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, 2024


☐	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 October 23, 2024, there were 30,196,372 outstanding shares of the Registrant’s Common Stock.

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

Three Months Ended September 30, 2024

Table of Contents


	Part I – Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets at September 30, 2024 (unaudited) and December 31, 2023	3

	Consolidated Statements of Income for the three and nine months ended September 30, 2024 and 2023 (unaudited)	4

	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023 (unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023 (unaudited)	6

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (unaudited)	8

	Notes to Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63

Item 4.	Controls and Procedures	63

	Part II – Other Information

Item 1.	Legal Proceedings	64

Item 1A.	Risk Factors	64

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	64

Item 3.	Defaults Upon Senior Securities	64

Item 4.	Mine Safety Disclosures	64

Item 5.	Other Information	64

Item 6.	Exhibits	65

Signatures		66

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,
	2024			2023
	(Unaudited)
Assets
Cash and due from banks	$	287,767		$	302,324
Securities available for sale, at fair value (amortized cost of $987,498 and $967,031 as of September 30, 2024 and December 31, 2023, respectively)		908,921			865,739
Loans held for sale, at the lower of cost or fair value		54,336			12,013
Loans receivable, net of allowance for credit losses of $69,163 and $69,462 as of September 30, 2024 and December 31, 2023, respectively		6,188,581			6,112,972
Accrued interest receivable		21,955			23,371
Premises and equipment, net		21,371			21,959
Customers' liability on acceptances		67			625
Servicing assets		6,683			7,070
Goodwill and other intangible assets, net		11,031			11,099
Federal Home Loan Bank ("FHLB") stock, at cost		16,385			16,385
Income tax assets		36,954			35,226
Bank-owned life insurance		56,851			56,335
Prepaid expenses and other assets		101,397			105,223
Total assets	$	7,712,299		$	7,570,341

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	2,051,790		$	2,003,596
Interest-bearing		4,351,431			4,276,978
Total deposits		6,403,221			6,280,574
Accrued interest payable		52,613			39,306
Bank's liability on acceptances		67			625
Borrowings		300,000			325,000
Subordinated debentures		130,478			130,012
Accrued expenses and other liabilities		89,211			92,933
Total liabilities		6,975,590			6,868,450
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of September 30, 2024 and December 31, 2023		—			—
Common stock, $0.001 par value; authorized 62,500,000 shares; issued 34,125,864 shares (30,196,755 shares outstanding) and 33,918,035 shares (30,368,655 shares outstanding) as of September 30, 2024 and December 31, 2023, respectively		34			34
Additional paid-in capital		589,567			586,912
Accumulated other comprehensive loss, net of tax benefit of $22,525 and $29,058 as of September 30, 2024 and December 31, 2023, respectively		(55,140	)		(71,928	)
Retained earnings		340,718			319,048
Less treasury stock; 3,929,109 shares and 3,549,380 shares as of September 30, 2024 and December 31, 2023, respectively		(138,470	)		(132,175	)
Total stockholders’ equity		736,709			701,891
Total liabilities and stockholders’ equity	$	7,712,299		$	7,570,341

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,
	2024		2023		2024		2023
Interest and dividend income:
Interest and fees on loans receivable	$	92,182	$	85,398	$	274,608	$	249,888
Interest on securities		5,523		4,204		15,717		12,356
Dividends on FHLB stock		356		317		1,075		888
Interest on deposits in other banks		2,356		4,153		7,270		9,012
Total interest and dividend income		100,417		94,072		298,670		272,144
Interest expense:
Interest on deposits		47,153		36,818		139,286		94,431
Interest on borrowings		1,561		753		5,112		4,755
Interest on subordinated debentures		1,652		1,646		4,948		4,828
Total interest expense		50,366		39,217		149,346		104,014
Net interest income before credit loss expense		50,051		54,855		149,324		168,130
Credit loss expense		2,286		5,154		3,474		7,210
Net interest income after credit loss expense		47,765		49,701		145,850		160,920
Noninterest income:
Service charges on deposit accounts		2,311		2,605		7,189		7,756
Trade finance and other service charges and fees		1,254		1,155		3,945		3,586
Gain on sale of Small Business Administration ("SBA") loans		1,544		1,172		4,669		4,253
Gain on sale of mortgage loans		324		—		1,132		—
Other operating income		3,005		6,296		7,293		11,904
Total noninterest income		8,438		11,228		24,228		27,499
Noninterest expense:
Salaries and employee benefits		20,851		20,361		62,870		61,336
Occupancy and equipment		4,499		4,825		13,643		13,737
Data processing		3,839		3,490		11,076		10,208
Professional fees		1,492		1,568		5,134		4,278
Supplies and communications		538		552		1,710		1,866
Advertising and promotion		631		534		2,207		2,114
Other operating expenses		3,230		2,915		10,160		7,777
Total noninterest expense		35,080		34,245		106,800		101,316
Income before tax		21,123		26,684		63,278		87,103
Income tax expense		6,231		7,888		18,772		25,695
Net income	$	14,892	$	18,796	$	44,506	$	61,408
Basic earnings per share	$	0.49	$	0.62	$	1.47	$	2.01
Diluted earnings per share	$	0.49	$	0.62	$	1.47	$	2.01
Weighted-average shares outstanding:
Basic		29,968,004		30,251,961		30,048,748		30,296,991
Diluted		30,033,679		30,292,872		30,117,269		30,338,678

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

(in thousands)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Net income	$	14,892		$	18,796		$	44,506		$	61,408
Other comprehensive income (loss), net of tax:
Unrealized gain (loss):
Unrealized holding gain (loss) on available for sale securities		29,090			(20,820	)		22,715			(16,943	)
Unrealized gain (loss) on cash flow hedges		2,427			—			(526	)		—
Unrealized gain (loss)		31,517			(20,820	)		22,189			(16,943	)
Income tax benefit (expense) related to other comprehensive income items		(9,130	)		6,037			(6,198	)		5,187
Other comprehensive income (loss), net of tax		22,387			(14,783	)		15,991			(11,756	)

Reclassification adjustment for losses included in net income		673			—			1,133			1,871
Income tax benefit related to reclassification adjustment		(200	)		—			(336	)		(552	)
Reclassification adjustment for (gains) losses included in net income, net of tax		473			—			797			1,319
Other comprehensive income (loss), net of tax		22,860			(14,783	)		16,788			(10,437	)
Total comprehensive income	$	37,752		$	4,013		$	61,294		$	50,971

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, 2024 and 2023

(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, 2023		33,863,421		(3,377,633	)		30,485,788		$	33	$	585,391	$	(84,639	)	$	296,901		$	(129,126	)	$	668,560
Issuance of awards pursuant to equity incentive plans, net of forfeitures		46,036		—			46,036			1		—		—			—			—			1
Share-based compensation expense		—		—			—			—		778		—			—			—			778
Shares surrendered to satisfy tax liability upon vesting of equity awards		—		(21,242	)		(21,242	)		—		—		—			—			(401	)		(401	)
Repurchase of common stock		—		(100,000	)		(100,000	)		—		—		—			—			(1,902	)		(1,902	)
Cash dividends paid (common stock, $0.25/share)		—		—			—			—		—		—			(7,690	)		—			(7,690	)
Net income		—		—			—			—		—		—			18,796			—			18,796
Change in unrealized gain (loss) on securities available for sale, net of income taxes		—		—			—			—		—		(14,783	)		—			—			(14,783	)
Balance at September 30, 2023		33,909,457		(3,498,875	)		30,410,582		$	34	$	586,169	$	(99,422	)	$	308,007		$	(131,429	)	$	663,359

Balance at July 1, 2024		34,124,910		(3,852,800	)		30,272,110		$	34	$	588,647	$	(78,000	)	$	333,392		$	(137,014	)	$	707,059
Issuance of awards pursuant to equity incentive plans, net of forfeitures		954		—			954			—		—		—			—			—			—
Share-based compensation expense		—		—			—			—		920		—			—			—			920
Shares surrendered to satisfy tax liability upon vesting of equity awards		—		(1,309	)		(1,309	)		—		—		—			—			(24	)		(24	)
Repurchase of common stock		—		(75,000	)		(75,000	)		—		—		—			—			(1,432	)		(1,432	)
Cash dividends paid (common stock, $0.25/share)		—		—			—