hafc-10q_20210331.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging Growth Company

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 March 31, 2021

☐	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.

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 May 3, 2021, there were 30,694,659 outstanding shares of the Registrant’s Common Stock.

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

Three Months Ended March 31, 2021

Table of Contents


	Part I – Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets at March 31, 2021 (unaudited) and December 31, 2020	3

	Consolidated Statements of Income (Unaudited)	4

	Consolidated Statements of Comprehensive Income (Unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	6

	Consolidated Statements of Cash Flows (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	53

Item 4.	Controls and Procedures	53

	Part II – Other Information

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	54

Item 6.	Exhibits	55

Signatures		56

Part I — Financial Information

Item 1. Financial Statements

Hanmi Financial Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)

	March 31,			December 31,
	2021			2020
	(Unaudited)
Assets
Cash and due from banks	$	646,445		$	391,849
Securities available for sale, at fair value (amortized cost of $787,675 as of March 31, 2021 and $749,458 as of December 31, 2020)		780,114			753,781
Loans held for sale, at the lower of cost or fair value		32,674			8,568
Loans receivable, net of allowance for credit losses of $88,392 as of March 31, 2021 and $90,426 as of December 31, 2020		4,728,759			4,789,742
Accrued interest receivable		14,806			16,363
Premises and equipment, net		26,398			26,431
Customers' liability on acceptances		735			1,319
Servicing assets		6,150			6,212
Goodwill and other intangible assets, net		11,558			11,612
Federal Home Loan Bank ("FHLB") stock, at cost		16,385			16,385
Income tax assets		42,665			42,704
Bank-owned life insurance		54,150			53,894
Prepaid expenses and other assets		77,562			83,028
Total assets	$	6,438,401		$	6,201,888

Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing	$	2,174,624		$	1,898,766
Interest-bearing		3,335,199			3,376,242
Total deposits		5,509,823			5,275,008
Accrued interest payable		2,352			4,564
Bank's liability on acceptances		735			1,319
Borrowings		150,000			150,000
Subordinated debentures ($126,800 face amount less unamortized discount and debt issuance costs of $7,676 and $7,828 as of March 31, 2021 and December 31, 2020, respectively)		119,124			118,972
Accrued expenses and other liabilities		74,545			74,981
Total liabilities		5,856,579			5,624,844
Stockholders' equity:
Preferred Stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of March 31, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value; authorized 62,500,000 shares; issued 33,585,181 shares (30,682,533 shares outstanding) as of March 31, 2021 and issued 33,560,801 shares (30,717,835 shares outstanding) as of December 31, 2020		33			33
Additional paid-in capital		578,958			578,360
Accumulated other comprehensive (loss) income, net of tax benefit of $2,268 as of March 31, 2021 and net of tax expense of $1,247 as of December 31, 2020		(5,293	)		3,076
Retained earnings		128,211			114,621
Less treasury stock; 2,902,648 shares as of March 31, 2021 and 2,842,966 shares as of December 31, 2020		(120,087	)		(119,046	)
Total stockholders' equity		581,822			577,044
Total liabilities and stockholders' equity	$	6,438,401		$	6,201,888

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 March 31,
	2021		2020
Interest and dividend income:
Interest and fees on loans receivable	$	50,614	$	54,648
Interest on securities		1,140		3,655
Dividends on FHLB stock		206		289
Interest on deposits in other banks		96		333
Total interest and dividend income		52,056		58,925
Interest expense:
Interest on deposits		3,958		12,742
Interest on borrowings		478		496
Interest on subordinated debentures		1,619		1,712
Total interest expense		6,055		14,950
Net interest income before credit loss expense		46,001		43,975
Credit loss expense		2,109		15,739
Net interest income after credit loss expense		43,892		28,236
Noninterest income:
Service charges on deposit accounts		2,357		2,400
Trade finance and other service charges and fees		1,034		986
Gain on sale of Small Business Administration ("SBA") loans		4,125		1,154
Net gain on sales of securities		99		—
Other operating income		2,193		1,683
Total noninterest income		9,808		6,223
Noninterest expense:
Salaries and employee benefits		16,820		17,749
Occupancy and equipment		4,595		4,475
Data processing		2,926		2,669
Professional fees		1,447		1,915
Supplies and communications		757		781
Advertising and promotion		359		734
Other operating expenses		2,631		2,745
Total noninterest expense		29,535		31,068
Income before tax		24,165		3,391
Income tax expense		7,506		1,041
Net income	$	16,659	$	2,350
Basic earnings per share	$	0.54	$	0.08
Diluted earnings per share	$	0.54	$	0.08
Weighted-average shares outstanding:
Basic		30,461,681		30,469,022
Diluted		30,473,970		30,472,899

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2021			2020
Net income	$	16,659		$	2,350
Other comprehensive income (loss), net of tax:
Unrealized gain on securities:
Unrealized holding gain arising during period		(11,785	)		11,924
Less: reclassification adjustment for net gain included in net income		(99	)		—
Income tax benefit (expense) related to items of other comprehensive income		3,515			(3,439	)
Other comprehensive income (loss), net of tax		(8,369	)		8,485
Comprehensive income	$	8,290		$	10,835

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 March 31, 2021 and March 31, 2020

(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		Income (Loss)		Earnings			at Cost			Equity
Balance at January 1, 2020		33,475,402			(2,675,778	)		30,799,624		$	33	$	575,816	$	3,382	$	100,552		$	(116,515	)	$	563,268
Adjustment related to adopting of new accounting standards
ASU 2016-13 (See Notes 1 and 3)		—			—			—			—		—		—		(12,167	)		—			(12,167	)
Adjusted balance at January 1, 2020		33,475,402			(2,675,778	)		30,799,624			33		575,816		3,382		88,385			(116,515	)		551,101
Restricted stock awards, net of forfeitures		(27,188	)		—			(27,188	)		—		—		—		—			—			—
Share-based compensation expense		—			—			—			—		769		—		—			—			769
Restricted stock surrendered due to employee tax liability		—			(14,295	)		(14,295	)		—		—		—		—			(171	)		(171	)
Repurchase of common stock		—			(135,400	)		(135,400	)		—		—		—		—			(2,196	)		(2,196	)
Cash dividends declared (common stock, $0.24/share)		—			—			—			—		—		—		(7,380	)		—			(7,380	)
Net income		—			—			—			—		—		—		2,350			—			2,350
Change in unrealized gain on securities available for sale, net of income taxes		—			—			—			—		—		8,485		—			—