can
tighten the liquidity position. Several ratios are reviewed on a daily, monthly and quarterly basis
to manage the liquidity position and to preempt any liquidity crisis. Six specific statistics,
which include the loans-to-assets ratio, off-balance sheet items and dependence on non-core
deposits, foreign deposits, lines of credit and liquid assets, are reviewed regularly for liquidity
management purposes.
28
The maintenance of a proper level of liquid assets is critical for both the liquidity and the
profitability of the Bank. Since the primary purpose of the investment portfolio is to ensure
the Bank has adequate liquidity management maintains appropriate levels of liquid assets to avoid
exposure to higher than necessary liquidity risk.
At March 31,
2006, short-term investments totaled 1.22 percent of the
Banks total assets, compared to
3.15 percent at December 31, 2005. Core deposits, expressed
as a percentage of the Banks total assets,
decreased to 34.00 percent at March 31, 2006 from 35.25 percent at December 31, 2005, while
short-term non-core funding as a percentage of the Banks total assets increased to 43.77 percent at March 31,
2006 from 41.85 percent at December 31, 2005. The ratio of short-term investments to short-term
non-core funding decreased to 13.06 percent at March 31, 2006 from 18.31 percent at December 31,
2005. Off-balance sheet items, primarily unused credit lines, as a
percentage of the Banks total assets,
increased to 19.75 percent at March 31, 2006 from 19.68 percent at December 31, 2005. During the
three months ended March 31, 2006, the Bank continued to see strong demand for
loans. Net loans as a percentage of the total assets increased to 75.2 percent at March 31, 2006 from
72.4 percent at December 31, 2005.
In order to ensure adequate levels of capital, we conduct an ongoing assessment of projected
sources and uses of capital in conjunction with projected increases in assets and levels of risk.
Management considers, among other things, cash generated from operations, and access to capital
from financial markets or the issuance of additional securities, including common stock or notes,
to meet our capital needs. Total shareholders equity was $439.2 million at March 31, 2006, which
represented an increase of $12.4 million, or 2.9 percent, over total shareholders equity of $426.8
million at December 31, 2005.
The regulatory agencies require a minimum ratio of qualifying total capital to risk-adjusted
assets of 8.0 percent and a minimum ratio of Tier 1 capital to risk-adjusted assets of 4.0 percent.
In addition to the risk-based guidelines, regulators require banking organizations to maintain a
minimum amount of Tier 1 capital to total assets, referred to as the leverage ratio, of 4.0
percent. For a bank rated in the highest of the five categories used by regulators to rate banks,
the minimum leverage ratio is 3.0 percent. In addition to these uniform risk-based capital
guidelines that apply across the industry, the regulators have the discretion to set individual
minimum capital requirements for specific institutions at rates significantly above the minimum
guidelines and ratios.
At March 31, 2006, Hanmi Financials Tier 1 capital (shareholders equity plus junior
subordinated debentures less intangible assets) was $307.2 million. This represented an increase of
$36.2 million, or 13.4 percent, over Tier 1 capital of $271.0 million at March 31, 2005. At March
31, 2006, Hanmi Financial had a ratio of total capital to total risk-weighted assets of 11.97
percent and a ratio of Tier 1 capital to total risk-weighted assets of 10.94 percent. The Tier 1
leverage ratio was 9.57 percent at March 31, 2006.
The capital ratios of Hanmi Financial and Hanmi Bank were as follows as of March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
|
Minimum to Be |
|
|
|
|
|
|
|
|
|
|
|
Regulatory |
|
|
Categorized as |
|
|
|
Actual |
|
|
Requirement |
|
|
Well Capitalized |
|
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
|
(Dollars in Thousands) |
|
Total Capital (to Risk-Weighted Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
335,989 |
|
|
|
11.97 |
% |
|
$ |
224,639 |
|
|
|
8.00 |
% |
|
|
N/A |
|
|
|
N/A |
|
Hanmi Bank |
|
$ |
333,024 |
|
|
|
11.87 |
% |
|
$ |
224,400 |
|
|
|
8.00 |
% |
|
$ |
280,500 |
|
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to Risk-Weighted Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
307,157 |
|
|
|
10.94 |
% |
|
$ |
112,320 |
|
|
|
4.00 |
% |
|
|
N/A |
|
|
|
N/A |
|
Hanmi Bank |
|
$ |
304,192 |
|
|
|
10.84 |
% |
|
$ |
112,200 |
|
|
|
4.00 |
% |
|
$ |
168,300 |
|
|
|
6.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to Average Total Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
307,157 |
|
|
|
9.57 |
% |
|
$ |
128,376 |
|
|
|
4.00 |
% |
|
|
N/A |
|
|
|
N/A |
|
Hanmi Bank |
|
$ |
304,192 |
|
|
|
9.49 |
% |
|
$ |
128,257 |
|
|
|
4.00 |
% |
|
$ |
160,321 |
|
|
|
5.00 |
% |
29
Dividends
On March 16, 2006, we declared a quarterly cash dividend of $0.06 per common share for the
first quarter of 2006. The dividend was paid on April 14, 2006. Future dividend payments are
subject to the future earnings and legal requirements and the discretion of the Board of Directors.
OFF-BALANCE SHEET ARRANGEMENTS
For a discussion of off-balance sheet arrangements, see Note 5 Off-Balance Sheet
Arrangements of Notes to Consolidated Financial Statements, Item 1. Business Small Business
Administration Guaranteed Loans and Item 1. Business Off-Balance Sheet Commitments in our
Annual Report on Form 10-K for the year ended December 31, 2005.
CONTRACTUAL OBLIGATIONS
There were no material changes to the contractual obligations described in our Annual Report
on Form 10-K for the year ended December 31, 2005.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For quantitative and qualitative disclosures regarding market risks in Hanmi Banks portfolio,
see Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Interest Rate Risk Management and Liquidity and Capital Resources.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of March 31, 2006, Hanmi Financial carried out an evaluation, under the supervision and
with the participation of Hanmi Financials management, including Hanmi Financials Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of Hanmi
Financials disclosure controls and procedures and internal controls over financial reporting
pursuant to Securities and Exchange Commission (SEC) rules. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that:
|
|
|
Hanmi Financials disclosure controls and procedures were effective as of the end of
the period covered by this report in timely alerting them to material information relating
to Hanmi Financial that is required to be included in Hanmi Financials periodic SEC
filings; and |
|
|
|
|
Hanmi Financials internal controls over financial reporting provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP. |
During the quarter ended March 31, 2006, there have been no significant changes in Hanmi
Financials internal controls over financial reporting or in other factors that could significantly
affect these controls subsequent to the evaluation date.
Disclosure controls and procedures are defined in SEC rules as controls and other procedures
designed to ensure that information required to be disclosed in Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms.
Hanmi Financials disclosure controls and procedures were designed to ensure that material
information related to Hanmi Financial, including subsidiaries, is made known to management,
including the Chief Executive Officer and Chief Financial Officer, in a timely manner.
30
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, Hanmi Financial or Hanmi Bank is a party to claims and legal proceedings
arising in the ordinary course of business. After taking into consideration information furnished
by counsel as to the current status of these claims or proceedings to which Hanmi Financial or
Hanmi Bank is a party, management is of the opinion that the ultimate aggregate liability
represented thereby, if any, will not have a material adverse effect on the financial condition or
results of operations of Hanmi Financial or Hanmi Bank.
ITEM 1A. RISK FACTORS
There were no material changes in the risk factors previously disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2005 that was filed on March 16, 2006.
|
|
|
ITEM 2. |
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
|
|
|
Exhibit |
|
|
Number |
|
Document |
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
amended |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
amended |
|
|
|
32.1
|
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
|
|
|
32.2
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HANMI FINANCIAL CORPORATION
|
|
|
|
|
Date: May 10, 2006
|
|
By:
|
|
/s/ Sung Won Sohn, Ph.D. |
|
|
|
|
|
|
|
|
|
Sung Won Sohn, Ph.D. |
|
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
By:
|
|
/s/ Michael J. Winiarski |
|
|
|
|
|
|
|
|
|
Michael J. Winiarski |
|
|
|
|
Senior Vice President and Chief Financial Officer |
32