Exhibit 99.1
 
 
Hanmi Reports 2014 Fourth Quarter and Retrospectively Adjusted Third Quarter Results
 
February 17, 2015. As discussed during our year-end 2014 earnings call, Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the holding company for Hanmi Bank (the “Bank”), today reported 2014 fourth quarter and retrospectively adjusted third quarter results.
 
Hanmi’s acquisition of Central Bancorp, Inc. (“CBI”), the parent company of United Central Bank, was completed on August 31, 2014. The combined companies began operating as Hanmi Financial Corporation and Hanmi Bank, respectively, with banking operations conducted under the Hanmi Bank brand effective as of September 1, 2014. The 2014 financial results reflect eight months of stand-alone operations of Hanmi and four months of combined operations. Hanmi’s accounting for this business combination is incomplete and has been recorded based on provisional amounts. The accounting is updated during the measurement period to reflect new information obtained about facts and circumstances that existed at the acquisition date. Adjustments to the provisional amounts during the measurement period are recognized as retrospective adjustments as of the date of the acquisition. During the fourth quarter Hanmi updated the valuation of assets and liabilities acquired in the transaction. As a result, the provisional values of certain assets and liabilities reported in the third quarter of 2014 have been updated to reflect the changes in estimated values. The results as of and for the quarter ended September 30, 2014, included herein, have been adjusted retrospectively to reflect measurement period adjustments to the provisional acquisition accounting values as of the acquisition date. The changes in provisional values resulted in a retrospective adjustment of $8.0 million to the bargain purchase gain that was provisionally reported for the third quarter of 2014 for a total bargain purchase gain of $14.6 million. This retrospective adjustment revises the reported third quarter net income to $21.8 million from $13.3 million as previously reported.
 
Fourth quarter 2014 net income totaled $5.9 million, or $0.19 per diluted share compared to $21.8 million, or $0.68 per diluted share, in the third quarter 2014, and $9.9 million, or $0.31 per diluted share, in the fourth quarter a year ago.
 
Mr. C. G. Kum, President and Chief Executive Officer, said, “2014 was a transformative year for Hanmi highlighted by the acquisition of CBI, strong loan growth and solid credit quality to help continue the growth trajectory across our enterprise. Full year profitability increased sharply with net income of $49.8 million, up 24.8% from 2013. Strong organic loan production from the legacy Hanmi team helped expand our loan portfolio by 25.7% to $2.74 billion at year end. Credit quality improved throughout the year with classified loans, excluding PCI loans, declining 42.0% during the year to $47.7 million, or 1.71% of gross loans at year end. Importantly, our activities to integrate the acquisition of CBI into Hanmi have been successfully completed.”
 
 
1
 
Fourth Quarter and Full Year Results
(In thousands, except per share data)

   
As of or for the Three Months Ended
    
As of or for the Year Ended
  
   
December 31,
    
September 30,
    
December 31,
    
December 31,
    
December 31,
  
   
2014
    
2014 (1)
    
2013 (2)
    
2014
    
2013 (2)
  
                               
Net income
   $ 5,928     $ 21,800     $ 9,930     $ 49,761     $ 39,857  
Net income per diluted common share
   $ 0.19     $ 0.68     $ 0.31     $ 1.56     $ 1.26  
                                         
Assets
   $ 4,234,768     $ 4,240,835     $ 3,054,379     $ 4,234,768     $ 3,054,379  
Loans receivable, net
   $ 2,738,157     $ 2,632,283     $ 2,177,498     $ 2,738,157     $ 2,177,498  
Deposits
   $ 3,556,746     $ 3,598,154     $ 2,512,325     $ 3,556,746     $ 2,512,325  
                                         
Return on average assets (3)
     0.56 %     2.46 %     1.37 %     1.47 %     1.41 %
Pre-tax, pre-provision earnings on average assets (3)
     0.88 %     3.06 %     2.08 %     1.95 %     2.21 %
Return on average stockholders' equity (3)
     5.21 %     19.97 %     9.89 %     11.79 %     10.13 %
Net interest margin
     3.80 %     3.72 %     3.86 %     3.88 %     3.94 %
Efficiency ratio
     80.03 %     48.45 %     54.54 %     59.73 %     53.18 %
Efficiency ratio (excluding merger and integration costs)
     73.39 %     41.97 %     52.36 %     55.70 %     52.64 %
                                         
Tangible common equity to tangible assets
     10.66 %     10.42 %     13.07 %     10.66 %     13.07 %
Tangible common equity per common share
   $ 14.14     $ 13.84     $ 12.56     $ 14.14     $ 12.56  
 
(1)
Results for September 30, 2014 have been adjusted retrospectively to reflect measurement period adjustments to the provisional acquisition accounting values as of the acquisition date.
(2)
Results for December 31, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle.
(3)
Amount calculated based on net income from continuing operations.
 
Financial Highlights (at or for the period ended December 31, 2014, compared to September 30, 2014, or December 31, 2013)

 
·
Assets grew 38.6% during 2014 to $4.23 billion, compared to $3.05 billion a year ago.
 
·
Gross loans increased $107.4 million (4.0%) and $553.5 million (24.8%) over the prior quarter and prior year, respectively.
 
·
After retrospective adjustments, fourth quarter net income totaled $5.9 million, or $0.19 per diluted share, compared to $21.8 million, or $0.68 per diluted share, in the prior quarter.
 
·
Fourth quarter new loan production (excluding loan purchases) totaled $204.3 million, representing $34.4 million increase from the preceding quarter; fourth quarter production consisted of $159.4 million of commercial real estate loans, $25.5 million of C&I loans, $17.2 million of SBA loans and $2.2 million of consumer loans.
 
·
Deposits grew 41.6% year-over-year, including a 24.9% increase in noninterest bearing deposits, which represent 28.8% of total deposits.
 
·
Asset quality improved with classified loans, excluding PCI loans, down 42.0% year-over-year; $0 loan loss provisions for legacy and non-PCI loans and $1.0 million in loan loss provisions for PCI loans for the fourth quarter.
 
·
Net interest margin (NIM) was 3.80% for the fourth quarter of 2014, up 8 basis points from the third quarter; NIM excluding effects of purchase accounting adjustments was 3.24% for the fourth quarter of 2014.
 
·
A cash dividend of $0.07 per share was paid on January 15, 2015.
 
Acquisition Accounting Adjustments
 
As a result of the acquisition of CBI on August 31, 2014, Hanmi became the second largest Korean American bank in the United States with 46 banking offices and five loan production offices serving communities across California, Colorado, Illinois, New Jersey, Texas, Virginia and Washington. The combined entity has the leading deposit market share among Korean American banks in Illinois and Texas along with substantial market share in California and Virginia.
 
 
2
 
The following table shows the calculation for the provisional bargain purchase gain recorded during 2014:
 
   
As Reported
    
Retrospective Adjustments
    
As Remeasured
  
         
(In thousands)
        
Consideration paid:
                  
CBI stockholders
   $ 50,000     $ -     $ 50,000  
Redemption of preferred and cumulative unpaid dividends
     28,675       -       28,675  
Accrued interest on subordinated debentures
     1,566       (1,566 )     -  
      80,241       (1,566 )     78,675  
Assets acquired:
                        
Cash and cash equivalents
     197,209       -       197,209  
Securities available for sale
     663,497       -       663,497  
Loans
     294,032       3,240       297,272  
Premises and equipment
     17,735       190       17,925  
Other real estate owned
     28,027       (2,075 )     25,952  
Income tax assets, net
     8,800       3,211       12,011  
Core deposit intangible
     2,213       -       2,213  
FDIC loss sharing assets
     9,692       1,721       11,413  
Bank-owned life insurance
     18,296       -       18,296  
Other assets
     16,428       (334 )     16,094  
Total assets acquired
     1,255,929       5,953       1,261,882  
Liabilities assumed:
                        
Deposits
     1,098,997       -       1,098,997  
Subordinated debentures
     18,473       -       18,473  
Rescinded stock obligation
     15,720       (235 )     15,485  
FHLB advances
     10,000       -       10,000  
Other liabilities
     25,905       (230 )     25,675  
Total liabilities assumed
     1,169,095       (465 )     1,168,630  
Total identifiable net assets
   $ 86,834     $ 6,418     $ 93,252  
Bargain purchase gain, net of deferred taxes
   $ 6,593     $ 7,984     $ 14,577  
 
The retrospective adjustments reflect refinements to the estimated acquisition date values previously recorded as better information was obtained related to the assets acquired and liabilities assumed as of the acquisition date. The $8.0 million of retrospective adjustments to the provisional values were primarily due to a $5.1 million increase in the estimated value of deferred tax assets due to the resolution of certain tax matters associated with the acquisition were resolved, a $3.2 million increase in the estimated value of loans due to refinement of assumptions and a $1.7 million increase in the estimated value of FDIC loss sharing assets due to changes in the estimated values of loss share assets, which were partially offset by a $2.1 million decrease in the estimated value of OREO as new appraisal information was obtained.
 
Results of Operations
 
Fourth quarter net interest income, before provision for credit losses, was $37.4 million, up 20.2% from $31.1 million in the third quarter of 2014, and up 39.6% from $26.8 million in the fourth quarter of 2013. Interest and dividend income increased 20.0% from the preceding quarter and increased 37.8% from the fourth quarter a year ago, while interest expense increased 18.2% from the preceding quarter and 23.0% from the year-ago quarter. Full year net interest income before provision for credit losses improved 16.2% to $122.7 million compared to $105.6 million for the full year 2013.

Net interest margin was 3.80% for the fourth quarter of 2014 and 3.72% for the third quarter of 2014. The increase in NIM primarily reflects the effects of purchase accounting adjustments. Net interest margin for 2014 was 3.88% compared to 3.94% in 2013. The decrease was primarily due to declining market interest rates partially offset by the impact of purchase accounting adjustments. The following table details the asset yields, liability costs, spread and margin.
 
 
3
 
 
   
Three Months Ended
    
Year Ended
  
   
December 31,
    
September 30,
    
December 31,
    
December 31,
    
December 31,
  
   
2014
    
2014 (1)
    
2013 (2)
    
2014
    
2013 (2)
  
                               
Interest-earning assets
     4.21 %     4.13 %     4.34 %     4.33 %     4.44 %
Interest-bearing liabilities
     0.61 %     0.66 %     0.78 %     0.68 %     0.80 %
Net interest spread
     3.60 %     3.47 %     3.56 %     3.65 %     3.64 %
Net interest margin
     3.80 %     3.72 %     3.86 %     3.88 %     3.94 %

(1)
Results for September 30, 2014 have been adjusted retrospectively to reflect measurement period adjustments to the provisional acquisition accounting values as of the acquisition date.
(2)
Results for December 31, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle.
 
Excluding the effects of acquisition accounting adjustments, the net interest margin for the 2014 fourth quarter was 3.24% and 3.66% for the full year of 2014. The impact of acquisition accounting adjustments on core loan yield and NIM are summarized in the following tables:

   
December 31, 2014
    
   
Three Months
  
Year
    
   
Ended
  
Ended
    
Core loan yield
     4.78 %     4.82 %  
Accretion of discount on purchased loans
     0.54 %     0.19 %  
As reported
     5.32 %     5.01 %  

   
December 31, 2014
  
   
Three Months Ended
    
Year Ended
  
   
Amount
    
NIM Impact
    
Amount
    
NIM Impact
  
    (In thousands)  
NIM excluding purchase accounting
   $ 31,891       3.24 %   $ 115,572       3.66 %
Accretion of discount on Non-PCI loans
     2,802       0.28 %     3,821       0.12 %
Accretion of discount on PCI loans
     963       0.10 %     1,114       0.03 %
Accretion of time deposits premium
     1,747       0.18 %     2,338       0.07 %
Amortization of subordinated debentures discount
     (36 )     -       (71 )     -  
Net impact
     5,476       0.56 %     7,202       0.22 %
As reported
   $ 37,367       3.80 %   $ 122,774       3.88 %

In the fourth quarter of 2014, net interest income after provision for credit losses totaled $36.3 million, compared to $31.1 million in the third quarter of 2014, and $26.8 million in the fourth quarter a year ago. For the full year in 2014, net interest income after provision for credit losses increased 22.0% to $128.8 million, compared to $105.6 million in 2013. Hanmi recorded a negative loan loss provision totaling $6.1 million during 2014 and no loan loss provisions in the prior year period.
 
Noninterest income was $9.0 million in the fourth quarter of 2014, compared to $21.6 million in the preceding quarter and $6.8 million in the year ago quarter. Effective as of the acquisition date, the company recorded an $8.0 million retrospective measurement period adjustment to the provisional $6.6 million bargain purchase gain recorded in the third quarter of 2014, for a total bargain purchase gain of $14.6 million associated with the acquisition of CBI. In addition, service charges on deposit accounts increased to $3.4 million in the fourth quarter of 2014, compared to $2.9 million in the preceding quarter and $2.6 million in the fourth quarter of 2013, due mainly to the acquisition of CBI. Fourth quarter 2014 gains on sales of SBA loans of $1.2 million was unchanged from the third quarter, but declined from $1.9 million in the period a year ago. These gains resulted from the sale of $15.4 million of SBA loans, compared to $14.3 million in the preceding quarter and $25.1 million in the fourth quarter a year ago. Disposition gains on PCI loans were $1.4 million in the fourth quarter of 2014, compared to no disposition gains in prior periods. Other operating income decreased to $913,000 in fourth quarter of 2014, compared to $1.5 million in the preceding quarter and $763,000 in the fourth quarter of 2013. The decline in operating income for the fourth quarter compared to the third quarter was due to an $807,000 nonrecurring gain on the early termination of CBI’s retirement plan that was recognized in the third quarter. For the full year, other operating income totaled $3.6 million compared to $2.5 million in 2013.
 
 
4
 
Noninterest expense increased 45.3% to $37.1 million in the fourth quarter of 2014, compared to $25.5 million in the third quarter of 2014, and up 102.9% from $18.3 million in the fourth quarter a year ago, primarily related to a full quarter of operations as a combined company and an increase in professional fees. Salary and employee benefits costs increased 30.7% to $16.8 million in the fourth quarter of 2014, compared to $12.8 million in the preceding quarter and grew 86.5% from $9.0 million in the fourth quarter of 2013. Professional fees increased to $4.8 million in the fourth quarter, compared to $1.4 million in the preceding quarter and from $1.2 million in the fourth quarter of 2013 primarily due to significant costs to strengthen our infrastructure to meet heightened control standards.
 
Total non-interest expense increased significantly during the fourth quarter as a result of various merger and integration expenses relating to the acquisition of CBI and the year-end expense management efforts which included payment of expenses that are deemed one-time in nature and not reflective of a future run rate. Taking into account the aforementioned expenses recorded in the fourth quarter, coupled with various cost cutting measures expected to be implemented during the first quarter of 2015, the adjusted fourth quarter 2014 total non-interest expense (excluding OREO gains/expenses) would have been approximately $26 million. This base level of non-interest expense will grow in 2015 with Hanmi's on-going investment in its loan and deposit growth infrastructure. Hanmi expects the growth in non-interest expense will be commensurate with the growth Hanmi achieves in loans and deposits.
 
Hanmi recorded a provision for income taxes of $2.3 million in the fourth quarter, representing an effective tax rate of 28.0% for the quarter and 31.5% for the year of 2014, compared to 36.4% for the year of 2013. The year-over-year reduction in tax rate can be attributed to the adjustment for the bargain purchase gain (excluding this gain and transaction costs, an effective tax rate for the year would be 39.4%).
 
“Fourth quarter profitability was impacted by a significant increase in non-interest expense primarily related to the acquisition and integration of CBI that are one-time in nature and not reflective of our future non-interest expense run rate. However, we continue to make good progress on our ongoing initiatives to improve operating efficiencies. As part of the CBI acquisition integration, we closed three legacy CBI branches on February 6 and are finalizing the process of right-sizing personnel. We successfully completed the integration process on-schedule as of this past weekend and expect to realize the strategic value of the combined bank,” said Kum.
 
Balance Sheet
 
On a sequential basis, total assets decreased 0.1% to $4.23 billion at December 31, 2014 but grew 38.6% from $3.05 billion a year ago. The year-over-year increase in total assets was primarily due to the acquisition of CBI. The investment portfolio was $1.1 billion at December 31, 2014, representing a 6.0% decrease from the prior quarter.
 
Loans receivable, net of allowance for loan losses, were $2.74 billion at December 31, 2014, up from $2.63 billion at September 30, 2014 and $2.18 billion in 2013. Loans held for sale at December 31, 2014 totaled $5.5 million, down from $7.8 million at September 30, 2014, and up from no loans held for sale at the end of 2013. Average gross loans, net of deferred loan fees, increased to $2.72 billion for the fourth quarter of 2014, up from $2.50 billion for the preceding quarter and $2.20 billion for the fourth quarter of 2013.
 
Average deposits were $3.58 billion during the fourth quarter, up from $2.88 billion for the preceding quarter and $2.47 billion for the fourth quarter of 2013. Due mainly to the CBI acquisition, the cost of deposits declined to 0.43% in the fourth quarter from 0.45% in the third quarter and 0.53% a year ago. The period-end deposit mix is detailed in the table below.
 
   
December 31,
    
September 30,
    
December 31,
  
   
2014
    
2014
    
2013
  
                   
Demand-noninterest-bearing
     28.8 %     28.6 %     32.5 %
Savings
     3.4 %     3.5 %     4.6 %
Money market checking and NOW accounts
     22.4 %     22.1 %     22.9 %
Time deposits of $100,000 or more
     25.6 %     25.5 %     20.2 %
Other time deposits
     19.8 %     20.3 %     19.8 %
Total deposits
     100.0 %     100.0 %     100.0 %
 
At December 31, 2014, stockholders’ equity was $453.4 million. Tangible common stockholders’ equity was $451.3 million, or 10.66% of tangible assets, compared to $441.5 million, or 10.42%, of tangible assets, three months earlier and $398.9 million, or 13.07%, of tangible assets, a year ago. Tangible book value per share was $14.14, compared to $13.84 three months earlier and $12.56 at December 31, 2013. On January 15, 2015, Hanmi paid a cash dividend of $0.07 per share, representing an aggregate dividend of $2.2 million.
 
 
5
 
Asset Quality
 
Loan credit quality continued to improve with classified loans declining 42.0% for the full year 2014. Nonperforming loans (“NPLs”), excluding PCI loans, were down 1.4% to $25.5 million at the end of the year, compared to $25.9 million at the end of 2013. Troubled debt restructurings (“TDRs”) totaled $26.3 million at December 31, 2014 compared to $29.9 million at December 31, 2013. Of these TDRs, $12.5 million were included in NPLs at December 31, 2014, compared to $10.5 million in 2013. The following table shows NPLs in each category:
 
   
December 31, 2014
    
September 30, 2014
    
December 31, 2013
  
         
% of Total
          
% of Total
          
% of Total
  
   
Amount
    
NPLs
    
Amount
    
NPLs
    
Amount
    
NPLs
  
               
(In thousands)
              
Real estate loans:
                                    
Commercial property
                                    
Retail
   $ 2,160       8.5 %   $ 2,062       8.6 %   $ 2,946       11.4 %
Hotel/Motel
     4,028       15.8 %     3,051       12.7 %     5,200       20.1 %
Gas station
     3,514       13.8 %     5,208       21.7 %     2,492       9.6 %
Other
     4,961       19.4 %     3,689       15.4 %     4,808       18.6 %
Residential property
     1,588       6.2 %     1,516       6.3 %     1,365       5.3 %
Commercial and industrial loans:
                                                
Commercial term
     7,052       27.7 %     6,060       25.2 %     7,146       27.6 %
Commercial lines of credit
     466       1.8 %     674       2.8 %     423       1.6 %
Consumer loans
     1,742       6.8 %     1,758       7.3 %     1,497       5.8 %
Total Nonperforming Non-PCI loans
   $ 25,511       100.0 %   $ 24,018       100.0 %   $ 25,877       100.0 %
 
Compared to a year ago, the credit quality of loans improved in all major aspects. There was one sale of problem loan in the fourth quarter of 2014, and a gain associated with the sale was $32,000 in 2014, compared to $557,000 losses in 2013. Classified loans were $47.7 million, or 1.71% of gross loans, at December 31, 2014, compared to $45.0 million, or 1.68% of gross loans, at September 30, 2014, and from $82.2 million, or 3.68%, a year ago. The allowance for loan losses totaled $52.7 million as of December 31, 2014, generating a coverage ratio of 1.89% as compared to a coverage ratio of 1.91% as of September 30, 2014. The slight decline in the coverage ratio was due to growth in loans. The ALLL coverage ratio as of December 31, 2013 was 2.58%. OREO decreased $6.9 million, or 30.5%, to $15.8 million compared to $22.7 million at September 30, 2014 and increased $15.0 million compared to $756,000 at December 31, 2013. The year-over-year increase was primarily due the CBI acquisition.

 
About Hanmi Financial Corporation
 
Headquartered in Los Angeles, Hanmi Bank, a wholly-owned subsidiary of Hanmi Financial Corporation, provides services to the multi-ethnic communities across California, Texas, Illinois, Virginia and New Jersey with 46 full-service branches as well as loan production offices in California, Colorado, Texas, Virginia, and Washington State. Hanmi Bank specializes in commercial, SBA and trade finance lending, and is a recognized community leader. Hanmi Bank's mission is to provide a full range of quality products and premier services to its customers and to maximize shareholder value. Additional information is available at www.hanmi.com.
 
 
6
 
Forward-Looking Statements
This report contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All statements other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital plans, strategic alternatives for a possible business combination, merger or sale transaction, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of potential future supervisory action against us or Hanmi Bank; general economic and business conditions internationally, nationally and in those areas in which we operate; volatility and deterioration in the credit and equity markets; changes in consumer spending, borrowing and savings habits; availability of capital from private and government sources; demographic changes; competition for loans and deposits and failure to attract or retain loans and deposits; fluctuations in interest rates and a decline in the level of our interest rate spread; risks of natural disasters related to our real estate portfolio; risks associated with Small Business Administration loans; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability of Hanmi Bank to make distributions to Hanmi Financial, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial tests; ability to identify a suitable strategic partner or to consummate a strategic transaction; adequacy of our allowance for loan losses; credit quality and the effect of credit quality on our provision for credit losses and allowance for loan losses; changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements; our ability to control expenses; and changes in securities markets. In addition, we set forth certain risks in our reports filed with the U.S. Securities and Exchange Commission, including, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K that we will file hereafter, which could cause actual results to differ from those projected. We undertake no obligation to update such forward-looking statements except as required by law.
 
 
7
 
Hanmi Financial Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(In thousands)

   
December 31,
    
September 30,
    
Percentage
    
December 31,
    
Percentage
  
   
2014
    
2014 (1)
    
Change
    
2013 (2)
    
Change
  
Assets
                              
Cash and cash equivalents
   $ 158,320     $ 197,016       -19.6 %   $ 179,357       -11.7 %
Securities available for sale, at fair value
     1,060,717       1,128,624       -6.0 %     530,926       99.8 %
Loans held for sale, at the lower of cost or fair value
     5,451       7,757       -29.7 %     -       -  
Loans receivable, net of allowance for loan losses
     2,738,157       2,632,283       4.0 %     2,177,498       25.7 %
Accrued interest receivable
     9,749       9,880       -1.3 %     7,055       38.2 %
Premises and equipment, net
     30,912       31,377       -1.5 %     14,221       117.4 %
Other real estate owned ("OREO"), net
     15,790       22,706       -30.5 %     756       1988.6 %
Customers' liability on acceptances
     1,847       2,428       -23.9 %     2,018       -8.5 %
Servicing assets
     13,773       13,842       -0.5 %     6,833       101.6 %
FDIC loss sharing asset
     -       9,416       -100.0 %     -       -  
Other intangible assets, net
     2,080       2,179       -4.5 %     1,171       77.6 %
Investment in Federal Home Loan Bank ("FHLB") stock, at cost
     17,580       17,579       0.0 %     14,060       25.0 %
Investment in Federal Reserve Bank ("FRB") stock, at cost
     12,273       12,273       0.0 %     11,196       9.6 %
Income tax asset
     84,371       75,142       12.3 %     63,841       32.2 %
Bank-owned life insurance
     48,866       48,670       0.4 %     29,699       64.5 %
Prepaid expenses
     2,672       2,753       -2.9 %     1,415       88.8 %
Other assets
     32,210       26,910       19.7 %     14,333       124.7 %
Total assets
   $ 4,234,768     $ 4,240,835       -0.1 %   $ 3,054,379       38.6 %
                                         
Liabilities and Stockholders' Equity
                                        
Liabilities:
                                        
Deposits:
                                        
Noninterest-bearing
   $ 1,022,972     $ 1,029,343       -0.6 %   $ 819,015       24.9 %
Interest-bearing
     2,533,774       2,568,811       -1.4 %     1,693,310       49.6 %
Total deposits
     3,556,746       3,598,154       -1.2 %     2,512,325       41.6 %
Accrued interest payable
     3,450       3,030       13.9 %     3,366       2.5 %
Bank's liability on acceptances
     1,847       2,428       -23.9 %     2,018       -8.5 %
FHLB advances
     150,000       110,000       36.4 %     127,546       17.6 %
Servicing liabilities
     5,971       5,998       -0.5 %     -       -  
FDIC loss sharing liability
     1,139       -       -       -       -  
Rescinded stock obligation
     933       15,485       -94.0 %     -       -  
Subordinated debentures
     18,544       18,509       0.2 %     -       -  
Accrued expenses and other liabilities
     42,751       43,525       -1.8 %     9,047       372.5 %
Total liabilities
     3,781,381       3,797,129       -0.4 %     2,654,302       42.5 %
 
                                       
Stockholders' equity:
                                        
Common stock
     257       257       0.0 %     257       0.0 %
Additional paid-in capital
     554,904       554,446       0.1 %     552,270       0.5 %
Accumulated other comprehensive income (loss)
     463       (5,065 )     -109.1 %     (9,380 )     -104.9 %
Accumulated deficit
     (32,379 )     (36,074 )     -10.2 %     (73,212 )     -55.8 %
Less treasury stock
     (69,858 )     (69,858 )     0.0 %     (69,858 )     0.0 %
Total stockholders' equity
     453,387       443,706       2.2 %     400,077       13.3 %
Total liabilities and stockholders' equity
   $ 4,234,768     $ 4,240,835       -0.1 %   $ 3,054,379       38.6 %
 
(1)
Results for September 30, 2014 have been adjusted retrospectively to reflect measurement period adjustments to the provisional acquisition accounting values as of the acquisition date.
(2)
Results for December 31, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle.
 
8
 
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In thousands, except share and per share data)

   
Three Months Ended
  
   
December 31,
    
September 30,
    
Percentage
    
December 31,
    
Percentage
  
   
2014
    
2014 (1)
    
Change
    
2013 (2)
    
Change
  
Interest and Dividend Income:
                              
Interest and fees on loans
   $ 36,457     $ 30,912       17.9 %   $ 27,417       33.0 %
Taxable interest on investment securities
     4,453       3,138       41.9 %     2,178       104.5 %
Tax-exempt interest on investment securities
     20       20       0.0 %     46       -56.5 %
Interest on interest-bearing deposits in other banks
     40       29       37.9 %     69       -42.0 %
Dividends on FRB stock
     185       173       6.9 %     177       4.5 %
Dividends on FHLB stock
     307       290       5.9 %     201       52.7 %
Total interest and dividend income
     41,462       34,562       20.0 %     30,088       37.8 %
Interest Expense:
                                        
Interest on deposits
     3,909       3,278       19.2 %     3,302       18.4 %
Interest on FHLB advances
     35       37       -5.4 %     36       -2.8 %
Interest on subordinated debentures
     162       73       121.9 %     -       -  
Interest on rescinded stock obligation
     -       87       -100.0 %     -       -  
Total interest expense
     4,106       3,475       18.2 %     3,338       23.0 %
Net interest income before provision for credit losses
     37,356       31,087       20.2 %     26,750       39.6 %
Provision for credit losses
     1,026       -       -       -       -  
Net interest income after provision for credit losses
     36,330       31,087       16.9 %     26,750       35.8 %
Noninterest Income:
                                        
Bargain purchase gain, net of deferred taxes
     -       14,577       -100.0 %     -       -  
Service charges on deposit accounts
     3,449       2,883       19.6 %     2,645       30.4 %
Trade finance and other service charges and fees
     1,606       1,153       39.3 %     1,073       49.7 %
Bank-owned life insurance income
     198       225       -12.0 %     232       -14.7 %
Gain on sale of SBA loans
     1,227       1,221       0.5 %     1,936       -36.6 %
Net gain on sales of investment securities
     159       67       137.3 %     116       37.1 %
Disposition gains on PCI loans
     1,432       -       -       -       -  
Other operating income
     913       1,485       -38.5 %     763       19.7 %
Total noninterest income
     8,984       21,611       -58.4 %     6,765       32.8 %
Noninterest Expense:
                                        
Salaries and employee benefits
     16,791       12,847       30.7 %     9,003       86.5 %
Occupancy and equipment
     4,331       3,098       39.8 %     2,485       74.3 %
Merger and integration costs
     3,074       3,415       -10.0 %     730       321.1 %
Deposit insurance premiums and regulatory assessments
     682       513       32.9 %     376       81.4 %
Data processing
     2,333       1,476       58.1 %     1,147       103.4 %
Other real estate owned expense
     686       (741 )     -192.6 %     (12 )     -5,816.7 %
Professional fees
     4,778       1,386       244.7 %     1,239       285.6 %
Directors and officers liability insurance
     121       191       -36.6 %     219       -44.7 %
Supplies and communications
     887       628       41.2 %     563       57.5 %
Advertising and promotion
     1,293       809       59.8 %     991       30.5 %
Loan-related expense
     318       58       448.3 %     68       367.6 %
Amortization of other intangible assets
     100       33       203.0 %     -       -  
Other operating expenses
     1,691       1,817       -6.9 %     1,469       15.1 %
Total noninterest expense
     37,085       25,530       45.3 %     18,278       102.9 %
Income from continuing operations before provision for income taxes
     8,229       27,168       -69.7 %     15,237       -46.0 %
Provision for income taxes
     2,301       5,368       -57.1 %     5,222       -55.9 %
Income from continuing operations, net of taxes
   $ 5,928     $ 21,800       -72.8 %   $ 10,015       -40.8 %
Discontinued operations
                                        
Loss from operations of discontinued subsidiary (including gain on disposal of $51 in the second quarter of 2014)
   $ -     $ -       -     $ (126 )     -100.0 %
Income tax expense
     -       -       -       (41 )     -100.0 %
Loss from discontinued operations
     -       -       -       (85 )     -100.0 %
Net income
   $ 5,928     $ 21,800       -72.8 %   $ 9,930       -40.3 %
                                      -  
Basic earnings per share:
                                        
Income from continuing operations, net of taxes
   $ 0.19     $ 0.69             $ 0.31          
Income from discontinued operations, net of taxes
     -       -               -          
Basic earnings per share
   $ 0.19     $ 0.69             $ 0.31          
Diluted earnings per share:
                                        
Income from continuing operations, net of taxes
   $ 0.19     $ 0.68             $ 0.31          
Income from discontinued operations, net of taxes
     -       -               -          
Diluted earnings per share
   $ 0.19     $ 0.68             $ 0.31          
                                         
Weighted-average shares outstanding:
                                        
Basic
     31,734,129       31,708,581               31,643,463          
Diluted
     32,021,391       32,001,419               31,864,845          
Common shares outstanding
     31,910,203       31,894,429               31,761,550          
 
 
 
9
 
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income, Continued (Unaudited)
(In thousands, except share and per share data)

   
Year Ended December 31,
  
   
December 31,
    
December 31,
    
Percentage
  
   
2014
    
2013 (2)
    
Change
  
Interest and Dividend Income:
                  
Interest and fees on loans
   $ 122,222     $ 108,804       12.3 %
Taxable interest on investment securities
     12,502       8,434       48.2 %
Tax-exempt interest on investment securities
     136       283       -51.9 %
Interest on federal funds sold
     -       6       -100.0 %
Interest on interest-bearing deposits in other banks
     107       209       -48.8 %
Dividends on FRB stock
     698       754       -7.4 %
Dividends on FHLB stock
     1,069       650       64.5 %
Total Interest and Dividend Income
     136,734       119,140       14.8 %
Interest Expense:
                        
Interest on deposits
     13,560       12,678       7.0 %
Interest on FHLB advances
     151       151       0.0 %
Interest on subordinated debentures
     235       678       -65.3 %
Interest on rescinded stock obligation
     87       -       -  
Total interest expense
     14,033       13,507       3.9 %
Net interest income before provision for credit losses
     122,701       105,633       16.2 %
Negative provision for credit losses
     (6,140 )     -       -  
Net interest income after provision for credit losses
     128,841       105,633       22.0 %
Noninterest Income:
                        
Bargain purchase gain, net of deferred taxes
     14,577       -       -  
Service charges on deposit accounts
     11,374       11,307       0.6 %
Trade finance and other service charges and fees
     4,946       4,475       10.5 %
Bank-owned life insurance income
     879       1,171       -24.9 %
Gain on sale of SBA loans
     3,494       8,000       -56.3 %
Net loss on sales of other loans
     -       (557 )     -100.0 %
Net gain on sales of investment securities
     2,011       1,039       93.6 %
Disposition gains on PCI loans
     1,432       -       -  
Other operating income
     3,583       2,465       45.4 %
Total noninterest income
     42,296       27,900       51.6 %
Noninterest Expense:
                        
Salaries and employee benefits
     50,177       35,129       42.8 %
Occupancy and equipment
     12,295       10,017       22.7 %
Merger and integration costs
     6,646       730       810.4 %
Unconsummated acquisition costs
     -       1,331       -100.0 %
Deposit insurance premiums and regulatory assessments
     2,031       1,435       41.5 %
Data processing
     6,080       4,582       32.7 %
Other real estate owned expense
     (49 )     (59 )     -16.9 %
Professional fees
     7,564       5,335       41.8 %
Directors and officers liability insurance
     696       876       -20.5 %
Supplies and communications
     2,612       2,155       21.2 %
Advertising and promotion
     3,435       3,411       0.7 %
Loan-related expense
     521       396       31.6 %
Amortization of other intangible assets
     133       -       -  
Other operating expenses
     6,412       5,679       12.9 %
Total noninterest expense
     98,553       71,017       38.8 %
Income from continuing operations before provision for income taxes
     72,584       62,516       16.1 %
Provision for income taxes
     22,379       22,732       -1.6 %
Income from continuing operations, net of taxes
   $ 50,205     $ 39,784       26.2 %
Discontinued operations
                        
Income from operations of discontinued subsidiary                        
(including gain on disposal of $51 in the second quarter of 2014)
   $ 37     $ 115       -67.8 %
Income tax expense
     481       42       1045.2 %
(Loss) income from discontinued operations
     (444 )     73       -708.2 %
Net income
   $ 49,761     $ 39,857       24.8 %
                         
Basic earnings per share:
                        
Income from continuing operations, net of taxes
   $ 1.58     $ 1.26          
Income from discontinued operations, net of taxes
     (0.01 )     -          
Basic earnings per share
   $ 1.57     $ 1.26          
Diluted earnings per share:
                        
Income from continuing operations, net of taxes
   $ 1.57     $ 1.26          
Income from discontinued operations, net of taxes
     (0.01 )     -          
Diluted earnings per share
   $ 1.56     $ 1.26          
                         
Weighted-average shares outstanding:
                        
Basic
     31,696,100       31,598,913          
Diluted
     31,978,064       31,696,520          
Common shares outstanding
     31,910,203       31,761,550          
 
(1)
Results for September 30, 2014 have been adjusted retrospectively to reflect measurement period adjustments to the provisional acquisition accounting values as of the acquisition date.
(2)
Results for December 31, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle.
 
10
 
Hanmi Financial Corporation and Subsidiaries
Selected Financial Data (Unaudited)
(In thousands)

   
As of or for the Three Months Ended
    
As of or for the Year Ended
  
   
December 31,
    
September 30,
    
December 31,
    
December 31,
    
December 31,
  
   
2014
    
2014 (6)
    
2013 (7)
    
2014
    
2013 (7)
  
Average balances:
                              
Average gross loans, net of deferred loan costs (1)
   $ 2,719,692     $ 2,499,951     $ 2,198,654     $ 2,440,682     $ 2,156,626  
Average investment securities
     1,112,606       749,566       447,272       676,729       446,563  
Average interest-earning assets
     3,905,646       3,317,356       2,755,182       3,163,141       2,687,799  
Average assets
     4,187,559       3,522,234       2,900,034       3,410,751       2,827,508  
Average deposits
     3,578,114       2,884,535       2,474,262       2,872,029       2,391,248  
Average borrowings
     110,418       118,358       8,606       81,110       27,815  
Average interest-bearing liabilities
     2,666,651       2,076,610       1,693,689       2,054,680       1,678,618  
Average stockholders’ equity
     450,986       433,164       401,675       425,913       392,601  
Average tangible equity
     449,276       432,638       400,477       425,018       391,342  
                                         
Performance ratios:
                                        
Return on average assets (2) (3)
     0.56 %     2.46 %     1.37 %     1.47 %     1.41 %
Pre-tax, pre-provision earnings on average assets (2) (3)
     0.88 %     3.06 %     2.08 %     1.95 %     2.21 %
Return on average stockholders’ equity (2) (3)
     5.21 %     19.97 %     9.89 %     11.79 %     10.13 %
Return on average tangible equity (2) (3)
     5.23 %     19.99 %     9.92 %     11.81 %     10.17 %
Efficiency ratio
     80.03 %     48.45 %     54.54 %     59.73 %     53.18 %
Efficiency ratio (excluding merger and integration costs)
     73.39 %     41.97 %     52.36 %     55.70 %     52.64 %
Net interest spread (2) (4)
     3.60 %     3.47 %     3.56 %     3.65 %     3.64 %
Net interest margin (2) (4)
     3.80 %     3.72 %     3.86 %     3.88 %     3.94 %
Average stockholders' equity to average assets
     10.77 %     12.30 %     13.85 %     12.49 %     13.89 %
                                         
Allowance for loan losses:
                                        
Balance at beginning of period
   $ 51,179     $ 51,886     $ 57,639     $ 57,555     $ 63,305  
Provision (negative provision) charged to operating expense
     1,204       48       82       (6,258 )     576  
Net recoveries (charge-offs)
     283       (755 )     (166 )     1,369       (6,326 )
Balance at end of period
   $ 52,666     $ 51,179     $ 57,555     $ 52,666     $ 57,555  
                                         
Asset quality ratios:
                                        
Nonperforming assets to assets (5)
     0.98 %     1.10 %     0.87 %     0.98 %     0.87 %
Nonperforming loans to gross loans (5)
     0.92 %     0.90 %     1.16 %     0.92 %     1.16 %
Nonperforming loans to allowance for loan losses (5)
     48.44 %     46.93 %     44.96 %     48.44 %     44.96 %
Net loan (recoveries) charge-offs to average gross loans (2)
     -0.04 %     0.12 %     0.03 %     -0.06 %     0.29 %
Allowance for loan losses to gross loans
     1.89 %     1.91 %     2.58 %     1.89 %     2.58 %
Allowance for loan losses to nonperforming loans
     206.44 %     213.09 %     222.42 %     206.44 %     222.42 %
                                         
Allowance for off-balance sheet items:
                                        
Balance at beginning of period
   $ 1,544     $ 1,592     $ 1,320     $ 1,248     $ 1,824  
(Negative provision) provision charged to operating expense
     (179 )     (48 )     10       117       (576 )
Balance at end of period
   $ 1,365     $ 1,544     $ 1,330     $ 1,365     $ 1,248  
                                         
Nonperforming assets (5):
                                        
Nonaccrual loans
   $ 25,511     $ 24,003     $ 25,877     $ 25,511     $ 25,877  
Loans 90 days or more past due and still accruing
     -       15       -       -       -  
Nonperforming loans
     25,511       24,018       25,877       25,511       25,877  
Other real estate owned, net
     15,790       22,706       756       15,790       756  
Nonperforming assets
     41,301       46,724       26,633       41,301       26,633  
Nonperforming loans in loans held for sale
     -       -       -       -       -  
Nonperforming assets
   $ 41,301     $ 46,724     $ 26,633     $ 41,301     $ 26,633  
                                         
Delinquent loans, 30 to 89 days past due and still accruing
   $ 9,515     $ 7,506     $ 6,756     $ 9,515     $ 6,756  
                                         
Delinquent loans to gross loans
     0.34 %     0.28 %     0.30 %     0.34 %     0.30 %
 
 
11
 
Hanmi Financial Corporation and Subsidiaries
Selected Financial Data, Continued (Unaudited)
(In thousands)

   
December 31,
    
September 30,
    
December 31,
  
   
2014
    
2014 (6)
    
2013 (7)
  
Loan portfolio:
                  
Real estate loans
   $ 2,375,538     $ 2,306,348     $ 1,890,720  
Residential loans
     135,303       108,835       79,078  
Commercial and industrial loans
     249,188       236,073       231,786  
Consumer loans
     27,557       28,895       32,505  
Gross loans
     2,787,586       2,680,151       2,234,089  
Deferred loan costs
     3,237       3,311       964  
Gross loans, net of deferred loan costs
     2,790,823       2,683,462       2,235,053  
Allowance for loan losses
     (52,666 )     (51,179 )     (57,555 )
Loans receivable, net
     2,738,157       2,632,283       2,177,498  
Loans held for sale, at the lower of cost or fair value
     5,451       7,757       -  
Total loans receivable, net
   $ 2,743,608     $ 2,640,040     $ 2,177,498  
                         
Loan mix:
                        
Real estate loans
     85.2 %     86.0 %     84.6 %
Residential loans
     4.9 %     4.1 %     3.5 %
Commercial and industrial loans
     8.9 %     8.8 %     10.4 %
Consumer loans
     1.0 %     1.1 %     1.5 %
Total loans
     100.0 %     100.0 %     100.0 %
                         
Deposit portfolio:
                        
Demand-noninterest-bearing
   $ 1,022,972     $ 1,029,343     $ 819,015  
Savings
     120,659       121,667       115,371  
Money market checking and NOW accounts
     796,490       796,849       574,334  
Time deposits of $100,000 or more
     910,340       919,085       506,946  
Other time deposits
     706,285       731,210       496,659  
Total deposits
   $ 3,556,746     $ 3,598,154     $ 2,512,325  
                         
Deposit mix:
                        
Demand-noninterest-bearing
     28.8 %     28.6 %     32.5 %
Savings
     3.4 %     3.5 %     4.6 %
Money market checking and NOW accounts
     22.4 %     22.1 %     22.9 %
Time deposits of $100,000 or more
     25.6 %     25.5 %     20.2 %
Other time deposits
     19.8 %     20.3 %     19.8 %
Total deposits
     100.0 %     100.0 %     100.0 %
                         
Capital ratios:
                        
Hanmi Financial
                        
Total risk-based capital ratio
     15.63 %     16.51 %     17.53 %
Tier 1 risk-based capital ratio
     14.37 %     15.26 %     16.26 %
Tier 1 leverage capital ratio
     10.88 %     12.95 %     13.66 %
Hanmi Bank
                        
Total risk-based capital ratio
     15.13 %     16.50 %     16.84 %
Tier 1 risk-based capital ratio
     13.88 %     15.24 %     15.58 %
Tier 1 leverage capital ratio
     10.34 %     12.94 %     13.09 %

(1)
Includes loans held for sale
(2)
Annualized
(3)
Amount calculated based on net income from continuing operations.
(4)
Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.
(5)
Excludes PCI loans
(6)
Results for September 30, 2014 have been adjusted retrospectively to reflect measurement period adjustments to the provisional acquisition accounting values as of the acquisition date.
(7)
Results for December 31, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle.
 
12
 
Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(In thousands)

   
Three Months Ended
  
   
December 31, 2014
  
September 30, 2014 (1)
    
December 31, 2013 (2)
  
         
Interest
    
Average
          
Interest
    
Average
          
Interest
    
Average
  
   
Average
    
Income /
    
Yield /
    
Average
    
Income /
    
Yield /
    
Average
    
Income /
    
Yield /
  
   
Balance
    
Expense
    
Rate
    
Balance
    
Expense
    
Rate
    
Balance
    
Expense
    
Rate
  
Assets
                                                      
Interest-earning assets:
                                                      
Gross loans, net of deferred loan costs
   $ 2,719,692     $ 36,457       5.32 %   $ 2,499,951     $ 30,912       4.91 %   $ 2,198,654     $ 27,417       4.95 %
Municipal securities-taxable
     16,646       164       3.94 %     16,713       164       3.93 %     34,214       357       4.17 %
Municipal securities-tax exempt
     4,423       31       2.78 %     4,441       31       2.77 %     7,035       71       4.02 %
Obligations of other U.S. government agencies
     139,872       599       1.71 %     144,177       491       1.36 %     87,079       424       1.95 %
Other debt securities
     921,403       3,690       1.60 %     555,584       2,483       1.79 %     292,860       1,397       1.91 %
Equity securities
     30,262       492       6.50 %     28,651       463       6.46 %     26,084       378       5.80 %
Interest-bearing deposits in other banks
     73,348       40       0.22 %     67,839       29       0.17 %     109,256       69       0.25 %
Total interest-earning assets
     3,905,646       41,473       4.21 %     3,317,356       34,573       4.13 %     2,755,182       30,113       4.34 %
                                                                         
Noninterest-earning assets:
                                                                        
Cash and cash equivalents
     87,410                       73,935                       71,768                  
Allowance for loan losses
     (52,155 )                     (58,390 )                     (57,884 )                
Other assets
     246,658                       189,333                       130,968                  
Total noninterest-earning assets
     281,913                       204,878                       144,852                  
                                                                         
Total assets
   $ 4,187,559                     $ 3,522,234                     $ 2,900,034                  
                                                                         
Liabilities and Stockholders' Equity
                                                                        
Interest-bearing liabilities:
                                                                        
Deposits:
                                                                        
Savings
   $ 120,332     $ 521       1.72 %   $ 112,690     $ 348       1.23 %   $ 114,939     $ 435       1.50 %
Money market checking and NOW accounts
     800,490       884       0.44 %     652,524       803       0.49 %     565,993       733       0.51 %
Time deposits of $100,000 or more
     919,195       1,491       0.64 %     641,545       1,388       0.86 %     503,822       920       0.72 %
Other time deposits
     716,216       1,013       0.56 %     551,493       739       0.53 %     500,329       1,214       0.96 %
FHLB advances
     78,478       35       0.18 %     105,667       37       0.14 %     8,575       36       1.67 %
Other Borrowings
     -       -       0.00 %     1,247       -       0.00 %     31       -       0.00 %
Rescinded stock obligation
     13,426       -       0.00 %     5,219       87       6.61 %     -       -       0.00 %
Subordinated debentures
     18,514       162       3.47 %     6,225       73       4.65 %     -       -       0.00 %
Total interest-bearing liabilities
     2,666,651       4,106       0.61 %     2,076,610       3,475       0.66 %     1,693,689       3,338       0.78 %
                                                                         
Noninterest-bearing liabilities:
                                                                        
Demand deposits
     1,021,881                       926,283                       789,179                  
Other liabilities
     48,041                       86,177                       15,491                  
Total noninterest-bearing liabilities
     1,069,922                       1,012,460                       804,670                  
                                                                         
Total liabilities
     3,736,573                       3,089,070                       2,498,359                  
Stockholders' equity
     450,986                       433,164                       401,675                  
                                                                         
Total liabilities and stockholders' equity
   $ 4,187,559                     $ 3,522,234                     $ 2,900,034                  
                                                                         
Net interest income
           $ 37,367                     $ 31,098                     $ 26,775          
                                                                         
Cost of deposits
                     0.43 %                     0.45 %                     0.53 %
Net interest spread
                     3.60 %                     3.47 %                     3.56 %
Net interest margin
                     3.80 %                     3.72 %                     3.86 %
 
13
 
Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid, Continued (Unaudited)
(In thousands)
 
   
For the Year Ended
  
   
December 31, 2014
    
December 31, 2013 (2)
  
         
Interest
    
Average
          
Interest
    
Average
  
   
Average
    
Income /
    
Yield /
    
Average
    
Income /
    
Yield /
  
   
Balance
    
Expense
    
Rate
    
Balance
    
Expense
    
Rate
  
Assets
                                    
Interest-earning assets:
                                    
Gross loans, net of deferred loan costs
   $ 2,440,682     $ 122,222       5.01 %   $ 2,156,626     $ 108,804       5.05 %
Municipal securities-taxable
     20,881       847       4.06 %     42,387       1,707       4.03 %
Municipal securities-tax exempt
     6,593       209       3.17 %     10,141       435       4.29 %
Obligations of other U.S. government agencies
     98,387       1,896       1.93 %     90,956       1,733       1.91 %
Other debt securities
     523,076       9,759       1.87 %     274,789       4,994       1.82 %
Equity securities
     27,792       1,767       6.36 %     28,290       1,404       4.96 %
Federal funds sold
     3       -       0.00 %     1,555       6       0.39 %
Interest-bearing deposits in other banks
     45,727       107       0.23 %     83,055       209       0.25 %
Total interest-earning assets
     3,163,141       136,807       4.33 %     2,687,799       119,292       4.44 %
                                                 
Noninterest-earning assets:
                                                
Cash and cash equivalents
     76,828                       67,859                  
Allowance for loan losses
     (54,817 )                     (60,119 )                
Other assets
     225,599                       131,969                  
Total noninterest-earning assets
     247,610                       139,709                  
                                                 
Total assets
   $ 3,410,751                     $ 2,827,508                  
                                                 
Liabilities and Stockholders' Equity
                                                
Interest-bearing liabilities:
                                                
Deposits:
                                                
Savings
   $ 116,254     $ 1,646       1.42 %   $ 114,968     $ 1,812       1.58 %
Money market checking and NOW accounts
     653,793       3,213       0.49 %     567,860       2,912       0.51 %
Time deposits of $100,000 or more
     643,017       4,321       0.67 %     546,588       4,094       0.75 %
Other time deposits
     560,506       4,380       0.78 %     421,387       3,860       0.92 %
FHLB advances
     69,781       151       0.22 %     6,573       151       2.30 %
Other Borrowings
     315       -       0.00 %     8       -       0.00 %
Rescinded stock obligation
     4,778       87       1.82 %     -       -       0.00 %
Subordinated debentures
     6,236       235       3.77 %     21,234       678       3.19 %
Total interest-bearing liabilities
     2,054,680       14,033       0.68 %     1,678,618       13,507       0.80 %
                                                 
Noninterest-bearing liabilities:
                                                
Demand deposits
     898,459                       740,445                  
Other liabilities
     31,699                       15,844                  
Total noninterest-bearing liabilities
     930,158                       756,289                  
                                                 
Total liabilities
     2,984,838                       2,434,907                  
Stockholders' equity
     425,913                       392,601                  
                                                 
Total liabilities and stockholders' equity
   $ 3,410,751                     $ 2,827,508                  
                                                 
Net interest income
           $ 122,774                     $ 105,785          
                                                 
Cost of deposits
                     0.47 %                     0.53 %
Net interest spread
                     3.65 %                     3.64 %
Net interest margin
                     3.88 %                     3.94 %

(1)
Results for September 30, 2014 have been adjusted retrospectively to reflect measurement period adjustments to the provisional acquisition accounting values as of the acquisition date.
(2)
Results for December 31, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle.
 
14
 
Non-GAAP Financial Measures
 
Tangible Common Equity to Tangible Assets Ratio
 
Tangible common equity to tangible assets ratio is supplemental financial information determined by a method other than in accordance with U.S. generally accepted accounting principles (“GAAP”). This non-GAAP measure is used by management in the analysis of Hanmi’s capital strength. Tangible equity is calculated by subtracting goodwill and other intangible assets from stockholders’ equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from stockholders’ equity when assessing the capital adequacy of a financial institution. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the capital strength of Hanmi. This disclosure should not be viewed as a substitution for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
 
The following table reconciles this non-GAAP performance measure to the GAAP performance measure for the periods indicated:
 
Tangible Common Equity to Tangible Assets Ratio (Unaudited)
(In thousands, except share and per share data)

   
December 31,
    
September 30,
    
December 31,
  
Hanmi Financial Corporation
  
2014
    
2014 (1)
    
2013 (2)
  
Assets
   $ 4,234,768     $ 4,240,835     $ 3,054,379  
Less other intangible assets
     (2,080 )     (2,179 )     (1,171 )
Tangible assets
   $ 4,232,688     $ 4,238,656     $ 3,053,208  
                         
Stockholders' equity
   $ 453,387     $ 443,706     $ 400,077  
Less other intangible assets
     (2,080 )     (2,179 )     (1,171 )
Tangible stockholders' equity
   $ 451,307     $ 441,527     $ 398,906  
                         
Stockholders' equity to assets
     10.71 %     10.46 %     13.10 %
Tangible common equity to tangible assets
     10.66 %     10.42 %     13.07 %
                         
Common shares outstanding
     31,910,203       31,894,429       31,761,550  
Tangible common equity per common share
   $ 14.14     $ 13.84     $ 12.56  

(1)
Results for September 30, 2014 have been adjusted retrospectively to reflect measurement period adjustments to the provisional acquisition accounting values as of the acquisition date.
(2)
Results for December 31, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle.
 
Change in Accounting Principle
 
As of April 1, 2014, the Bank changed its method of accounting for investment in low-income housing tax credit, as required by FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. Previously, the investment in low-income housing tax credit was accounted for under equity method.
 
Effective April 1, 2014, the Bank began recording amortization of the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizing the net investment performance in the income statement as a component of income tax expense (proportional amortization method). The Bank recorded this change in accounting principle in accordance with ASU 2014-01 which requires retrospective application of the new accounting principle to all practicable prior accounting periods as if the principle had always been used. The accounting principle was retrospectively applied from the period beginning on January 1, 1998, and to each period thereafter. Net income in the three and twelve months ended December 31, 2013 decreased by $98,000 and $48,000 respectively, due to this change in accounting principle.
 
 
 
15