10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2023


☐	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		(I.R.S. Employer
Incorporation or Organization)		Identification No.)


900 Wilshire Boulevard, Suite 1250
Los Angeles, California		90017
(Address of Principal Executive Offices)		(Zip Code)

(213) 382-2200

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

HAFC

Nasdaq Global Select Market

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 ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of May 3, 2023, there were 30,546,198 outstanding shares of the Registrant’s Common Stock.

Hanmi Financial Corporation and Subsidiaries Quarterly Report on Form 10-Q

Three Months Ended March 31, 2023

Table of Contents


	Part I – Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets at March 31, 2023 (unaudited) and December 31, 2022	3

	Consolidated Statements of Income for the three months ended March 31, 2023 and 2022 (unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022 (unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)	6

	Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	7

	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52

Item 4.	Controls and Procedures	52

	Part II – Other Information

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	54

Item 6.	Exhibits	55

Signatures		56

Part I — Financial Information

Item 1. Financial Statements

Hanmi Financial Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)


	March 31,			December 31,
	2023			2022
	(Unaudited)
Assets
Cash and due from banks	$	386,201		$	352,421
Securities available for sale, at fair value (amortized cost of $990,052 and $978,796 as of March 31, 2023 and December 31, 2022, respectively)		878,701			853,838
Loans held for sale, at the lower of cost or fair value		3,652			8,043
Loans receivable, net of allowance for credit losses of $72,249 and $71,523 as of March 31, 2023 and December 31, 2022, respectively		5,908,209			5,895,610
Accrued interest receivable		19,004			18,537
Premises and equipment, net		22,625			22,850
Customers' liability on acceptances		41			328
Servicing assets		7,541			7,176
Goodwill and other intangible assets, net		11,193			11,225
Federal Home Loan Bank ("FHLB") stock, at cost		16,385			16,385
Income tax assets		39,658			51,924
Bank-owned life insurance		55,814			55,544
Prepaid expenses and other assets		85,106			84,381
Total assets	$	7,434,130		$	7,378,262

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	2,334,083		$	2,539,602
Interest-bearing		3,866,955			3,628,470
Total deposits		6,201,038			6,168,072
Accrued interest payable		20,512			7,792
Bank's liability on acceptances		41			328
Borrowings		350,000			350,000
Subordinated debentures ($136,800 and $136,800 face amount less unamortized discount and debt issuance costs of $7,242 and $7,391 as of March 31, 2023 and December 31, 2022, respectively)		129,558			129,409
Accrued expenses and other liabilities		70,816			85,146
Total liabilities		6,771,965			6,740,747
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of March 31, 2023 and December 31, 2022		—			—
Common stock, $0.001 par value; authorized 62,500,000 shares; issued 33,827,801 shares (30,555,287 shares outstanding) and 33,708,234 shares (30,485,621 shares outstanding) as of March 31, 2023 and December 31, 2022, respectively		33			33
Additional paid-in capital		584,884			583,410
Accumulated other comprehensive loss, net of tax benefit of $32,292 and $35,973 as of March 31, 2023 and December 31, 2022, respectively		(79,059	)		(88,985	)
Retained earnings		283,910			269,542
Less treasury stock; 3,272,514 shares and 3,222,613 shares as of March 31, 2023 and December 31, 2022, respectively		(127,603	)		(126,485	)
Total stockholders’ equity		662,165			637,515
Total liabilities and stockholders’ equity	$	7,434,130		$	7,378,262

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Income (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended
	March 31,
	2023		2022
Interest and dividend income:
Interest and fees on loans receivable	$	80,923	$	53,924
Interest on securities		4,025		2,516
Dividends on FHLB stock		289		248
Interest on deposits in other banks		2,066		216
Total interest and dividend income		87,303		56,904
Interest expense:
Interest on deposits		25,498		2,013
Interest on borrowings		2,369		337
Interest on subordinated debentures		1,583		3,598
Total interest expense		29,450		5,948
Net interest income before credit loss expense		57,853		50,956
Credit loss expense (recovery)		2,133		(1,375	)
Net interest income after credit loss expense (recovery)		55,720		52,331
Noninterest income:
Service charges on deposit accounts		2,579		2,875
Trade finance and other service charges and fees		1,258		1,142
Gain on sale of Small Business Administration ("SBA") loans		1,869		2,521
Other operating income		2,630		1,982
Total noninterest income		8,336		8,520
Noninterest expense:
Salaries and employee benefits		20,610		17,717
Occupancy and equipment		4,412		4,646
Data processing		3,253		3,236
Professional fees		1,335		1,430
Supplies and communications		676		665
Advertising and promotion		833		817
Other operating expenses		1,672		3,181
Total noninterest expense		32,791		31,692
Income before tax		31,265		29,159
Income tax expense		9,274		8,464
Net income	$	21,991	$	20,695
Basic earnings per share	$	0.72	$	0.68
Diluted earnings per share	$	0.72	$	0.68
Weighted-average shares outstanding:
Basic		30,347,325		30,254,212
Diluted		30,430,745		30,377,580

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(in thousands)


	Three Months Ended
	March 31,
	2023			2022
Net income	$	21,991		$	20,695
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities:
Unrealized holding gain (loss) arising during period		13,607			(52,163	)
Income tax benefit (expense) related to items of other comprehensive income		(3,681	)		15,787
Other comprehensive income (loss), net of tax		9,926			(36,376	)
Comprehensive income (loss)	$	31,917		$	(15,681	)

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

For the Three Months Ended March 31, 2023 and 2022

(in thousands, except share data)


	Common Stock - Number of Shares								Stockholders' Equity
													Accumulated
											Additional		Other						Treasury			Total
	Shares		Treasury			Shares			Common		Paid-in		Comprehensive			Retained			Stock,			Stockholders'
	Issued		Shares			Outstanding			Stock		Capital		Income (Loss)			Earnings			at Cost			Equity
Balance at January 1, 2022		33,603,839		(3,196,578	)		30,407,261		$	33	$	580,796	$	(8,443	)	$	196,784		$	(125,753	)	$	643,417
Restricted stock awards, net of forfeitures		66,358		—			66,358			—		—		—			—			—			—
Share-based compensation expense		—		—			—			—		541		—			—			—			541
Restricted stock surrendered due to employee tax liability		—		(5,161	)		(5,161	)		—		—		—			—			(134	)		(134	)
Cash dividends paid (common stock, $0.22/share)		—		—			—			—		—		—			(6,691	)		—			(6,691	)
Net income		—		—			—			—		—		—			20,695			—			20,695
Change in unrealized gain (loss) on securities available for sale, net of income taxes		—		—			—			—		—		(36,376	)		—			—			(36,376	)
Balance at March 31, 2022		33,670,197		(3,201,739	)		30,468,458		$	33	$	581,337	$	(44,819	)	$	210,788		$	(125,887	)	$	621,452

Balance at January 1, 2023		33,708,234		(3,222,613	)		30,485,621		$	33	$	583,410	$	(88,985	)	$	269,542		$	(126,485	)	$	637,515
Stock options exercised		50,000		(35,273	)		14,727			—		822