Quarterly report pursuant to Section 13 or 15(d)

Sale of Insurance Subsidiaries and Discontinued Operations

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Sale of Insurance Subsidiaries and Discontinued Operations
 6 Months Ended
Jun. 30, 2014
Discontinued Operations And Disposal Groups [Abstract]  
Sale of Insurance Subsidiaries and Discontinued Operations

Note 3 — Sale of Insurance Subsidiaries and Discontinued Operations

In June 2014, Hanmi Financial sold its insurance subsidiaries, Chun-Ha and All World, and entered into a stock purchase agreement for their sale. The subsidiaries were classified as held for sale in April 2014 and accounted for as discontinued operations. The operations and cash flows of the businesses have been eliminated and in accordance with the provisions of ASC 205, Presentation of Financial Statements, the results are reported as discontinued operations for all periods presented.

Hanmi Financial completed the sale of its two insurance subsidiaries to Chunha Holding Corporation on June 30, 2014. The total sales price was $3.5 million, of which $2.0 million was paid upon signing. The $2.0 million was reduced by $1.6 million cash and cash equivalents included in net assets of Chun-Ha and All World, resulting in $398,000 net cash proceeds. The remaining $1.5 million will be payable in three equal installments on each anniversary of the closing date through June 30, 2017.

The sale resulted in a $51,000 gain and a $4,000 income tax benefit from operating loss, offset by a $470,000 capital gain tax and a $52,000 operating loss. Consequently, net loss from discontinued operations in the second quarter of 2014 was $467,000, or $0.01 per diluted share. The discontinued operations generated non-interest income, primarily in the line item for insurance commissions, of $2.7 million in the first six months of 2014 and $1.3 million in the first quarter of 2014. They also incurred non-interest expense in various line items of $2.7 million in the first six months of 2014 and $1.4 million in the first quarter of 2014.

 

Summarized financial information for our discontinued operations related to Chun-Ha and All World are as follows:

 

     June 30,      December 31,  
     2014      2013  
     (In thousands)  

Cash and cash equivalents

    $ 1,602       $ 1,396   

Premises and equipment, net

      90         79   

Other intangible assets, net

      1,089         1,171   

Other assets

      2,855         3,298   
  

 

 

     

 

 

  

Total assets

    $ 5,636       $ 5,944   
  

 

 

     

 

 

  

Income tax payable

    $ 415       $ 1,304   

Accrued expenses and other liabilities

      1,878         2,171   
  

 

 

     

 

 

  

Total liabilities

    $ 2,293       $ 3,475   
  

 

 

     

 

 

  

Net assets of discontinued operations

    $ 3,343       $ 2,469   
  

 

 

     

 

 

  

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2014     2013      2014     2013  
     (In thousands)  

Non-interest (loss) income

    $ (52 )    $ 244       $ (14 )    $ 128   

Gain on disposal

      51        —           51        —     
  

 

 

    

 

 

     

 

 

    

 

 

  

(Loss) income before taxes

    $ (1 )    $ 244       $ 37      $ 128   

Provision for income taxes

      466        84         481        39   
  

 

 

    

 

 

     

 

 

    

 

 

  

Net (loss) income from discontinued operations

    $ (467 )    $ 160       $ (444 )    $ 89