×

Hanmi Earnings Grow 10.1% to $11.0 Million, or $0.35 per Share, in 1Q14 from 4Q13

LOS ANGELES, April 22, 2014 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (Nasdaq:HAFC), the holding company for Hanmi Bank (the "Bank"), today reported that first quarter 2014 net income increased 10.1% to $11.0 million, or $0.35 per diluted share, which includes a negative loan loss provision of $3.3 million. In the fourth quarter of 2013, Hanmi earned $10.0 million, or $0.31 per diluted share, and in the first quarter of 2013, Hanmi earned $10.1 million, or $0.32 per diluted share. Pre-tax pre-provision net income grew 2.4% in the first quarter of 2014 to $15.4 million from $15.0 million in the preceding quarter, and was up 4.0% from $14.8 million a year ago.

"Our first quarter profits were fueled by strong net interest margin, solid loan and core deposit growth," said C. G. Kum, President and Chief Executive Officer. "With higher loan recoveries, we recorded a $3.3 million negative provision for loan losses in the first quarter. Even with this negative provision, our allowance for loan losses remains strong at 2.49% of gross loans."

First Quarter Results
(In thousands, except per share data)
As of or for the Three Months Ended
March 31, December 31, March 31,
2014 2013 2013
Net income $ 11,035 $ 10,027 $ 10,110
Net income per diluted common share $ 0.35 $ 0.31 $ 0.32
Assets $ 3,096,613 $ 3,055,539 $ 2,792,423
Loans receivable, net $ 2,221,520 $ 2,177,498 $ 2,061,156
Deposits $ 2,506,580 $ 2,512,325 $ 2,333,012
Return on average assets 1.50% 1.37% 1.45%
Return on average stockholders' equity 11.02% 9.88% 10.71%
Net interest margin 4.02% 3.98% 3.86%
Efficiency ratio 56.27% 57.29% 56.44%
Tangible common equity to tangible assets 13.36% 13.10% 13.89%
Tangible common equity per common share $ 13.01 $ 12.60 $ 12.28

Financial Highlights (at or for the period ended March 31, 2014, compared to December 31, 2013, or March 31, 2013)

  • Gross loans increased 7.3% to $2.28 billion, from $2.12 billion a year ago, and increased 1.9% from $2.23 billion at December 31, 2013.
  • Deposits grew 7.4% from a year ago, with non-interest bearing deposits up 16.6% and representing 33.0% of total deposits.
  • The mix of core deposits increased to 81.0% of total deposits compared to 76.1% of total deposits a year ago.
  • Higher recoveries generated a $3.3 million negative provision for loan losses in the first quarter of 2014.
  • Gain on sales of investment securities contributed $1.4 million to first quarter revenues.
  • First quarter net income increased 10.1% to $11.0 million, or $0.35 per diluted share, compared to $10.0 million, or $0.31 per diluted share, in the fourth quarter of 2013 and grew 9.1% from $10.1 million, or $0.32 per diluted share, a year ago.
  • Net interest margin (NIM) was 4.02% for the first quarter of 2014, an improvement of 4 basis points from the fourth quarter of 2013 and 16 basis points from a year ago.
  • A cash dividend of $0.07 per share, representing a 20% payout ratio for the quarter, was paid on April 18, 2014.

Acquisition of Central Bancorp, Inc.

On December 16, 2013, Hanmi announced the signing of a definitive agreement to acquire Central Bancorp, Inc. ("CBI"), the parent company of Texas-based United Central Bank which had $1.4 billion in assets as of December 31, 2013. The acquisition price is $50 million in cash, subject to potential purchase price adjustments. On March 23, 2014, the definitive agreement was amended and restated to clarify the tax refund adjustment process and to address timing and collectability of funds. On April 17, 2014, shareholders of CBI overwhelmingly approved the merger with Hanmi. The transaction, which is expected to close in the second half of 2014, remains subject to regulatory approvals and other customary closing conditions. Following the anticipated close of the transaction, on a pro forma basis, the combined entity would have approximately $4.3 billion in assets, $2.8 billion in gross loans and $3.8 billion in deposits, with 50 banking offices and 2 loan production offices serving a broad range of communities in California, Texas, Illinois, New York, New Jersey, and Virginia.

Results of Operations

First quarter net interest income, before provision for credit losses, was $28.0 million, up 1.3%, from $27.6 million for the fourth quarter of 2013, and up 9.2% from $25.6 million for the first quarter of 2013. Interest and dividend income increased 1.0% from the preceding quarter and 6.2% from the first quarter a year ago, while interest expense decreased 2.1% from the preceding quarter and 13.8% from the year ago quarter.

Net interest margin improved 4 basis points to 4.02% for the first quarter of 2014 from the fourth quarter of 2013, and grew 16 basis points from a year ago. The increase in net interest margin mainly reflects the increase in higher yielding assets and lower overall cost of funds. In addition, the elimination of interest payments on trust preferred securities improved the margin year-over-year. The following table details the asset yields, liability costs, spread and margin.

Three Months Ended
March 31, December 31, March 31,
2014 2013 2013
Interest-earning assets 4.49% 4.46% 4.43%
Interest-bearing liabilities 0.75% 0.78% 0.89%
Net interest spread 3.74% 3.68% 3.54%
Net interest margin 4.02% 3.98% 3.86%

In the first quarter of 2014, net interest income after provision for credit losses increased 13.3% to $31.3 million, compared to $27.6 million in the fourth quarter of 2013, and grew 22.1% from $25.6 million in the first quarter a year ago. The first quarter 2014 increase reflects the $3.3 million negative loan loss provision.

Non-interest income was $7.2 million in the first quarter of 2014, compared to $7.6 million in the preceding quarter and $8.4 million in the year ago quarter. In the first quarter of 2014, gain on sales of the guaranteed portion of SBA loans was down to $547,000 from $1.9 million in the preceding quarter and $2.7 million in the first quarter a year ago, reflecting the reforms currently being made in the SBA lending department. "Recently, we hired Anna Chung, one of the nation's leading SBA lenders, to build a strong SBA lending operation for Hanmi," said Kum. Net gain on sales of investment securities contributed $1.4 million to first quarter non-interest income, compared to $116,000 in the preceding quarter and $9,000 a year ago.

Non-interest expense decreased 1.8% to $19.8 million in the first quarter of 2014, compared to $20.2 million in the fourth quarter of 2013, and was up 3.3% from $19.2 million in the first quarter a year ago. Professional fees decreased in the first quarter reflecting lower costs associated with the merger process, strategic reviews, and consulting and litigation costs. Salary and employee benefits costs increased in the first quarter compared to both the preceding quarter and the first quarter of 2013 primarily reflecting normal compensation escalation, higher employee benefit costs, and addition of new personnel.

The efficiency ratio improved to 56.27% in the first quarter of 2014, compared to 57.29% in the preceding quarter and 56.44% in the first quarter a year ago.

The first quarter provision for income taxes increased to $7.7 million, which is an effective tax rate of 40.95%, compared to $5.0 million or 33.26% in the fourth quarter of 2013 and $4.7 million or 31.66% in the first quarter a year ago. For the full year in 2013, the effective tax rate was 35.63%. The increase in the effective tax rate is due mainly to the expiration of the California EZ net interest deduction and EZ hiring credits.

Balance Sheet

Assets increased 10.9% to $3.10 billion at March 31, 2014, from $2.79 billion a year ago. The investment portfolio decreased to $521.0 million as of March 31, 2014, from $530.9 million as of December 31, 2013, representing a 1.9% decrease from the prior quarter.

Loans receivable, net of allowance for loan losses, increased 2.0% in the quarter and 7.8% year-over-year to $2.22 billion at March 31, 2014, from $2.18 billion at December 31, 2013, and $2.06 billion a year ago. Average gross loans, net of deferred loan costs, increased to $2.26 billion for the first quarter of 2014, up from $2.20 billion for the preceding quarter and $2.07 billion for the first quarter a year ago.

First quarter new loans totaled $159.9 million, consisting mainly of $79.7 million of commercial real estate loans, $36.9 million of C&I loans, $34.2 million of purchased residential mortgages, and $8.4 million of SBA loans. Loan commitments were $178.6 million in the first quarter of 2014, which included loans approved but not funded.

Average deposits were $2.50 billion during the first quarter, up from $2.47 billion for the preceding quarter and $2.35 billion for the first quarter of 2013. The overall mix of funding continued to improve with core deposits increasing. The period-end deposit mix is detailed in the table below.

March 31, December 31, March 31,
2014 2013 2013
Demand-noninterest-bearing 33.0% 32.5% 30.5%
Savings 4.7% 4.6% 4.9%
Money market checking and NOW accounts 23.9% 22.9% 24.8%
Time deposits of $100,000 or more 19.0% 20.2% 23.9%
Other time deposits 19.4% 19.8% 15.9%
Total deposits 100.0% 100.0% 100.0%

At March 31, 2014, stockholders' equity was $414.7 million. Tangible common stockholders' equity was $413.6 million, or 13.36% of tangible assets, compared to $387.8 million, or 13.89% of tangible assets, a year ago. Tangible book value per share was $13.01, compared to $12.60 three months earlier and $12.28 at March 31, 2013. On April 18, 2014, Hanmi paid a cash dividend of $0.07 per share, representing an aggregate dividend of $2.2 million.

Asset Quality

Non-performing loans ("NPLs") were down 3.3% to $25.0 million at the end of the quarter, compared to $25.9 million at the end of 2013, and were down 23.9% year-over-year, reflecting the continuing improvement in the economy and active management of delinquent accounts. Troubled debt restructurings ("TDRs") totaled $24.9 million at March 31, 2014, and $30.0 million at December 31, 2013. Of these TDRs, $11.2 million were included in NPLs at March 31, 2014, compared to $10.5 million at the end of 2013. The following table shows NPLs in each category:

March 31, 2014 December 31, 2013 March 31, 2013
% of Total % of Total % of Total
Amount NPLs Amount NPLs Amount NPLs
(In thousands)
Real estate loans:
Commercial property
Retail $ 3,507 14.1% $ 2,946 11.4% $ 2,947 9.0%
Hotel/Motel 2,510 10.0% 5,200 20.1% 4,019 12.2%
Gas station 2,560 10.2% 2,492 9.6% 1,761 5.4%
Other 5,008 20.0% 4,808 18.6% 6,369 19.3%
Residential property 1,180 4.7% 1,365 5.3% 1,638 5.0%
Commercial & industrial loans:
Commercial term 8,092 32.3% 7,146 27.6% 12,999 39.5%
Commercial lines of credit 546 2.2% 423 1.6% 1,505 4.6%
Consumer loans 1,631 6.5% 1,497 5.8% 1,655 5.0%
Total non-performing loans $ 25,034 100.0% $ 25,877 100.0% $ 32,893 100.0%

Total classified loans declined 35.9% to $51.4 million, or 2.3% of gross loans, at March 31, 2014, from $80.3 million, or 3.6% of gross loans, at December 31, 2013, and were down 45.9% from $95.1 million, or 4.5% of gross loans, a year ago. The decline in classified loans reflects $20.3 million in loan upgrades and $8.8 million in repayments in the first quarter of 2014.

In the first quarter, recoveries of previously charged-off loans totaled $4.3 million compared to $572,000 in the preceding quarter and $714,000 in the first quarter of 2013. Gross charge-offs in the first quarter totaled $1.6 million compared to $738,000 in the preceding quarter and $3.0 million a year ago. As a result, there was a net recovery of $2.6 million in the first quarter of 2014, compared to net charge-offs of $166,000 in the preceding quarter and net charge-offs of $2.3 million a year ago.

The allowance for loan losses totaled $56.6 million, which is a coverage ratio of 2.49% of gross loans and 226.06% of NPLs as of March 31, 2014, compared to 2.88% of gross loans and 186.03% of NPLs as of March 31, 2013.

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 branch 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 shareholder 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, including our acquisition of Central Bancorp, Inc., 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; ability of the parties to obtain required regulatory approvals and satisfy other closing conditions with respect to our acquisition of Central Bancorp, Inc.; 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.

Hanmi Financial Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(In thousands)
March 31, December 31, Percentage March 31, Percentage
2014 2013 Change 2013 Change
Assets
Cash and cash equivalents $ 204,384 $ 179,357 14.0% $ 145,299 40.7%
Securities available for sale, at fair value 520,990 530,926 -1.9% 419,903 24.1%
Loans held for sale, at the lower of cost or fair value 390 -- -- 6,043 -93.5%
Loans receivable, net of allowance for loan losses 2,221,520 2,177,498 2.0% 2,061,156 7.8%
Accrued interest receivable 7,107 7,055 0.7% 7,526 -5.6%
Premises and equipment, net 13,947 14,221 -1.9% 14,792 -5.7%
Other real estate owned, net -- 756 -100.0% 900 -100.0%
Customers' liability on acceptances 1,985 2,018 -1.6% 2,170 -8.5%
Servicing assets 6,559 6,833 -4.0% 6,004 9.2%
Other intangible assets, net 1,130 1,171 -3.5% 1,294 -12.7%
Investment in federal home loan bank stock, at cost 14,060 14,060 0.0% 16,014 -12.2%
Investment in federal reserve bank stock, at cost 11,196 11,196 0.0% 12,222 -8.4%
Income tax asset 52,878 63,536 -16.8% 57,084 -7.4%
Bank-owned life insurance 29,922 29,699 0.8% 29,284 2.2%
Prepaid expenses 2,262 1,415 59.9% 2,676 -15.5%
Other assets 8,283 15,798 -47.6% 10,056 -17.6%
Total assets $ 3,096,613 $ 3,055,539 1.3% $ 2,792,423 10.9%
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 827,153 $ 819,015 1.0% $ 709,650 16.6%
Interest-bearing 1,679,427 1,693,310 -0.8% 1,623,362 3.5%
Total deposits 2,506,580 2,512,325 -0.2% 2,333,012 7.4%
Accrued interest payable 3,319 3,366 -1.4% 3,192 4.0%
Bank's liability on acceptances 1,985 2,018 -1.6% 2,170 -8.5%
Federal home loan bank advances 132,445 127,546 3.8% 2,840 4563.6%
Junior subordinated debentures -- -- -- 51,478 -100.0%
Accrued expenses and other liabilities 37,569 9,047 315.3% 10,626 253.6%
Total liabilities 2,681,898 2,654,302 1.0% 2,403,318 11.6%
Stockholders' equity:
Common stock 257 257 0.0% 257 0.0%
Additional paid-in capital 553,067 552,270 0.1% 551,064 0.4%
Accumulated other comprehensive (loss) income (5,509) (9,380) -41.3% 5,051 -209.1%
Accumulated deficit (63,242) (72,052) -12.2% (97,409) -35.1%
Less treasury stock (69,858) (69,858) 0.0% (69,858) 0.0%
Total stockholders' equity 414,715 401,237 3.4% 389,105 6.6%
Total liabilities and stockholders' equity $ 3,096,613 $ 3,055,539 1.3% $ 2,792,423 10.9%
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In thousands, except share and per share data)
Three Months Ended
March 31, December 31, Percentage March 31, Percentage
2014 2013 Change 2013 Change
Interest and Dividend Income:
Interest and fees on loans $ 28,190 $ 28,256 -0.2% $ 26,799 5.2%
Taxable interest on investment securities 2,537 2,178 16.5% 2,116 19.9%
Tax-exempt interest on investment securities 76 46 65.2% 95 -20.0%
Interest on federal funds sold -- -- -- 6 -100.0%
Interest on interest-bearing deposits in other banks 21 69 -69.6% 88 -76.1%
Dividends on federal reserve bank stock 168 177 -5.1% 183 -8.2%
Dividends on federal home loan bank stock 236 201 17.4% 108 118.5%
Total interest and dividend income 31,228 30,927 1.0% 29,395 6.2%
Interest Expense:
Interest on deposits 3,221 3,302 -2.5% 3,159 2.0%
Interest on federal home loan bank advances 48 36 33.3% 38 26.3%
Interest on junior subordinated debentures -- -- -- 594 -100.0%
Total interest expense 3,269 3,338 -2.1% 3,791 -13.8%
Net interest income before provision for credit losses 27,959 27,589 1.3% 25,604 9.2%
Negative provision for credit losses (3,300) -- -- -- --
Net interest income after provision for credit losses 31,259 27,589 13.3% 25,604 22.1%
Non-Interest Income:
Service charges on deposit accounts 2,474 2,645 -6.5% 3,048 -18.8%
Insurance commissions 1,406 1,343 4.7% 1,213 15.9%
Trade finance & other service charges and fees 1,021 1,073 -4.8% 1,172 -12.9%
Bank-owned life insurance income 223 232 -3.9% 230 -3.0%
Gain on sales of SBA loans guaranteed portion 547 1,936 -71.7% 2,692 -79.7%
Net loss on sales of other loans -- -- -- (97) -100.0%
Net gain on sales of investment securities 1,421 116 1125.0% 9 0.0%
Other operating income 134 239 -43.9% 90 48.9%
Total non-interest income 7,226 7,584 -4.7% 8,357 -13.5%
Non-Interest Expense:
Salaries and employee benefits 11,241 9,936 13.1% 9,351 20.2%
Occupancy and equipment 2,477 2,564 -3.4% 2,556 -3.1%
Deposit insurance premiums and regulatory assessments 437 376 16.2% 234 86.8%
Data processing 1,172 1,157 1.3% 1,170 0.2%
Other real estate owned expense 6 (12) -150.0% 32 -81.3%
Professional fees 843 1,975 -57.3% 2,156 -60.9%
Directors and officers liability insurance 191 221 -13.6% 220 -13.2%
Supplies and communications 527 600 -12.2% 495 6.5%
Advertising and promotion 731 1,264 -42.2% 672 8.8%
Loan-related expense 83 68 22.1% 146 -43.2%
Amortization of other intangible assets 41 41 0.0% 41 0.0%
Other operating expenses 2,048 1,960 4.5% 2,094 -2.2%
Total non-interest expense 19,797 20,150 -1.8% 19,167 3.3%
Income before provision for income taxes 18,688 15,023 24.4% 14,794 26.3%
Provision for income taxes 7,653 4,996 53.2% 4,684 63.4%
Net income $ 11,035 $ 10,027 10.1% $ 10,110 9.1%
Earnings per share:
Basic $ 0.35 $ 0.32 $ 0.32
Diluted $ 0.35 $ 0.31 $ 0.32
Weighted-average shares outstanding:
Basic 31,659,705 31,643,463 31,538,980
Diluted 31,934,163 31,864,845 31,626,667
Common shares outstanding 31,795,108 31,761,550 31,588,767
Hanmi Financial Corporation and Subsidiaries
Selected Financial Data (Unaudited)
(In thousands)
As of or for the Three Months Ended
March 31, December 31, March 31,
2014 2013 2013
Average balances:
Average gross loans, net of deferred loan costs (1) $ 2,257,162 $ 2,198,654 $ 2,073,514
Average investment securities 535,356 447,272 473,409
Average interest-earning assets 2,825,669 2,755,182 2,693,424
Average assets 2,979,094 2,901,097 2,829,927
Average deposits 2,500,300 2,474,262 2,348,799
Average borrowings 56,886 8,606 79,110
Average interest-bearing liabilities 1,757,159 1,693,689 1,727,272
Average stockholders' equity 406,280 402,738 383,003
Average tangible equity 405,123 401,540 381,682
Performance ratios:
Return on average assets (2) 1.50% 1.37% 1.45%
Return on average stockholders' equity (2) 11.02% 9.88% 10.71%
Return on average tangible equity (2) 11.05% 9.91% 10.74%
Efficiency ratio 56.27% 57.29% 56.44%
Net interest spread (2), (3) 3.74% 3.68% 3.54%
Net interest margin (2), (3) 4.02% 3.98% 3.86%
Allowance for loan losses:
Balance at beginning of period $ 57,555 $ 57,639 $ 63,305
(Negative provision) provision charged to operating expense (3,609) 82 196
Net recoveries (charge-offs) 2,647 (166) (2,310)
Balance at end of period $ 56,593 $ 57,555 $ 61,191
Asset quality ratios:
Net loan (recoveries) charge-offs to average gross loans (2) -0.47% 0.03% 0.45%
Allowance for loan losses to gross loans 2.49% 2.58% 2.88%
Allowance for loan losses to non-performing loans 226.06% 222.42% 186.03%
Non-performing assets to assets 0.81% 0.87% 1.21%
Non-performing loans to gross loans 1.10% 1.16% 1.55%
Non-performing assets to allowance for loan losses 44.24% 46.27% 55.23%
Allowance for off-balance sheet items:
Balance at beginning of period $ 1,248 $ 1,330 $ 1,824
Provision (negative provision) charged to operating expense 309 (82) (196)
Balance at end of period $ 1,557 $ 1,248 $ 1,628
Non-performing assets:
Non-accrual loans $ 25,034 $ 25,877 $ 32,893
Loans 90 days or more past due and still accruing -- -- --
Non-performing loans 25,034 25,877 32,893
Other real estate owned, net -- 756 900
Non-performing assets 25,034 26,633 33,793
Non-performing loans in loans held for sale -- -- 2,306
Non-performing assets (including loans held for sale) $ 25,034 $ 26,633 $ 36,099
Delinquent loans (30 to 89 days past due and still accruing) $ 5,290 $ 4,068 $ 6,440
Delinquent loans to gross loans 0.23% 0.18% 0.30%
(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
March 31, December 31, March 31,
2014 2013 2013
Loan portfolio:
Real estate loans $ 1,917,609 $ 1,890,720 $ 1,787,710
Residential loans 110,305 79,078 94,735
Commercial and industrial loans 219,102 231,786 204,061
Consumer loans 29,356 32,505 35,180
Gross loans 2,276,372 2,234,089 2,121,686
Deferred loan costs 1,741 964 661
Gross loans, net of deferred loan costs 2,278,113 2,235,053 2,122,347
Allowance for loan losses (56,593) (57,555) (61,191)
Loans receivable, net 2,221,520 2,177,498 2,061,156
Loans held for sale, at the lower of cost or fair value 390 -- 6,043
Total loans receivable, net $ 2,221,910 $ 2,177,498 $ 2,067,199
Loan mix:
Real estate loans 84.3% 84.6% 84.2%
Residential loans 4.8% 3.5% 4.5%
Commercial and industrial loans 9.6% 10.4% 9.6%
Consumer loans 1.3% 1.5% 1.7%
Total loans 100.0% 100.0% 100.0%
Deposit portfolio:
Demand-noninterest-bearing $ 827,153 $ 819,015 $ 709,650
Savings 118,017 115,371 115,186
Money market checking and NOW accounts 597,884 574,334 579,192
Time deposits of $100,000 or more 476,654 506,946 557,180
Other time deposits 486,872 496,659 371,804
Total deposits $ 2,506,580 $ 2,512,325 $ 2,333,012
Deposit mix:
Demand-noninterest-bearing 33.0% 32.5% 30.5%
Savings 4.7% 4.6% 4.9%
Money market checking and NOW accounts 23.9% 22.9% 24.8%
Time deposits of $100,000 or more 19.0% 20.2% 23.9%
Other time deposits 19.4% 19.8% 15.9%
Total deposits 100.0% 100.0% 100.0%
Capital ratios:
Hanmi Financial
Total risk-based capital ratio 17.98% 17.53% 19.45%
Tier 1 risk-based capital ratio 16.72% 16.26% 18.17%
Tier 1 leverage capital ratio 13.79% 13.66% 14.68%
Tangible equity to tangible assets ratio 13.36% 13.10% 13.89%
Hanmi Bank
Total risk-based capital ratio 17.24% 16.84% 18.69%
Tier 1 risk-based capital ratio 15.97% 15.58% 17.42%
Tier 1 leverage capital ratio 13.19% 13.09% 14.07%
Tangible equity to tangible assets ratio 12.84% 12.58% 15.10%
Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned and Average Rate Paid (Unaudited)
(In thousands)
Three Months Ended
March 31, 2014 December 31, 2013 March 31, 2013
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 $ 2,257,162 $ 28,190 5.07% $ 2,198,654 $ 28,256 5.10% $ 2,073,514 $ 26,799 5.24%
Municipal securities-taxable 31,220 328 4.20% 34,214 357 4.17% 46,111 454 3.94%
Municipal securities-tax exempt 13,202 117 3.54% 7,035 71 4.02% 12,803 146 4.57%
Obligations of other U.S. government agencies 83,565 405 1.94% 87,079 424 1.95% 88,982 422 1.90%
Other debt securities 382,113 1,804 1.89% 292,860 1,397 1.91% 295,177 1,240 1.68%
Equity securities 25,256 404 6.40% 26,084 378 5.80% 30,336 291 3.84%
Federal funds sold 11 -- 0.00% -- -- 0.00% 5,963 6 0.41%
Interest-bearing deposits in other banks 33,140 21 0.26% 109,256 69 0.25% 140,538 88 0.25%
Total interest-earning assets 2,825,669 31,269 4.49% 2,755,182 30,952 4.46% 2,693,424 29,446 4.43%
Noninterest-earning assets:
Cash and cash equivalents 77,397 71,768 66,166
Allowance for loan losses (58,655) (57,884) (62,639)
Other assets 134,683 132,031 132,976
Total noninterest-earning assets 153,425 145,915 136,503
Total assets $ 2,979,094 $ 2,901,097 $ 2,829,927
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Savings $ 116,471 $ 403 1.40% $ 114,939 $ 435 1.50% $ 114,182 $ 458 1.63%
Money market checking and NOW accounts 591,593 767 0.53% 565,993 733 0.51% 567,977 720 0.51%
Time deposits of $100,000 or more 500,095 887 0.72% 503,822 920 0.72% 595,205 1,175 0.80%
Other time deposits 492,114 1,164 0.96% 500,329 1,214 0.96% 370,798 806 0.88%
FHLB advances 56,886 48 0.34% 8,575 36 1.67% 2,890 38 5.33%
Other Borrowings -- -- 0.00% 31 -- 0.00% -- -- 0.00%
Junior subordinated debentures -- -- 0.00% -- -- 0.00% 76,220 594 3.16%
Total interest-bearing liabilities 1,757,159 3,269 0.75% 1,693,689 3,338 0.78% 1,727,272 3,791 0.89%
Noninterest-bearing liabilities:
Demand deposits 800,027 789,179 700,637
Other liabilities 15,628 15,491 19,015
Total noninterest-bearing liabilities 815,655 804,670 719,652
Total liabilities 2,572,814 2,498,359 2,446,924
Stockholders' equity 406,280 402,738 383,003
Total liabilities and stockholders' equity $ 2,979,094 $ 2,901,097 $ 2,829,927
Net interest income $ 28,000 $ 27,614 $ 25,655
Cost of deposits 0.52% 0.53% 0.55%
Net interest spread 3.74% 3.68% 3.54%
Net interest margin 4.02% 3.98% 3.86%

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 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 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)
March 31, December 31, March 31,
Hanmi Financial Corporation 2014 2013 2013
Assets $ 3,096,613 $ 3,055,539 $ 2,792,423
Less other intangible assets (1,130) (1,171) (1,294)
Tangible assets $ 3,095,483 $ 3,054,368 $ 2,791,129
Stockholders' equity $ 414,715 $ 401,237 $ 389,105
Less other intangible assets (1,130) (1,171) (1,294)
Tangible stockholders' equity $ 413,585 $ 400,066 $ 387,811
Stockholders' equity to assets 13.39% 13.13% 13.93%
Tangible common equity to tangible assets 13.36% 13.10% 13.89%
Common shares outstanding 31,795,108 31,761,550 31,588,767
Tangible common equity per common share $ 13.01 $ 12.60 $ 12.28

CONTACT: Hanmi Financial Corporation Mark Yoon, CFA CPA CVA EVP & Chief Financial Officer 213-427-5636Source:Hanmi Bank