10-Q

(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 ☒ 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.

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 April 30, 2024, there were 30,387,062 outstanding shares of the Registrant’s Common Stock.

Note 1 — Organization and Basis of Presentation

Hanmi Financial Corporation (“Hanmi Financial,” the “Company,” “we,” “us” or “our”) is a bank holding company whose primary subsidiary is Hanmi Bank (the “Bank”). Our primary operations are related to traditional banking activities, including the acceptance of deposits and the lending and investing of money by the Bank.

In management’s opinion, the accompanying unaudited consolidated financial statements of Hanmi Financial and its subsidiaries reflect all adjustments of a normal and recurring nature that are necessary for a fair presentation of the results for the interim period ended March 31, 2024. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. The unaudited consolidated financial statements are prepared in conformity with GAAP and in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Operating results for the three-month period ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ended December 31, 2024 or for any other period. The interim information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report on Form 10-K”).

The preparation of interim unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions affect the amounts reported in the unaudited financial statements and disclosures provided, and actual results could differ.

Recently Issued Accounting Standards Not Yet Effective

Accounting Standards Update (“ASU”) 2023-09,


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)


	Part I – Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets at March 31, 2024 (unaudited) and December 31, 2023	3

	Consolidated Statements of Income for the three months ended March 31, 2024 and 2023 (unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023 (unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023 (unaudited)	6

	Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited)	7

	Notes to Consolidated Financial Statements (unaudited)	8

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55

Item 4.	Controls and Procedures	55

	Part II – Other Information

Item 1.	Legal Proceedings	56

Item 1A.	Risk Factors	56

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	56

Item 3.	Defaults Upon Senior Securities	56

Item 4.	Mine Safety Disclosures	56

Item 5.	Other Information	56

Item 6.	Exhibits	57

Signatures		58


	March 31,			December 31,
	2024			2023
	(Unaudited)
Assets
Cash and due from banks	$	256,038		$	302,324
Securities available for sale, at fair value (amortized cost of $978,580 and $967,031 as of March 31, 2024 and December 31, 2023, respectively)		872,190			865,739
Loans held for sale, at the lower of cost or fair value		3,999			12,013
Loans receivable, net of allowance for credit losses of $68,270 and $69,462 as of March 31, 2024 and December 31, 2023, respectively		6,109,570			6,112,972
Accrued interest receivable		23,032			23,371
Premises and equipment, net		21,952			21,959
Customers' liability on acceptances		161			625
Servicing assets		6,890			7,070
Goodwill and other intangible assets, net		11,074			11,099
Federal Home Loan Bank ("FHLB") stock, at cost		16,385			16,385
Income tax assets		35,863			35,226
Bank-owned life insurance		56,639			56,335
Prepaid expenses and other assets		98,253			105,223
Total assets	$	7,512,046		$	7,570,341

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	1,933,060		$	2,003,596
Interest-bearing		4,443,000			4,276,978
Total deposits		6,376,060			6,280,574
Accrued interest payable		38,007			39,306
Bank's liability on acceptances		161			625
Borrowings		172,500			325,000
Subordinated debentures ($136,800 and $136,800 face amount less unamortized discount and debt issuance costs of $6,635 and $6,788 as of March 31, 2024 and December 31, 2023, respectively)		130,165			130,012
Accrued expenses and other liabilities		92,053			92,933
Total liabilities		6,808,946			6,868,450
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of March 31, 2024 and December 31, 2023		—			—
Common stock, $0.001 par value; authorized 62,500,000 shares; issued 33,957,284 shares (30,276,358 shares outstanding) and 33,918,035 shares (30,368,655 shares outstanding) as of March 31, 2024 and December 31, 2023, respectively		34			34
Additional paid-in capital		587,687			586,912
Accumulated other comprehensive loss, net of tax benefit of $31,401 and $29,058 as of March 31, 2024 and December 31, 2023, respectively		(76,890	)		(71,928	)
Retained earnings		326,526			319,048
Less treasury stock; 3,680,926 shares and 3,549,380 shares as of March 31, 2024 and December 31, 2023, respectively		(134,257	)		(132,175	)
Total stockholders’ equity		703,100			701,891
Total liabilities and stockholders’ equity	$	7,512,046		$	7,570,341


	Three Months Ended
	March 31,
	2024		2023
Interest and dividend income:
Interest and fees on loans receivable	$	91,674	$	80,923
Interest on securities		4,955		4,025
Dividends on FHLB stock		361		289
Interest on deposits in other banks		2,604		2,066
Total interest and dividend income		99,594		87,303
Interest expense:
Interest on deposits		45,638		25,498
Interest on borrowings		1,655		2,369
Interest on subordinated debentures		1,646		1,583
Total interest expense		48,939		29,450
Net interest income before credit loss expense		50,655		57,853
Credit loss expense		227		2,133
Net interest income after credit loss expense		50,428		55,720
Noninterest income:
Service charges on deposit accounts		2,450		2,579
Trade finance and other service charges and fees		1,414		1,258
Gain on sale of Small Business Administration ("SBA") loans		1,482		1,869
Other operating income		2,387		2,630
Total noninterest income		7,733		8,336
Noninterest expense:
Salaries and employee benefits		21,585		20,610
Occupancy and equipment		4,537		4,412
Data processing		3,551		3,253
Professional fees		1,893		1,335
Supplies and communications		601		676
Advertising and promotion		907		833
Other operating expenses		3,371		1,672
Total noninterest expense		36,445		32,791
Income before tax		21,716		31,265
Income tax expense		6,552		9,274
Net income	$	15,164	$	21,991
Basic earnings per share	$	0.50	$	0.72
Diluted earnings per share	$	0.50	$	0.72
Weighted-average shares outstanding:
Basic		30,119,646		30,347,325
Diluted		30,119,646		30,430,745


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


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


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


	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 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		—			—			(1,003	)		(181	)
Issuance of awards pursuant to equity incentive plans, net of forfeitures		69,567		—			69,567			—		—		—			—			—			—
Share-based compensation expense		—		—			—			—		652		—			—			—			652
Shares surrendered to satisfy tax liability upon vesting of equity awards		—		(11,392	)		(11,392	)		—		—		—			—			(115	)		(115	)
Repurchase of common stock		—		(3,236	)		(3,236	)		—		—		—			—			—			—
Cash dividends paid (common stock, $0.25/share)		—		—			—			—		—		—			(7,623	)		—			(7,623	)
Net income		—		—			—			—		—		—			21,991			—			21,991
Change in unrealized gain (loss) on securities available for sale, net of income taxes		—		—			—			—		—		9,926			—			—			9,926
Balance at March 31, 2023		33,827,801		(3,272,514	)		30,555,287		$	33	$	584,884	$	(79,059	)	$	283,910		$	(127,603	)	$	662,165

Balance at January 1, 2024		33,918,035		(3,549,380	)		30,368,655		$	34	$	586,912	$	(71,928	)	$	319,048		$	(132,175	)	$	701,891
Issuance of awards pursuant to equity incentive plans, net of forfeitures		39,249		—			39,249			—		—		—			—			—			—
Share-based compensation expense		—		—			—			—		775		—			—			—			775
Shares surrendered to satisfy tax liability upon vesting of equity awards		—		(31,546	)		(31,546	)		—		—		—			—			(490	)		(490	)
Repurchase of common stock		—		(100,000	)		(100,000	)		—		—		—			—			(1,592	)		(1,592	)
Cash dividends paid (common stock, $0.25/share)		—		—			—			—		—		—			(7,686	)		—			(7,686	)
Net income		—		—			—			—		—		—			15,164			—			15,164
Change in unrealized gain (loss) on securities available for sale, net of income taxes		—		—			—			—		—		(3,394	)		—			—			(3,394	)
Change in unrealized gain (loss) on cash flow hedge, net of income taxes		—		—			—			—		—		(1,568	)		—			—			(1,568	)
Balance at March 31, 2024		33,957,284		(3,680,926	)		30,276,358		$	34	$	587,687	$	(76,890	)	$	326,526		$	(134,257	)	$	703,100


	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net income	$	15,164		$	21,991
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,604			1,742
Amortization of servicing assets - net		694			634
Share-based compensation expense		775			652
Credit loss expense		227			2,133
Gain on sales of SBA loans		(1,482	)		(1,869	)
Origination of SBA loans held for sale		(17,632	)		(25,316	)
Proceeds from sales of SBA loans		26,555			30,954
Gain on sales of mortgage loans		(443	)		—
Change in bank-owned life insurance		(304	)		(270	)
Change in prepaid expenses and other assets		5,564			(3,000	)
Change in income tax assets		1,707			8,585
Valuation adjustment on servicing assets		—			(384	)
Change in accrued interest payable and other liabilities		(2,446	)		276
Net cash provided by operating activities		29,983			36,128
Cash flows from investing activities:
Purchases of securities available for sale		(38,424	)		(29,504	)
Proceeds from matured, called and repayment of securities		26,233			17,499
Purchases of loans receivable		(10,198	)		—
Proceeds from sales of mortgage loans		30,427			—
Purchases of premises and equipment		(794	)		(617	)
Change in loans receivable, excluding purchases		(16,729	)		(14,773	)
Net cash used in investing activities		(9,485	)		(27,395	)
Cash flows from financing activities:
Change in deposits		95,486			32,966
Change in borrowings		(152,500	)		—
Proceeds from exercise of stock options		—			822
Cash paid for employee vested shares surrendered due to employee tax liability		(490	)		(1,118	)
Repurchase of common stock		(1,594	)		—
Cash dividends paid		(7,686	)		(7,623	)
Net cash provided by (used in) financing activities		(66,784	)		25,047
Net increase (decrease) in cash and due from banks		(46,286	)		33,780
Cash and due from banks at beginning of year		302,324			352,421
Cash and due from banks at end of period	$	256,038		$	386,201
Supplemental disclosures of cash flow information:
Interest paid	$	50,238		$	16,730
Income taxes paid	$	175		$	334
Non-cash activities:
Income tax benefit (expense) related to other comprehensive income items	$	2,343		$	(3,681	)
Change in right-of-use asset obtained in exchange for lease liability	$	(1,873	)	$	(145	)