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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

or

 

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

 

2


 

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)

3


 

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)

4


 

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)

5


 

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