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 September 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 November 1, 2023, there were 30,394,397 outstanding shares of the Registrant’s Common Stock.

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

Three Months Ended September 30, 2023

Table of Contents


	Part I – Financial Information

Item 1.	Financial Statements	3

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

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

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

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

	Consolidated Statements of Cash Flows for the nine months ended September 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	41

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60

Item 4.	Controls and Procedures	60

	Part II – Other Information

Item 1.	Legal Proceedings	61

Item 1A.	Risk Factors	61

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	61

Item 3.	Defaults Upon Senior Securities	61

Item 4.	Mine Safety Disclosures	61

Item 5.	Other Information	61

Item 6.	Exhibits	62

Signatures		63

Part I — Financial Information

Item 1. Financial Statements

Hanmi Financial Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)


	September 30,			December 31,
	2023			2022
	(Unaudited)
Assets
Cash and due from banks	$	289,006		$	352,421
Securities available for sale, at fair value (amortized cost of $957,272 and $978,796 as of September 30, 2023 and December 31, 2022, respectively)		817,242			853,838
Loans held for sale, at the lower of cost or fair value		11,767			8,043
Loans receivable, net of allowance for credit losses of $67,313 and $71,523 as of September 30, 2023 and December 31, 2022, respectively		5,953,472			5,895,610
Accrued interest receivable		20,715			18,537
Premises and equipment, net		20,707			22,850
Customers' liability on acceptances		1,386			328
Servicing assets		7,156			7,176
Goodwill and other intangible assets, net		11,131			11,225
Federal Home Loan Bank ("FHLB") stock, at cost		16,385			16,385
Income tax assets		48,039			51,924
Bank-owned life insurance		56,364			55,544
Prepaid expenses and other assets		96,770			84,381
Total assets	$	7,350,140		$	7,378,262

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	2,161,238		$	2,539,602
Interest-bearing		4,098,834			3,628,470
Total deposits		6,260,072			6,168,072
Accrued interest payable		50,286			7,792
Bank's liability on acceptances		1,386			328
Borrowings		162,500			350,000
Subordinated debentures ($136,800 and $136,800 face amount less unamortized discount and debt issuance costs of $6,940 and $7,391 as of September 30, 2023 and December 31, 2022, respectively)		129,860			129,409
Accrued expenses and other liabilities		82,677			85,146
Total liabilities		6,686,781			6,740,747
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of September 30, 2023 and December 31, 2022		—			—
Common stock, $0.001 par value; authorized 62,500,000 shares; issued 33,909,457 shares (30,410,582 shares outstanding) and 33,708,234 shares (30,485,621 shares outstanding) as of September 30, 2023 and December 31, 2022, respectively		34			33
Additional paid-in capital		586,169			583,410
Accumulated other comprehensive loss, net of tax benefit of $40,608 and $35,973 as of September 30, 2023 and December 31, 2022, respectively		(99,422	)		(88,985	)
Retained earnings		308,007			269,542
Less treasury stock; 3,498,875 shares and 3,222,613 shares as of September 30, 2023 and December 31, 2022, respectively		(131,429	)		(126,485	)
Total stockholders’ equity		663,359			637,515
Total liabilities and stockholders’ equity	$	7,350,140		$	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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Interest and dividend income:
Interest and fees on loans receivable	$	85,398	$	66,976	$	249,888	$	180,755
Interest on securities		4,204		3,271		12,356		8,718
Dividends on FHLB stock		317		245		888		735
Interest on deposits in other banks		4,153		958		9,012		1,366
Total interest and dividend income		94,072		71,450		272,144		191,574
Interest expense:
Interest on deposits		36,818		6,567		94,431		11,038
Interest on borrowings		753		349		4,755		1,056
Interest on subordinated debentures		1,646		1,448		4,828		6,394
Total interest expense		39,217		8,364		104,014		18,488
Net interest income before credit loss expense		54,855		63,086		168,130		173,086
Credit loss expense		5,154		563		7,210		783
Net interest income after credit loss expense		49,701		62,523		160,920		172,303
Noninterest income:
Service charges on deposit accounts		2,605		2,996		7,756		8,745
Trade finance and other service charges and fees		1,155		1,132		3,586		3,690
Gain on sale of Small Business Administration ("SBA") loans		1,172		2,250		4,253		7,545
Other operating income		6,296		2,536		11,904		6,763
Total noninterest income		11,228		8,914		27,499		26,743
Noninterest expense:
Salaries and employee benefits		20,361		19,365		61,336		55,861
Occupancy and equipment		4,825		4,736		13,737		13,979
Data processing		3,490		3,352		10,208		9,702
Professional fees		1,568		1,249		4,278		3,909
Supplies and communications		552		710		1,866		1,956
Advertising and promotion		534		1,186		2,114		2,664
Other operating expenses		2,915		2,677		7,777		8,370
Total noninterest expense		34,245		33,275		101,316		96,441
Income before tax		26,684		38,162		87,103		102,605
Income tax expense		7,888		10,993		25,695		29,690
Net income	$	18,796	$	27,169	$	61,408	$	72,915
Basic earnings per share	$	0.62	$	0.89	$	2.01	$	2.39
Diluted earnings per share	$	0.62	$	0.89	$	2.01	$	2.39
Weighted-average shares outstanding:
Basic		30,251,961		30,314,439		30,296,991		30,289,068
Diluted		30,292,872		30,396,762		30,338,678		30,369,538

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						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net income	$	18,796		$	27,169		$	61,408		$	72,915
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities:
Unrealized holding gain (loss) arising during period		(20,820	)		(42,135	)		(16,943	)		(125,368	)
Unrealized gain (loss) on securities		(20,820	)		(42,135	)		(16,943	)		(125,368	)
Income tax benefit (expense) related to items of other comprehensive income		6,037			12,641			5,187			37,749
Other comprehensive income (loss), net of tax		(14,783	)		(29,494	)		(11,756	)		(87,619	)

Reclassification adjustment for (gains) losses included in net earnings		—			—			1,871			—
Income tax (benefit) expense related to reclassification adjustment		—			—			(552	)		—
Reclassification adjustment for (gains) losses included in net earnings, net of tax		—			—			1,319			—
Other comprehensive income (loss), net of tax		(14,783	)		(29,494	)		(10,437	)		(87,619	)
Total comprehensive income (loss)	$	4,013		$	(2,325	)	$	50,971		$	(14,704	)

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 September 30, 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		Loss			Earnings		at Cost			Equity
Balance at July 1, 2022		33,701,784		(3,218,794	)		30,482,990	$	33	$	582,018	$	(66,568	)	$	229,135	$	(126,322	)	$	618,296
Stock options exercised		—		1,050			1,050		—		13