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 June 30, 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 August 1, 2023, there were 30,477,301 outstanding shares of the Registrant’s Common Stock.

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

Three Months Ended June 30, 2023

Table of Contents


	Part I – Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets at June 30, 2023 (unaudited) and December 31, 2022	3

	Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022 (unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2023 and 2022 (unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)	6

	Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)	8

	Notes to Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58

Item 4.	Controls and Procedures	58

	Part II – Other Information

Item 1.	Legal Proceedings	59

Item 1A.	Risk Factors	59

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	59

Item 3.	Defaults Upon Senior Securities	59

Item 4.	Mine Safety Disclosures	59

Item 5.	Other Information	59

Item 6.	Exhibits	60

Signatures		61

Part I — Financial Information

Item 1. Financial Statements

Hanmi Financial Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)


	June 30,			December 31,
	2023			2022
	(Unaudited)
Assets
Cash and due from banks	$	344,907		$	352,421
Securities available for sale, at fair value (amortized cost of $955,860 and $978,796 as of June 30, 2023 and December 31, 2022, respectively)		836,650			853,838
Loans held for sale, at the lower of cost or fair value		7,293			8,043
Loans receivable, net of allowance for credit losses of $71,024 and $71,523 as of June 30, 2023 and December 31, 2022, respectively		5,894,147			5,895,610
Accrued interest receivable		18,163			18,537
Premises and equipment, net		22,849			22,850
Customers' liability on acceptances		1,688			328
Servicing assets		7,352			7,176
Goodwill and other intangible assets, net		11,162			11,225
Federal Home Loan Bank ("FHLB") stock, at cost		16,385			16,385
Income tax assets		43,431			51,924
Bank-owned life insurance		56,085			55,544
Prepaid expenses and other assets		84,812			84,381
Total assets	$	7,344,924		$	7,378,262

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	2,206,078		$	2,539,602
Interest-bearing		4,109,690			3,628,470
Total deposits		6,315,768			6,168,072
Accrued interest payable		34,621			7,792
Bank's liability on acceptances		1,688			328
Borrowings		125,000			350,000
Subordinated debentures ($136,800 and $136,800 face amount less unamortized discount and debt issuance costs of $7,092 and $7,391 as of June 30, 2023 and December 31, 2022, respectively)		129,708			129,409
Accrued expenses and other liabilities		69,579			85,146
Total liabilities		6,676,364			6,740,747
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of June 30, 2023 and December 31, 2022		—			—
Common stock, $0.001 par value; authorized 62,500,000 shares; issued 33,863,421 shares (30,485,788 shares outstanding) and 33,708,234 shares (30,485,621 shares outstanding) as of June 30, 2023 and December 31, 2022, respectively		33			33
Additional paid-in capital		585,391			583,410
Accumulated other comprehensive loss, net of tax benefit of $34,571 and $35,973 as of June 30, 2023 and December 31, 2022, respectively		(84,639	)		(88,985	)
Retained earnings		296,901			269,542
Less treasury stock; 3,377,633 shares and 3,222,613 shares as of June 30, 2023 and December 31, 2022, respectively		(129,126	)		(126,485	)
Total stockholders’ equity		668,560			637,515
Total liabilities and stockholders’ equity	$	7,344,924		$	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					Six Months Ended
	June 30,					June 30,
	2023			2022		2023		2022
Interest and dividend income:
Interest and fees on loans receivable	$	83,567		$	59,855	$	164,490	$	113,779
Interest on securities		4,126			2,930		8,152		5,447
Dividends on FHLB stock		283			242		572		490
Interest on deposits in other banks		2,794			193		4,859		408
Total interest and dividend income		90,770			63,220		178,073		120,124
Interest expense:
Interest on deposits		32,115			2,457		57,613		4,470
Interest on borrowings		1,633			370		4,002		707
Interest on subordinated debentures		1,600			1,349		3,182		4,947
Total interest expense		35,348			4,176		64,797		10,124
Net interest income before credit loss expense		55,422			59,044		113,276		110,000
Credit loss expense (recovery)		(77	)		1,596		2,056		220
Net interest income after credit loss expense (recovery)		55,499			57,448		111,220		109,780
Noninterest income:
Service charges on deposit accounts		2,571			2,875		5,151		5,750
Trade finance and other service charges and fees		1,173			1,416		2,431		2,558
Gain on sale of Small Business Administration ("SBA") loans		1,212			2,774		3,081		5,295
Other operating income		2,979			2,245		5,608		4,226
Total noninterest income		7,935			9,310		16,271		17,829
Noninterest expense:
Salaries and employee benefits		20,365			18,779		40,975		36,496
Occupancy and equipment		4,500			4,597		8,912		9,243
Data processing		3,465			3,114		6,718		6,351
Professional fees		1,376			1,231		2,710		2,661
Supplies and communications		638			581		1,314		1,245
Advertising and promotion		748			660		1,581		1,477
Other operating expenses		3,188			2,513		4,862		5,694
Total noninterest expense		34,280			31,475		67,072		63,167
Income before tax		29,154			35,283		60,419		64,442
Income tax expense		8,534			10,233		17,807		18,697
Net income	$	20,620		$	25,050	$	42,612	$	45,745
Basic earnings per share	$	0.68		$	0.82	$	1.40	$	1.50
Diluted earnings per share	$	0.67		$	0.82	$	1.39	$	1.50
Weighted-average shares outstanding:
Basic		30,324,264			30,296,897		30,320,281		30,271,761
Diluted		30,387,041			30,412,348		30,383,226		30,391,273

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						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Net income	$	20,620		$	25,050		$	42,612		$	45,745
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities:
Unrealized holding gain (loss) arising during period		(9,730	)		(31,070	)		3,877			(83,233	)
Unrealized gain (loss) on securities		(9,730	)		(31,070	)		3,877			(83,233	)
Income tax benefit (expense) related to items of other comprehensive income		2,827			9,321			(849	)		25,108
Other comprehensive income (loss), net of tax		(6,903	)		(21,749	)		3,028			(58,125	)

Reclassification adjustment for (gains) losses included in net earnings		1,871			—			1,871			—
Income tax (benefit) expense related to reclassification adjustment		(548	)		—			(553	)		—
Reclassification adjustment for (gains) losses included in net earnings, net of tax		1,323