Hanmi's Earnings Up 7.7% in the Third Quarter With Net Interest Margin Expanding to 4.28%

LOS ANGELES, Oct. 22, 2013 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (Nasdaq:HAFC), the holding company for Hanmi Bank (the "Bank"), today reported that improving operating efficiencies and expanding net interest margin generated a 7.7% increase in net income during the third quarter of 2013. Third quarter net income grew to $10.3 million, or $0.32 per diluted share, compared to $9.5 million, or $0.30 per diluted share, for the second quarter this year. Pretax income improved 9.7% to $16.8 million in the third quarter of 2013 from $15.3 million in the second quarter of 2013. In the third quarter of 2012, following a net tax benefit of $644,000 resulting from the reversal of a deferred tax asset ("DTA") valuation allowance, Hanmi earned $13.3 million, or $0.42 per diluted share.

In the first nine months of 2013, net income was $30.0 million, or $0.94 per diluted share, compared to $76.4 million, or $2.42 per diluted share, in the first nine months a year ago, which included the $47.7 million net tax benefit from the DTA valuation allowance reversal. Year-to-date pretax income grew 63.9% to $47.0 million from $28.7 million for the first nine months of 2012.

"We continue to make progress implementing our strategic plan to build a premier business bank serving the Korean American community. To build competitive advantage and ultimately achieve this vision, we will continue to invest in technology, infrastructure and talented bankers," said C. G. Kum, President and Chief Executive Officer. "We recently launched our new Corporate Banking Center and hired four of the top lenders in our market to increase our lending capacity, particularly for commercial and industrial loans. Our skilled and dedicated lending team continues to build an impressive pipeline of new loans. We are also strengthening our cash management offerings for business customers with the addition of an experienced banker who will manage the newly created Cash Management department. Hanmi will be the only Korean American bank to actively market a full complement of cash management products and services to deepen our customer relationships and to generate core deposits."

Third Quarter Results
(In thousands, except per share data)
As of or for the Three Months Ended
September 30, June 30, September 30,
2013 2013 2012
Net income $ 10,250 $ 9,519 $ 13,279
Net income per diluted common share $ 0.32 $ 0.30 $ 0.42
Total assets $ 2,845,137 $ 2,773,414 $ 2,841,857
Loans receivable, net $ 2,102,621 $ 2,128,208 $ 1,892,813
Total deposits $ 2,429,707 $ 2,361,913 $ 2,363,385
Return on average assets 1.46% 1.37% 1.87%
Return on average stockholders' equity 10.29% 9.70% 14.97%
Net interest margin 4.28% 4.10% 3.69%
Efficiency ratio 52.98% 56.55% 59.81%
Tangible common equity to tangible assets 13.95% 14.22% 12.77%
Tangible common equity per common share $ 12.49 $ 12.47 $ 11.52

Financial Highlights (at or for the period ended September 30, 2013 compared to June 30, 2013 or September 30, 2012)

  • Third quarter net income was $10.3 million, or $0.32 per diluted share, compared to $9.5 million, or $0.30 per diluted share, in the second quarter of 2013.
  • Net interest margin ("NIM") increased 18 basis points to 4.28%, from 4.10% in the second quarter of 2013, and increased 59 basis points from 3.69% in the third quarter of 2012.
  • Efficiency ratio continued to improve to 52.98% for this quarter from 56.55% for the second quarter of 2013 and 59.81% for the same quarter a year ago.
  • New loan production totaled $136.0 million, mainly consisting of $84.6 million of commercial real estate loans, $22.8 million of commercial and industrial ("C&I") loans, and $27.9 million of Small Business Administration ("SBA") loans.
  • C&I lending almost doubled to $22.8 million in the third quarter of 2013, compared to $11.9 million in the preceding quarter.
  • Average gross loans were up 11.7% year-over-year.
  • Asset quality improved, with non-performing assets declining to 0.81% of total assets.
  • A cash dividend of $0.07 per share of common stock was paid on September 17, 2013.

Results of Operations

Third quarter net interest income, before provision for credit losses, increased 4.9% to $28.5 million, from $27.2 million for the second quarter of 2013, and was up 14.3% from $24.9 million for the third quarter of 2012. Interest and dividend income increased 4.1% from the preceding quarter and 7.6% from the third quarter a year ago, while interest expense decreased 2.2% and 29.7% from the preceding and year ago quarters, respectively. Year-to-date, net interest income before provision for credit losses, improved 8.9% to $81.2 million compared to $74.6 million for the first nine months of 2012.

"Our net interest margin continued to expand, growing 59 basis points to 4.28% in the third quarter of 2013 compared to the third quarter a year ago. The elimination of interest payments on trust preferred securities that were paid off earlier in the year, as well as solid yields on loans and stable costs on deposits contributed to margin expansion in both the quarter and year-to-date results," said Mark Yoon, Executive Vice President and Chief Financial Officer. For the first nine months of 2013, NIM increased to 4.08% from 3.74% for the first nine months of 2012. The following table details the asset yields, liability costs, spread and margin.

Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2013 2013 2012 2013 2012
Interest-earning assets 4.75% 4.59% 4.35% 4.59% 4.49%
Interest-bearing liabilities 0.77% 0.78% 1.01% 0.81% 1.14%
Net interest spread 3.98% 3.81% 3.34% 3.78% 3.35%
Net interest margin 4.28% 4.10% 3.69% 4.08% 3.74%

Hanmi is benefitting from the continuing improvement in the credit performance of its loan portfolio. Net charge-offs for the third quarter of 2013 were $2.2 million compared to $5.9 million in the third quarter of 2012. The improvement in our asset quality metrics when applied in our allowance for loan losses methodology resulted in an allowance of $57.6 million, which is a coverage ratio of 2.67% of gross loans and 253.07% of non-performing loans ("NPLs") as of September 30, 2013, compared to 2.88% of gross loans and 186.03% of NPLs as of December 31, 2012. There was no provision for loan losses for the three and nine months ended September 30, 2013.

For the first nine months of 2013, net interest income after provision for credit losses increased 18.4% to $81.2 million, compared to $68.6 million, which included a $6.0 million provision for credit losses, for the first nine months of 2012.

Non-interest income in the third quarter of 2013 was $7.3 million, compared to $8.2 million in the preceding quarter. The modest decline reflects lower gains from selling SBA loans. For the first nine months of 2013, non-interest income increased 37.4% to $23.8 million from $17.3 million for the like period a year ago, reflecting a significant reduction in losses from selling NPLs, partially offset by lower gains from selling SBA loans and investment securities.

Non-interest expense fell 5.0% to $19.0 million in the third quarter of 2013, compared to $20.0 million in the second quarter of 2013, and was up 0.9% from $18.8 million in the third quarter a year ago. For the first nine months of 2013, non-interest expense increased 1.4% to $58.1 million, compared to $57.3 million for the first nine months last year. "With the addition of new personnel, compensation cost increased 5.4% in the quarter and 8.5% from the third quarter a year ago," said Yoon. "Professional fees were down in the third quarter of 2013, due primarily to lower legal expenses incurred in defending lawsuits in the ordinary course of business, as well as lower professional and legal expenses related to strategic reviews. The decline in legal expenses was mainly a result of not incurring further costs in connection with a lawsuit we prevailed on in the prior quarter and the reimbursement of $634,000 from our insurance company for legal expenses incurred for another lawsuit."

Balance Sheet

Assets totaled $2.85 billion at September 30, 2013, up from $2.77 billion at three months earlier and from $2.84 billion a year ago. With loan pay-offs and growing retail deposits this quarter, cash and cash equivalents were $193.9 million, up 149.0% from the second quarter of 2013 and down 35.9% from a year ago.

Excluding loans held for sale, loans receivable decreased 1.2% in the quarter and increased 11.1% year-over-year to $2.10 billion at September 30, 2013, from $2.13 billion at June 30, 2013, and $1.89 billion a year ago. Loans held for sale totaled $5.2 million at September 30, 2013, compared to $2.6 million at June 30, 2013 and $10.7 million at September 30, 2012. Average gross loans, net of deferred loan fees, increased to $2.19 billion for the third quarter of 2013, up from $2.17 billion for the preceding quarter and $1.96 billion for the third quarter a year ago.

Average deposits were $2.38 billion, up slightly from $2.37 billion for the preceding quarter and $2.36 billion for the third quarter of 2012. The overall mix of funding continued to improve with core deposits increasing. The deposit mix is detailed in the table below.

September 30, June 30, September 30,
2013 2013 2012
Demand-noninterest-bearing 32.0% 31.1% 29.4%
Savings 4.7% 4.9% 4.7%
Money market checking and NOW accounts 22.2% 24.4% 23.9%
Time deposits of $100,000 or more 20.3% 23.9% 26.9%
Other time deposits 20.8% 15.7% 15.1%
Total deposits 100.0% 100.0% 100.0%

At September 30, 2013, stockholders' equity was $398.0 million. Tangible common stockholders' equity was $396.7 million, or 13.95% of tangible assets, compared to $362.6 million, or 12.77% of tangible assets, a year ago. Tangible book value per share was $12.49, up from $12.47 three months earlier and $11.52 at September 30, 2012. Hanmi paid a cash dividend of $0.07 per share, representing an aggregate dividend of $2.2 million, on September 17, 2013. In addition, volatility in interest rates and the resulting impact on the value of the securities portfolio reduced the accumulated other comprehensive income component of shareholders' equity.

Asset Quality

NPLs were down 18.6% to $22.8 million for the third quarter of 2013 and 49.1% year-over year, reflecting the continuing improvement in the economy and active management of delinquent accounts. Troubled debt restructurings ("TDRs") totaled $28.0 million at September 30, 2013, down from $29.0 million at June 30, 2013 and $38.0 million at September 30, 2012. Of these TDRs, $10.2 million were included in NPLs. The following table shows NPLs in each category:

September 30, 2013 June 30, 2013 September 30, 2012
% of Total % of Total % of Total
Amount NPLs Amount NPLs Amount NPLs
(In thousands)
Real estate loans:
Commercial property
Retail $ 768 3.4% $ -- 0.0% $ 1,102 2.5%
Land -- 0.0% 1,612 5.8% 2,037 4.6%
Construction -- 0.0% -- 0.0% 7,868 17.6%
Residential property 1,659 7.3% 1,620 5.8% 1,411 3.2%
Commercial & industrial loans:
Commercial term loans
Unsecured 2,490 10.9% 6,209 22.2% 8,106 18.1%
Secured by real estate 5,591 24.5% 5,389 19.3% 8,418 18.8%
Commercial lines of credit 830 3.6% 1,052 3.8% 1,359 3.0%
SBA 9,959 43.7% 10,596 37.9% 13,048 29.2%
Consumer loans 1,479 6.5% 1,497 5.4% 1,343 3.0%
Total non-performing loans $ 22,776 100.0% $ 27,975 100.0% $ 44,692 100.0%

Asset quality continues to improve in all major aspects, and there were no sales of problem loans in the third quarter. Losses associated with our loan sales strategy were just $557,000 year to date, compared to $8.2 million in the first nine months of 2012. Classified loans were $83.7 million, or 3.9% of gross loans, at September 30, 2013, down from $89.6 million, or 4.1%, at June 30, 2013, and from $130.9 million, or 6.7%, a year ago.

Conference Call

Management will host a conference call today, October 22, 2013, at 1:30 p.m. Pacific Time (4:30 p.m. ET) to discuss these results. This call will also be broadcast live via the internet. Investment professionals and all current and prospective stockholders are invited to access the live call by dialing 1-480-629-9723 before 1:30 p.m. Pacific Time, using access code HANMI. To listen to the call online, either live or archived, visit the Investor Relations page of Hanmi's website at www.hanmi.com.

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 of California, with 27 full-service offices in Los Angeles, Orange, San Bernardino, San Francisco, Santa Clara and San Diego counties, and loan production offices in Texas 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 stockholder value.

Forward-Looking Statements

This press release 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 ("SEC"), including, in Item 1A of our Form 10-K for the year ended December 31, 2012, our quarterly reports on Form 10-Q, and current and periodic reports that we will file with the SEC 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.

Hanmi Financial Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(In thousands)
September 30, June 30, Percentage September 30, Percentage
2013 2013 Change 2012 Change
Assets
Cash and due from banks $ 78,810 $ 72,429 8.8% $ 72,053 9.4%
Interest-bearing deposits in other banks 115,044 5,431 2018.3% 217,375 -47.1%
Federal funds sold -- -- 0.0% 13,000 -100.0%
Cash and cash equivalents 193,854 77,860 149.0% 302,428 -35.9%
Restricted cash -- -- 0.0% 4,393 -100.0%
Term federal funds sold -- -- 0.0% 55,000 -100.0%
Securities available for sale, at fair value 383,057 400,815 -4.4% 410,210 -6.6%
Loans held for sale, at the lower of cost or fair value 5,228 2,553 104.8% 10,736 -51.3%
Loans receivable, net of allowance for loan losses 2,102,621 2,128,208 -1.2% 1,892,813 11.1%
Accrued interest receivable 6,957 7,441 -6.5% 7,467 -6.8%
Premises and equipment, net 14,205 14,463 -1.8% 15,412 -7.8%
Other real estate owned, net 290 900 -67.8% 364 -20.3%
Customers' liability on acceptances 1,535 1,372 11.9% 2,157 -28.8%
Servicing assets 6,385 6,383 0.0% 5,148 24.0%
Other intangible assets, net 1,212 1,253 -3.3% 1,376 -11.9%
Investment in federal home loan bank stock, at cost 14,060 14,197 -1.0% 19,621 -28.3%
Investment in federal reserve bank stock, at cost 13,200 13,200 0.0% 10,261 28.6%
Income tax asset 61,747 63,783 -3.2% 60,515 2.0%
Bank-owned life insurance 29,468 29,517 -0.2% 28,816 2.3%
Prepaid expenses 1,986 2,572 -22.8% 2,239 -11.3%
Other assets 9,332 8,897 4.9% 12,901 -27.7%
Total assets $ 2,845,137 $ 2,773,414 2.6% $ 2,841,857 0.1%
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 778,345 $ 736,470 5.7% $ 694,345 12.1%
Interest-bearing 1,651,362 1,625,443 1.6% 1,669,040 -1.1%
Total deposits 2,429,707 2,361,913 2.9% 2,363,385 2.8%
Accrued interest payable 2,705 2,570 5.3% 15,266 -82.3%
Bank's liability on acceptances 1,535 1,372 11.9% 2,157 -28.8%
Federal home loan bank advances 2,645 2,743 -3.6% 3,029 -12.7%
Junior subordinated debentures -- -- 0.0% 82,406 -100.0%
Accrued expenses and other liabilities 10,589 9,420 12.4% 11,627 -8.9%
Total liabilities 2,447,181 2,378,018 2.9% 2,477,870 -1.2%
Stockholders' equity:
Common stock 257 257 0.0% 257 0.0%
Additional paid-in capital 551,881 551,253 0.1% 549,722 0.4%
Accumulated other comprehensive income (4,469) 1,634 -373.5% 5,364 -183.3%
Accumulated deficit (79,855) (87,890) -9.1% (121,498) -34.3%
Less treasury stock (69,858) (69,858) 0.0% (69,858) 0.0%
Total stockholders' equity 397,956 395,396 0.6% 363,987 9.3%
Total liabilities and stockholders' equity $ 2,845,137 $ 2,773,414 2.6% $ 2,841,857 0.1%
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(In thousands, except share and per share data)
Three Months Ended
September 30, June 30, Percentage September 30, Percentage
2013 2013 Change 2012 Change
Interest and Dividend Income:
Interest and fees on loans $ 29,098 $ 27,839 4.5% $ 26,781 8.7%
Taxable interest on investment securities 2,040 2,100 -2.9% 1,992 2.4%
Tax-exempt interest on investment securities 69 73 -5.5% 98 -29.6%
Interest on term federal funds sold -- -- 0.0% 191 -100.0%
Interest on federal funds sold -- -- 0.0% 20 -100.0%
Interest on interest-bearing deposits in other banks 28 24 16.7% 142 -80.3%
Dividends on federal reserve bank stock 198 196 1.0% 154 28.6%
Dividends on federal home loan bank stock 194 147 32.0% 24 708.3%
Total interest and dividend income 31,627 30,379 4.1% 29,402 7.6%
Interest Expense: 0.0%
Interest on deposits 3,117 3,100 0.5% 3,639 -14.3%
Interest on federal home loan bank advances 36 41 -12.2% 40 -10.0%
Interest on junior subordinated debentures -- 84 -100.0% 804 -100.0%
Total interest expense 3,153 3,225 -2.2% 4,483 -29.7%
Net interest income before provision for credit losses 28,474 27,154 4.9% 24,919 14.3%
Provision for credit losses -- -- 0.0% -- 0.0%
Net interest income after provision for credit losses 28,474 27,154 4.9% 24,919 14.3%
Non-Interest Income: 0.0% 0.0%
Service charges on deposit accounts 2,730 2,884 -5.3% 2,851 -4.2%
Insurance commissions 1,273 1,418 -10.2% 1,092 16.6%
Trade finance & other service charges and fees 1,078 1,152 -6.4% 1,111 -3.0%
Bank-owned life insurance income 230 233 -1.3% 235 -2.1%
Gain on sales of SBA loans guaranteed portion 994 2,378 -58.2% 1,772 -43.9%
Net loss on sales of other loans -- (460) -100.0% (515) -100.0%
Net gain on sales of investment securities 611 303 101.7% 10 6010.0%
Other-than-temporary impairment loss on investment securities -- -- 0.0% (176) -100.0%
Other operating income 410 242 69.4% 140 192.9%
Total non-interest income 7,326 8,150 -10.1% 6,520 12.4%
Non-Interest Expense:
Salaries and employee benefits 9,926 9,415 5.4% 9,148 8.5%
Occupancy and equipment 2,634 2,555 3.1% 2,623 0.4%
Deposit insurance premiums and regulatory assessments 308 517 -40.4% 283 8.8%
Data processing 1,158 1,142 1.4% 1,211 -4.4%
Other real estate owned expense (59) (20) 195.0% 352 -116.8%
Professional fees 907 2,365 -61.6% 1,112 -18.4%
Directors and officers liability insurance 219 219 0.0% 296 -26.0%
Supplies and communications 562 630 -10.8% 669 -16.0%
Advertising and promotion 1,140 1,005 13.4% 1,023 11.4%
Loan-related expense 91 91 0.0% 164 -44.5%
Amortization of other intangible assets 41 41 0.0% 41 0.0%
Other operating expenses 2,039 2,004 1.7% 1,882 8.3%
Total non-interest expense 18,966 19,964 -5.0% 18,804 0.9%
Income before provision for income taxes 16,834 15,340 9.7% 12,635 33.2%
Provision (benefit) for income taxes 6,584 5,821 13.1% (644) -1122.4%
Net income $ 10,250 $ 9,519 7.7% $ 13,279 -22.8%
Earnings per share:
Basic $ 0.32 $ 0.30 $ 0.42
Diluted $ 0.32 $ 0.30 $ 0.42
Weighted-average shares outstanding:
Basic 31,621,049 31,590,760 31,475,976
Diluted 31,733,004 31,655,988 31,545,111
Common shares outstanding 31,754,115 31,604,837 31,489,201
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Operations, Continued (Unaudited)
(In thousands, except per share data)
Nine Months Ended
September 30, September 30, Percentage
2013 2012 Change
Interest and Dividend Income:
Interest and fees on loans $ 83,736 $ 81,564 2.7%
Taxable interest on investment securities 6,256 6,280 -0.4%
Tax-exempt interest on investment securities 237 299 -20.7%
Interest on term federal funds sold -- 684 -100.0%
Interest on federal funds sold 6 53 -88.7%
Interest on interest-bearing deposits in other banks 140 269 -48.0%
Dividends on federal reserve bank stock 577 430 34.2%
Dividends on federal home loan bank stock 449 82 447.6%
Total Interest and Dividend Income 91,401 89,661 1.9%
Interest Expense:
Interest on deposits 9,376 12,511 -25.1%
Interest on federal home loan bank advances 115 126 -8.7%
Interest on junior subordinated debentures 678 2,400 -71.8%
Total interest expense 10,169 15,037 -32.4%
Net interest income before provision for credit losses 81,232 74,624 8.9%
Provision for credit losses -- 6,000 -100.0%
Net interest income after provision for credit losses 81,232 68,624 18.4%
Non-Interest Income:
Service charges on deposit accounts 8,662 8,955 -3.3%
Insurance commissions 3,904 3,622 7.8%
Trade finance & other service charges and fees 3,402 3,380 0.7%
Bank-owned life insurance income 693 872 -20.5%
Gain on sales of SBA loans guaranteed portion 6,064 7,245 -16.3%
Net loss on sales of other loans (557) (8,234) -93.2%
Net gain on sales of investment securities 923 1,392 -33.7%
Other-than-temporary impairment loss on investment securities -- (292) -100.0%
Other operating income 742 402 84.6%
Total non-interest income 23,833 17,342 37.4%
Non-Interest Expense:
Salaries and employee benefits 28,692 27,707 3.6%
Occupancy and equipment 7,745 7,839 -1.2%
Deposit insurance premiums and regulatory assessments 1,059 3,182 -66.7%
Data processing 3,470 3,762 -7.8%
Other real estate owned expense (47) 377 -112.5%
Professional fees 5,428 2,950 84.0%
Directors and officers liability insurance 658 888 -25.9%
Supplies and communications 1,687 1,803 -6.4%
Advertising and promotion 2,817 2,633 7.0%
Loan-related expense 328 452 -27.4%
Amortization of other intangible assets 123 157 -21.7%
Other operating expenses 6,137 5,563 10.3%
Total non-interest expense 58,097 57,313 1.4%
Income before provision for income taxes 46,968 28,653 63.9%
Provision (benefit) for income taxes 17,089 (47,742) -135.8%
Net income $ 29,879 $ 76,395 -60.9%
Earnings per share:
Basic $ 0.95 $ 2.43
Diluted $ 0.94 $ 2.42
Weighted-average shares outstanding:
Basic 31,583,897 31,474,042
Diluted 31,652,795 31,506,767
Common shares outstanding 31,754,115 31,489,201
Hanmi Financial Corporation and Subsidiaries
Selected Financial Data (Unaudited)
(In thousands)
As of or for the Three Months Ended
September 30, June 30, September 30,
2013 2013 2012
Average balances:
Average gross loans, net of deferred loan fees (1) $ 2,186,884 $ 2,165,741 $ 1,958,819
Average investment securities 385,961 423,562 386,513
Average interest-earning assets 2,644,844 2,657,629 2,694,571
Average total assets 2,789,741 2,793,505 2,829,778
Average deposits 2,374,847 2,365,887 2,361,534
Average borrowings 5,587 19,154 85,482
Average interest-bearing liabilities 1,630,637 1,663,951 1,766,709
Average stockholders' equity 395,274 393,741 352,980
Average tangible equity 394,035 392,461 351,577
Performance ratios:
Return on average assets (2) 1.46% 1.37% 1.87%
Return on average stockholders' equity (2) 10.29% 9.70% 14.97%
Return on average tangible equity (2) 10.32% 9.73% 15.03%
Efficiency ratio 52.98% 56.55% 59.81%
Net interest spread (2), (3) 3.98% 3.81% 3.34%
Net interest margin (2), (3) 4.28% 4.10% 3.69%
Allowance for loan losses:
Balance at beginning of period $ 59,876 $ 61,191 $ 71,893
Provision charged to operating expense (10) 308 117
Charge-offs, net of recoveries (2,227) (1,623) (5,903)
Balance at end of period $ 57,639 $ 59,876 $ 66,107
Asset quality ratios:
Net loan charge-offs to average gross loans (2) 0.41% 0.30% 1.21%
Allowance for loan losses to gross loans 2.67% 2.74% 3.38%
Allowance for loan losses to non-performing loans 253.07% 214.03% 147.92%
Non-performing assets to total assets 0.81% 1.04% 1.59%
Non-performing loans to gross loans 1.05% 1.28% 2.28%
Non-performing assets to allowance for loan losses 40.02% 48.22% 68.16%
Allowance for off-balance sheet items:
Balance at beginning of period $ 1,320 $ 1,628 $ 2,348
Provision charged to operating expense 10 (308) (117)
Balance at end of period $ 1,330 $ 1,320 $ 2,231
Non-performing assets:
Non-accrual loans $ 22,776 $ 27,975 $ 44,692
Loans 90 days or more past due and still accruing -- -- --
Non-performing loans 22,776 27,975 44,692
Other real estate owned, net 290 900 364
Non-performing assets 23,066 28,875 45,056
Non-performing loans in loans held for sale -- 2,553 4,421
Non-performing assets (including loans held for sale) $ 23,066 $ 31,428 $ 49,477
Delinquent loans (30 to 89 days past due and still accruing) $ 6,756 $ 2,565 $ 4,005
Delinquent loans to gross loans 0.31% 0.12% 0.20%
(1) Included loans held for sale
(2) Annualized
(3) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate
Hanmi Financial Corporation and Subsidiaries
Selected Financial Data, Continued (Unaudited)
(In thousands)
As of or for the Three Months Ended
September 30, June 30, September 30,
2013 2013 2012
Loan portfolio:
Real estate loans $ 887,576 $ 887,782 $ 736,287
Residential loans 82,519 88,654 103,774
Commercial and industrial loans 1,155,111 1,175,573 1,079,814
Consumer loans 34,065 35,380 38,415
Gross loans 2,159,271 2,187,389 1,958,290
Deferred loan fees 989 695 630
Gross loans, net of deferred loan fees 2,160,260 2,188,084 1,958,920
Allowance for loan losses (57,639) (59,876) (66,107)
Loans receivable, net 2,102,621 2,128,208 1,892,813
Loans held for sale, at the lower of cost or fair value 5,228 2,553 10,736
Total loans receivable, net $ 2,107,849 $ 2,130,761 $ 1,903,549
Loan mix:
Real estate loans 41.1% 40.6% 37.6%
Residential loans 3.8% 4.1% 5.3%
Commercial and industrial loans 53.5% 53.7% 55.1%
Consumer loans 1.6% 1.6% 2.0%
Total loans 100.0% 100.0% 100.0%
Deposit portfolio:
Demand-noninterest-bearing $ 778,345 $ 736,470 $ 694,345
Savings 113,892 115,318 111,654
Money market checking and NOW accounts 539,130 575,471 563,785
Time deposits of $100,000 or more 493,532 564,079 635,802
Other time deposits 504,808 370,575 357,799
Total deposits $ 2,429,707 $ 2,361,913 $ 2,363,385
Deposit mix:
Demand-noninterest-bearing 32.0% 31.1% 29.4%
Savings 4.7% 4.9% 4.7%
Money market checking and NOW accounts 22.2% 24.4% 23.9%
Time deposits of $100,000 or more 20.3% 23.9% 26.9%
Other time deposits 20.8% 15.7% 15.1%
Total deposits 100.0% 100.0% 100.0%
Capital ratios:
Hanmi Financial
Total risk-based capital ratio 17.73% 16.50% 20.79%
Tier 1 risk-based capital ratio 16.47% 15.23% 19.52%
Tier 1 leverage capital ratio 13.68% 12.90% 14.71%
Tangible equity to tangible assets ratio 13.95% 14.22% 12.77%
Hanmi Bank
Total risk-based capital ratio 17.10% 16.53% 19.91%
Tier 1 risk-based capital ratio 15.83% 25.26% 18.63%
Tier 1 leverage capital ratio 13.15% 12.88% 14.05%
Tangible equity to tangible assets ratio 13.38% 13.66% 14.96%
Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned and Average Rate Paid (Unaudited)
(In thousands)
Three Months Ended
September 30, 2013 June 30, 2013 September 30, 2012
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 fees $ 2,186,884 $ 29,098 5.28% $ 2,165,741 $ 27,839 5.16% $ 1,958,819 $ 26,781 5.44%
Municipal securities-taxable 43,259 442 4.09% 46,102 454 3.94% 44,887 452 4.03%
Municipal securities-tax exempt 10,088 106 4.21% 10,707 112 4.20% 12,587 151 4.79%
Obligations of other U.S. government agencies 94,350 455 1.93% 93,432 432 1.85% 74,345 280 1.51%
Other debt securities 238,264 1,143 1.92% 273,321 1,214 1.78% 254,694 1,260 1.98%
Equity securities 28,058 392 5.59% 28,729 343 4.78% 30,886 178 2.31%
Federal funds sold -- -- 0.00% 341 -- 0.00% 17,925 20 0.44%
Term federal funds sold -- -- 0.00% -- -- 0.00% 78,967 191 0.96%
Interest-bearing deposits in other banks 43,941 28 0.25% 39,256 24 0.25% 221,461 142 0.26%
Total interest-earning assets 2,644,844 31,664 4.75% 2,657,629 30,418 4.59% 2,694,571 29,455 4.35%
Noninterest-earning assets:
Cash and cash equivalents 66,808 66,643 70,591
Allowance for loan losses (58,991) (61,026) (71,481)
Other assets 137,080 130,259 136,097
Total noninterest-earning assets 144,897 135,876 135,207
Total assets $ 2,789,741 $ 2,793,505 $ 2,829,778
Liabilities and Stockholders' Equity ��
Interest-bearing liabilities:
Deposits:
Savings $ 115,058 $ 454 1.57% $ 115,685 $ 466 1.62% $ 111,432 $ 516 1.84%
Money market checking and NOW accounts 546,413 691 0.50% 591,317 769 0.52% 555,454 859 0.62%
Time deposits of $100,000 or more 522,664 942 0.72% 565,927 1,057 0.75% 660,036 1,467 0.88%
Other time deposits 440,915 1,030 0.93% 371,868 808 0.87% 354,305 797 0.89%
FHLB advances 5,587 36 2.56% 9,188 41 1.79% 3,076 40 5.17%
Junior subordinated debentures -- -- 0.00% 9,966 84 3.38% 82,406 804 3.88%
Total interest-bearing liabilities 1,630,637 3,153 0.77% 1,663,951 3,225 0.78% 1,766,709 4,483 1.01%
Noninterest-bearing liabilities:
Demand deposits 749,797 721,090 680,307
Other liabilities 14,033 14,723 29,782
Total noninterest-bearing liabilities 763,830 735,813 710,089
Total liabilities 2,394,467 2,399,764 2,476,798
Stockholders' equity 395,274 393,741 352,980
Total liabilities and stockholders' equity $ 2,789,741 $ 2,793,505 $ 2,829,778
Net interest income $ 28,511 $ 27,193 $ 24,972
Cost of deposits 0.52% 0.53% 0.61%
Net interest spread 3.98% 3.81% 3.34%
Net interest margin 4.28% 4.10% 3.69%
Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned and Average Rate Paid (Unaudited)
(In thousands)
Nine Months Ended
September 30, 2013 September 30, 2012
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 fees $ 2,142,462 $ 83,736 5.23% $ 1,982,369 $ 81,564 5.50%
Municipal securities-taxable 45,141 1,350 3.99% 44,881 1,340 3.98%
Municipal securities-tax exempt 11,188 365 4.35% 12,959 460 4.73%
Obligations of other U.S. government agencies 92,262 1,309 1.89% 75,058 985 1.75%
Other debt securities 268,699 3,597 1.78% 276,646 3,955 1.91%
Equity securities 29,032 1,026 4.71% 31,486 512 2.17%
Federal funds sold 2,079 6 0.39% 16,545 53 0.43%
Term federal funds sold -- -- 0.00% 91,898 684 0.99%
Interest-bearing deposits in other banks 74,224 140 0.25% 139,458 269 0.26%
Total interest-earning assets 2,665,087 91,529 4.59% 2,671,300 89,822 4.49%
Noninterest-earning assets:
Cash and cash equivalents 66,542 70,303
Allowance for loan losses (60,872) (79,502)
Other assets 133,467 103,207
Total noninterest-earning assets 139,137 94,008
Total assets $ 2,804,224 $ 2,765,308
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Savings $ 114,978 $ 1,377 1.60% $ 109,605 $ 1,675 2.04%
Money market checking and NOW accounts 568,490 2,180 0.51% 512,086 2,313 0.60%
Time deposits of $100,000 or more 560,999 3,174 0.76% 700,443 5,978 1.14%
Other time deposits 394,784 2,645 0.90% 346,925 2,545 0.98%
FHLB advances 5,898 115 2.61% 3,478 126 4.84%
Junior subordinated debentures 28,410 678 3.19% 82,406 2,400 3.89%
Total interest-bearing liabilities 1,673,559 10,169 0.81% 1,754,943 15,037 1.14%
Noninterest-bearing liabilities:
Demand deposits 724,021 666,712
Other liabilities 15,944 29,837
Total noninterest-bearing liabilities 739,965 696,549
Total liabilities 2,413,524 2,451,492
Stockholders' equity 390,700 313,816
Total liabilities and stockholders' equity $ 2,804,224 $ 2,765,308
Net interest income $ 81,360 $ 74,785
Cost of deposits 0.53% 0.72%
Net interest spread 3.78% 3.35%
Net interest margin 4.08% 3.74%

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 Financial's capital strength. Tangible equity is calculated by subtracting goodwill and other intangible assets from total stockholders' equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from total 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 Financial. 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)
September 30, June 30, September 30,
Hanmi Financial Corporation 2013 2013 2012
Total assets $ 2,845,137 $ 2,773,414 $ 2,841,857
Less other intangible assets (1,212) (1,253) (1,376)
Tangible assets $ 2,843,925 $ 2,772,161 $ 2,840,481
Total stockholders' equity $ 397,956 $ 395,396 $ 363,987
Less other intangible assets (1,212) (1,253) (1,376)
Tangible stockholders' equity $ 396,744 $ 394,143 $ 362,611
Total stockholders' equity to total assets 13.99% 14.26% 12.81%
Tangible common equity to tangible assets 13.95% 14.22% 12.77%
Common shares outstanding 31,754,115 31,604,837 31,489,201
Tangible common equity per common share $ 12.49 $ 12.47 $ 11.52

CONTACT: Hanmi Financial Corporation Shick (Mark) Yoon, CFA CPA CVA EVP & Chief Financial Officer 213-427-5636 Investor Relations The Cereghino Group Becky Reid 206-388-5788 www.stockvalues.comSource:Hanmi Bank