Hanmi Reports Strong 2015 First Quarter Results

LOS ANGELES, April 23, 2015 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (Nasdaq:HAFC) (or "Hanmi"), the holding company for Hanmi Bank (the "Bank"), today reported first quarter 2015 results. For the quarter, net income increased 86.5% to $11.1 million, or $0.35 per diluted share, compared to $5.9 million, or $0.19 per diluted share, in the fourth quarter 2014 and was up 0.6% from $11.0 million, or $0.34 per diluted share, in the year-ago period. In the first quarter 2015, pretax income from continuing operations grew 125.9% to $18.6 million from $8.2 million in the fourth quarter 2014 but was down 1.2% from $18.8 million in the year-ago period.

Mr. C. G. Kum, President and Chief Executive Officer, said, "We are off to a good start in 2015. First quarter net income of $11.1 million increased 86.5% from the prior quarter driven by a $5.4 million reduction in noninterest expense. We expect ongoing expense reduction initiatives currently underway will continue to improve our financial performance as we transform Hanmi into a nationwide community bank. To this end, we are making good progress integrating the acquisition of Central Bancorp, Inc. ("CBI") and building out our asset generating platform in the former CBI markets. In doing so, we have created a platform that will enable the Hanmi franchise to generate sustainable growth well into the future."

Quarterly Results
(In thousands, except per share data)
As of or for the Three Months Ended
March 31, December 31, March 31,
2015 2014 2014
Net income $ 11,054 $ 5,928 $ 10,991
Net income per diluted common share $ 0.35 $ 0.19 $ 0.34
Assets $ 4,083,887 $ 4,232,443 $ 3,095,758
Loans receivable, net $ 2,767,080 $ 2,735,832 $ 2,221,520
Deposits $ 3,552,717 $ 3,556,746 $ 2,506,580
Return on average assets (1) 1.07% 0.56% 1.49%
Pre-tax, pre-provision earnings on average assets (1) 1.61% 0.88% 2.11%
Return on average stockholders' equity (1) 9.75% 5.21% 10.98%
Net interest margin 3.92% 3.80% 3.90%
Net interest margin (excluding purchase accounting) 3.30% 3.24% 3.90%
Efficiency ratio 65.63% 80.03% 53.43%
Efficiency ratio (excluding merger and integration costs) 62.30% 73.39% 53.18%
Tangible common equity to tangible assets 11.40% 10.67% 13.33%
Tangible common equity per common share $ 14.58 $ 14.14 $ 12.97
(1) Amount calculated based on net income from continuing operations.

Financial Highlights (at or for the quarter ended March 31, 2015)

  • Net interest margin (NIM) improved to 3.92%, an increase of 12 basis points from the prior quarter.
  • Reduced noninterest expense by $5.4 million during the quarter, with the efficiency ratio improving to 65.63% from 80.03% in the prior quarter; the efficiency ratio excluding merger and integration costs in the first quarter was 62.30%.
  • Gross loans totaled $2.82 billion, up $31.3 million from the prior quarter; the increase is net of loan payoffs which included $24.6 million of performing loans with two borrowers that Hanmi requested to leave the Bank due to heightened risk profiles.
  • Noninterest-bearing deposits increased 4.1% to $1.06 billion representing 30.0% of total deposits.
  • A cash dividend of $0.11 per share was paid on April 14, 2015, an increase of 57.1% from the prior quarter.

Results of Operations

First quarter net interest income before provision for credit losses improved 0.8% to $37.7 million from $37.4 million in the preceding quarter and improved 39.0% from $27.1 million in the first quarter last year. Interest and dividend income increased 0.5% from the preceding quarter and increased 37.2% from the first quarter a year ago, while interest expense decreased 3.0% from the preceding quarter and increased 21.8% from the year ago quarter.

Net interest margin for the first quarter 2015 was 3.92% compared to 3.80% in the fourth quarter of 2014 and 3.90% in the year-ago period. The expansion of NIM in the first quarter of 2015 was due to an improved mix of interest earning assets favoring higher yielding loans and the impact of acquisition accounting.

The following table details the asset yields, liability costs, spread and margin.

Three Months Ended
March 31, December 31, March 31,
2015 2014 2014
Interest-earning assets 4.33% 4.21% 4.36%
Interest-bearing liabilities 0.61% 0.61% 0.75%
Net interest spread 3.72% 3.60% 3.61%
Net interest margin 3.92% 3.80% 3.90%

The impact of the CBI acquisition accounting adjustments on core loan yield, core deposit cost and NIM are summarized in the following tables.

Three Months Ended
March 31, December 31,
2015 2014
Core loan yield 4.74% 4.78%
Accretion of discount on purchased loans 0.61% 0.54%
As reported 5.35% 5.32%
Core deposit cost 0.62% 0.63%
Accretion of time deposits premium 0.19% 0.20%
As reported 0.43% 0.43%
Three Months Ended
March 31, 2015 December 31, 2014
Amount NIM Impact Amount NIM Impact
(In thousands)
NIM excluding purchase accounting $ 31,762 3.30% $ 31,891 3.24%
Accretion of discount on Non-PCI loans 3,511 0.36% 2,802 0.28%
Accretion of discount on PCI loans 843 0.09% 963 0.10%
Accretion of time deposits premium 1,606 0.17% 1,747 0.18%
Amortization of subordinated debentures discount (38) -- (36) --
Net impact 5,922 0.62% 5,476 0.56%
As reported $ 37,684 3.92% $ 37,367 3.80%

For the first quarter, net interest income, after provision for credit losses, increased 9.2% to $39.7 million compared to $36.3 million in the fourth quarter 2014 and was up 30.5% from $30.4 million in the first quarter last year. In the first quarter of 2015, Hanmi recorded a negative provision for loan losses of $2.0 million which was net of $414,000 of impairment reserves on PCI loans. In the preceding quarter, Hanmi recognized $1.0 million of provision for loan losses, which was comprised entirely of impairment reserves on PCI loans. In the year ago quarter, Hanmi recognized a negative provision for loan losses of $3.3 million.

Noninterest income increased 18.4% to $10.6 million for the first quarter 2015 compared to $9.0 million in the fourth quarter 2014 and increased 71.1% from $6.2 million in the preceding year. Service charges on deposit accounts were $3.2 million in the first quarter of 2015, compared to $3.4 million in the fourth quarter of 2014 and $2.5 million in the first quarter last year. Gains on sales of SBA loans were $1.7 million in the first quarter 2015, compared to $1.2 million in the fourth quarter 2014 and $547,000 in the year-ago period. Net gain on sales of investment securities were $2.2 million in the first quarter of 2015 compared to $159,000 in the fourth quarter of 2014 and $1.4 million in the first quarter last year. Disposition gains on PCI loans were $881,000 in the first quarter 2015, compared to $1.4 million in the prior quarter and no disposition gains in the period a year-ago.

Noninterest expense declined 14.5% to $31.7 million from $37.1 million in the preceding quarter but increased 78.1% from $17.8 million in the first quarter last year. Salary and employee benefits costs declined 2.4% to $16.4 million compared to $16.8 million in the fourth quarter 2014 but increased 59.7% from $10.3 million in the first quarter of 2014. Merger and integration costs declined to $1.6 million in the first quarter of 2015 from $3.1 million in the preceding quarter but were up from $85,000 in the first quarter last year. Professional fees decreased to $2.3 million in the first quarter of 2015 from $4.8 million in the preceding quarter but were up from $748,000 in the first quarter last year.

"While we made good progress reducing noninterest expense in the first quarter, we expect further improvements as the year progresses. We recently closed three unprofitable legacy CBI branches and streamlined our operations with staffing reductions that will result in further expense savings beginning in the second quarter. As the year progresses, we will continue to reduce costs and improve profitability," said Mr. Kum.

Hanmi recorded a provision for income taxes of $7.5 million in the first quarter of 2015, representing an effective tax rate of 40.5%, compared to $2.3 million, representing an effective tax rate of 28.0%, in the preceding quarter and $7.8 million, representing an effective rate of 41.7% in the first quarter 2014. The effective tax rate of 28.0% in the fourth quarter of 2014 was due to the resolution of certain tax matters.

Balance Sheet

Total assets were $4.08 billion at March 31, 2015, a 3.5% decrease from $4.23 billion at December 31, 2014 and a 31.9% increase from $3.10 billion a year ago. The year-over-year increase in total assets was primarily due to the acquisition of CBI. The investment portfolio was $858.1 million at March 31, 2015, compared to $1.06 billion as of December 31, 2014 and $521.0 million at March 31, 2014.

"During the quarter we sold $174.7 million of the securities portfolio and paid-off the $150.0 million of FHLB advances. This is in line with our previously stated strategy to convert the securities portfolio acquired from CBI into higher yielding loans and to lower funding costs," noted Mr. Kum.

Loans receivable, net of allowance for loan losses, were $2.77 billion at March 31, 2015, up 1.1% from $2.74 billion at December 31, 2014 and increased 24.6% from $2.22 billion at March 31, 2014. Loans held for sale at March 31, 2015 totaled $8.7 million, up from $5.5 million at the end of 2014 and $390,000 at March 31, 2014.

2015 first quarter new loan production (excluding loan purchases of $44.0 million) totaled $134.9 million. The composition of the first quarter production was $89.4 million of commercial real estate loans, $11.8 million of C&I loans, $32.8 million of SBA loans and $894,000 of consumer loans.

Deposits were $3.55 billion during the first quarter, compared to $3.56 billion for the preceding quarter and $2.51 billion for the first quarter of 2014. The cost of deposits was 0.43% in both the first quarter of 2015 and the fourth quarter of 2014, compared to 0.52% a year ago.

"We were successful in our ability to improve our deposit mix. During the first quarter, we achieved a 4.1% increase in noninterest-bearing deposits compared to the prior quarter. As a result, noninterest-bearing deposits comprise 30.0% of our total deposits as of the end of the first quarter, up from 28.8% of total deposits in the prior quarter. At the same time, we also saw a 1.8% decline in interest-bearing deposits due to the maturity of rate-sensitive CDs," Mr. Kum noted.

The period-end deposit mix is detailed in the table below.

March 31, December 31, March 31,
2015 2014 2014
Demand-noninterest-bearing 30.0% 28.8% 33.0%
Savings 3.3% 3.4% 4.7%
Money market checking and NOW accounts 22.7% 22.4% 23.9%
Time deposits of $100,000 or more 25.1% 25.6% 19.0%
Other time deposits 18.9% 19.8% 19.4%
Total deposits 100.0% 100.0% 100.0%

At March 31, 2015, stockholders' equity was $467.5 million, compared to $453.4 million and $413.5 million at December 31, 2014 and March 31, 2014, respectively. Tangible common stockholders' equity was $465.5 million, or 11.40% of tangible assets, compared to $451.3 million, or 10.67%, and $412.4 million, or 13.33%, of tangible assets, at December 31, 2014 and March 31, 2014, respectively. Tangible book value per share was $14.58, compared to $14.14 and $12.97 at December 31, 2014 and March 31, 2014, respectively. On April 14, 2015, Hanmi paid a cash dividend of $0.11 per share, an increase of 57.1% from the prior quarter, representing an aggregate dividend of $3.5 million.

On January 1, 2015, new regulatory capital rules went into effect. Although the new capital rules reduced our regulatory capital ratios, Hanmi and the Bank remained well capitalized at March 31, 2015.

Asset Quality

Nonperforming loans ("NPLs"), excluding PCI loans, were $29.3 million in the first quarter of 2015, or 1.04% of gross loans, compared to $25.3 million in the fourth quarter of 2014, or 0.91% of gross loans and $25.0 million, or 1.10% of total loans in the first quarter last year. Troubled debt restructurings ("TDRs") totaled $26.0 million at March 31, 2015, compared to $26.3 million at December 31, 2014 and $24.9 million at March 31, 2014. Of these TDRs, $14.6 million were included in NPLs at March 31, 2015, compared to $11.2 million in the same quarter last year.

Other-real-estate-owned ("OREO") totaled $12.1 million at the end of the first quarter of 2015, down from $15.8 million at the end of the prior quarter. Hanmi continues to make excellent progress in reducing OREO, which was primarily acquired as part of the CBI acquisition. Classified loans were $56.1 million, or 1.99% of gross loans, at March 31, 2015, compared to $47.4 million, or 1.70% of gross loans, at December 31, 2014 and $52.8 million, or 2.32%, a year ago. The increase in the first quarter is due primarily to two loans that matured in the first quarter that Hanmi expects to have fully paid off in 2015. Nonperforming assets ("NPAs") totaled $41.4 million at the end of the first quarter of 2015, or 1.01% of assets, compared to 0.97% of assets in the prior quarter and 0.81% of assets in the same quarter last year.

In the first quarter of 2015, recoveries of previously charged-off loans totaled $2.0 million compared to $1.7 million in the preceding quarter and $4.3 million in the first quarter of 2014. Gross charge-offs in the first quarter of 2015 totaled $86,000, compared to $1.4 million in the preceding quarter and $1.6 million a year ago. As a result, there were net recoveries of $2.0 million in the first quarter of 2015, compared to net recoveries of $282,000 in the preceding quarter and net recoveries of $2.6 million a year ago.

The allowance for loan losses totaled $53.0 million as of March 31, 2015, generating an allowance of loan losses to gross loans ratio of 1.88% as compared to 1.89% as of December 31, 2014 and 2.49% as of March 31, 2014.

Conference Call

Management will host a conference call today, April 23, 2015, at 1:00 p.m. PT (4:00 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 1-877-407-9039 before 1:00 p.m. PT, 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 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.

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, including, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014, 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
2015 2014 Change 2014 Change
Assets
Cash and cash equivalents $ 182,054 $ 158,320 15.0% $ 204,384 -10.9%
Securities available for sale, at fair value 858,064 1,060,717 -19.1% 520,990 64.7%
Loans held for sale, at the lower of cost or fair value 8,677 5,451 59.2% 390 2124.9%
Loans receivable, net of allowance for loan losses 2,767,080 2,735,832 1.1% 2,221,520 24.6%
Accrued interest receivable 9,238 9,749 -5.2% 7,107 30.0%
Premises and equipment, net 30,934 30,912 0.1% 13,947 121.8%
Other real estate owned ("OREO"), net 12,114 15,790 -23.3% -- --
Customers' liability on acceptances 2,598 1,847 40.7% 1,985 30.9%
Servicing assets 13,321 13,773 -3.3% 6,559 103.1%
Other intangible assets, net 1,985 2,080 -4.6% 1,130 75.7%
Investment in Federal Home Loan Bank ("FHLB") stock, at cost 17,581 17,580 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 86,478 84,371 2.5% 53,500 61.6%
Bank-owned life insurance 47,795 48,866 -2.2% 29,922 59.7%
Prepaid expenses 3,918 2,672 46.6% 2,262 73.2%
Other assets 29,777 32,210 -7.6% 6,806 337.5%
Total assets $ 4,083,887 $ 4,232,443 -3.5% $ 3,095,758 31.9%
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 1,064,736 $ 1,022,972 4.1% $ 827,153 28.7%
Interest-bearing 2,487,981 2,533,774 -1.8% 1,679,427 48.1%
Total deposits 3,552,717 3,556,746 -0.1% 2,506,580 41.7%
Accrued interest payable 3,497 3,450 1.4% 3,319 5.4%
Bank's liability on acceptances 2,598 1,847 40.7% 1,985 30.9%
FHLB advances -- 150,000 -100.0% 132,445 -100.0%
Servicing liabilities 5,529 5,971 -7.4% 30 --
FDIC loss sharing liability 543 2,074 -73.8% -- --
Rescinded stock obligation 150 933 -83.9% -- --
Subordinated debentures 18,582 18,544 0.2% -- --
Accrued expenses and other liabilities 32,801 39,491 -16.9% 37,888 -13.4%
Total liabilities 3,616,417 3,779,056 -4.3% 2,682,247 34.8%
Stockholders' equity:
Common stock 257 257 0.0% 257 0.0%
Additional paid-in capital 555,710 554,904 0.1% 553,067 0.5%
Accumulated other comprehensive income (loss) 6,199 463 1238.9% (5,509) -212.5%
Accumulated deficit (24,838) (32,379) -23.3% (64,446) -61.5%
Less treasury stock (69,858) (69,858) 0.0% (69,858) 0.0%
Total stockholders' equity 467,470 453,387 3.1% 413,511 13.0%
Total liabilities and stockholders' equity $ 4,083,887 $ 4,232,443 -3.5% $ 3,095,758 31.9%
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
2015 2014 Change 2014 Change
Interest and Dividend Income:
Interest and fees on loans $ 37,250 $ 36,457 2.2% $ 27,329 36.3%
Taxable interest on investment securities 3,854 4,453 -13.5% 2,537 51.9%
Tax-exempt interest on investment securities 20 20 0.0% 76 -73.7%
Interest on interest-bearing deposits in other banks 48 40 20.0% 21 128.6%
Dividends on FRB stock 184 185 -0.5% 168 9.5%
Dividends on FHLB stock 298 307 -2.9% 236 26.3%
Total interest and dividend income 41,654 41,462 0.5% 30,367 37.2%
Interest Expense:
Interest on deposits 3,780 3,909 -3.3% 3,221 17.4%
Interest on FHLB advances 56 35 60.0% 48 16.7%
Interest on subordinated debentures 145 162 -10.5% -- --
Total interest expense 3,981 4,106 -3.0% 3,269 21.8%
Net interest income before provision for credit losses 37,673 37,356 0.8% 27,098 39.0%
(Negative provision) provision for credit losses (1,985) 1,026 -293.5% (3,300) -39.8%
Net interest income after provision for credit losses 39,658 36,330 9.2% 30,398 30.5%
Noninterest Income:
Service charges on deposit accounts 3,211 3,449 -6.9% 2,474 29.8%
Trade finance and other service charges and fees 1,267 1,329 -4.7% 1,021 24.1%
Bank-owned life insurance income 253 198 27.8% 223 13.5%
Gain on sale of SBA loans 1,684 1,227 37.2% 547 207.9%
Net gain on sales of investment securities 2,184 159 1273.6% 1,421 53.7%
Disposition gains on PCI loans 881 1,432 -38.5% -- --
Other operating income 1,154 1,190 -3.0% 528 118.6%
Total noninterest income 10,634 8,984 18.4% 6,214 71.1%
Noninterest Expense:
Salaries and employee benefits 16,384 16,791 -2.4% 10,259 59.7%
Occupancy and equipment 4,303 4,331 -0.6% 2,396 79.6%
Merger and integration costs 1,611 3,074 -47.6% 85 1795.3%
Deposit insurance premiums and regulatory assessments 893 682 30.9% 437 104.3%
Data processing 2,132 2,333 -8.6% 1,158 84.1%
OREO expense 417 686 -39.2% 6 6850.0%
Professional fees 2,341 4,778 -51.0% 748 213.0%
Directors and officers liability insurance 176 121 45.5% 191 -7.9%
Supplies and communications 830 887 -6.4% 501 65.7%
Advertising and promotion 523 1,293 -59.6% 581 -10.0%
Loan-related expense 669 318 110.4% 83 706.0%
Amortization of other intangible assets 95 100 -5.0% -- --
Other operating expenses 1,330 1,691 -21.3% 1,354 -1.8%
Total noninterest expense 31,704 37,085 -14.5% 17,799 78.1%
Income from continuing operations before provision for income taxes 18,588 8,229 125.9% 18,813 -1.2%
Provision for income taxes 7,534 2,301 227.4% 7,844 -4.0%
Income from continuing operations, net of taxes $ 11,054 $ 5,928 86.5% $ 10,969 0.8%
Discontinued operations
Income from operations of discontinued subsidiaries $ -- $ -- -- $ 37 -100.0%
Income tax expense -- -- -- 15 -100.0%
Income from discontinued operations -- -- -- 22 -100.0%
Net income $ 11,054 $ 5,928 86.5% $ 10,991 0.6%
Basic earnings per share:
Income from continuing operations, net of taxes $ 0.35 $ 0.19 $ 0.35
Income from discontinued operations, net of taxes -- -- --
Basic earnings per share $ 0.35 $ 0.19 $ 0.35
Diluted earnings per share:
Income from continuing operations, net of taxes $ 0.35 $ 0.19 $ 0.34
Income from discontinued operations, net of taxes -- -- --
Diluted earnings per share $ 0.35 $ 0.19 $ 0.34
Weighted-average shares outstanding:
Basic 31,747,299 31,734,129 31,659,705
Diluted 32,026,723 32,021,391 31,934,163
Common shares outstanding 31,933,634 31,910,203 31,795,108
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,
2015 2014 2014
Average balances:
Average gross loans, net of deferred loan costs (1) $ 2,821,616 $ 2,719,692 $ 2,257,162
Average investment securities 1,001,707 1,112,606 535,356
Average interest-earning assets 3,901,818 3,905,646 2,825,669
Average assets 4,181,405 4,187,559 2,977,939
Average deposits 3,526,667 3,578,114 2,500,300
Average borrowings 146,773 110,418 56,886
Average interest-bearing liabilities 2,642,501 2,666,651 1,757,159
Average stockholders' equity 459,661 450,986 405,120
Average tangible equity 457,615 449,276 403,963
Performance ratios:
Return on average assets (2) (3) 1.07% 0.56% 1.49%
Pre-tax, pre-provision earnings on average assets (2) (3) 1.61% 0.88% 2.11%
Return on average stockholders' equity (2) (3) 9.75% 5.21% 10.98%
Return on average tangible equity (2) (3) 9.80% 5.23% 11.01%
Efficiency ratio 65.63% 80.03% 53.43%
Efficiency ratio (excluding merger and integration costs) 62.30% 73.39% 53.18%
Net interest spread (2) (4) 3.72% 3.60% 3.61%
Net interest spread (excluding purchase accounting) (2) (4) 3.03% 2.97% 3.61%
Net interest margin (2) (4) 3.92% 3.80% 3.90%
Net interest margin (excluding purchase accounting) (2) (4) 3.30% 3.24% 3.90%
Average stockholders' equity to average assets 10.99% 10.77% 13.60%
Allowance for loan losses:
Balance at beginning of period $ 52,666 $ 51,179 $ 57,555
(Negative provision) provision charged to operating expense (1,673) 1,204 (3,609)
Net recoveries 1,958 283 2,647
Balance at end of period $ 52,951 $ 52,666 $ 56,593
Asset quality ratios:
Nonperforming assets to assets (5) 1.01% 0.97% 0.81%
Nonperforming loans to gross loans (5) 1.04% 0.91% 1.10%
Nonperforming loans to allowance for loan losses (5) 55.25% 48.00% 44.24%
Net loan recoveries to average gross loans (2) -0.28% -0.04% -0.47%
Allowance for loan losses to gross loans 1.88% 1.89% 2.49%
Allowance for loan losses to nonperforming loans 180.98% 208.31% 226.06%
Allowance for off-balance sheet items:
Balance at beginning of period $ 1,366 $ 1,544 $ 1,248
(Negative provision) provision charged to operating expense (312) (178) 309
Balance at end of period $ 1,054 $ 1,366 $ 1,557
Nonperforming assets (5):
Nonaccrual loans $ 29,258 $ 25,282 $ 25,034
Loans 90 days or more past due and still accruing -- -- --
Nonperforming loans 29,258 25,282 25,034
Other real estate owned, net 12,114 15,790 --
Nonperforming assets 41,372 41,072 25,034
Nonperforming loans in loans held for sale -- -- --
Nonperforming assets $ 41,372 $ 41,072 $ 25,034
Delinquent loans, 30 to 89 days past due and still accruing $ 14,175 $ 9,515 $ 5,290
Delinquent loans to gross loans 0.50% 0.34% 0.23%
Hanmi Financial Corporation and Subsidiaries
Selected Financial Data, Continued (Unaudited)
(In thousands)
March 31, December 31, March 31,
2015 2014 2014
Loan portfolio:
Real estate loans $ 2,383,443 $ 2,373,212 $ 1,917,609
Residential loans 156,513 135,303 110,305
Commercial and industrial loans 250,613 249,189 219,102
Consumer loans 25,988 27,557 29,356
Gross loans 2,816,557 2,785,261 2,276,372
Deferred loan costs 3,474 3,237 1,741
Gross loans, net of deferred loan costs 2,820,031 2,788,498 2,278,113
Allowance for loan losses (52,951) (52,666) (56,593)
Loans receivable, net 2,767,080 2,735,832 2,221,520
Loans held for sale, at the lower of cost or fair value 8,677 5,451 390
Total loans receivable, net $ 2,775,757 $ 2,741,283 $ 2,221,910
Loan mix:
Real estate loans 84.6% 85.2% 84.3%
Residential loans 5.6% 4.9% 4.8%
Commercial and industrial loans 8.9% 8.9% 9.6%
Consumer loans 0.9% 1.0% 1.3%
Total loans 100.0% 100.0% 100.0%
Deposit portfolio:
Demand-noninterest-bearing $ 1,064,736 $ 1,022,972 $ 827,153
Savings 118,328 120,659 118,017
Money market checking and NOW accounts 807,965 796,490 597,884
Time deposits of $100,000 or more 890,362 910,340 476,654
Other time deposits 671,326 706,285 486,872
Total deposits $ 3,552,717 $ 3,556,746 $ 2,506,580
Deposit mix:
Demand-noninterest-bearing 30.0% 28.8% 33.0%
Savings 3.3% 3.4% 4.7%
Money market checking and NOW accounts 22.7% 22.4% 23.9%
Time deposits of $100,000 or more 25.1% 25.6% 19.0%
Other time deposits 18.9% 19.8% 19.4%
Total deposits 100.0% 100.0% 100.0%
Capital ratios:
Hanmi Financial
Total risk-based capital 15.60% 15.89% 17.96%
Tier 1 risk-based capital 14.30% 14.63% 16.70%
Common equity tier 1 captial 13.80% -- --
Tier 1 leverage capital ratio 10.50% 10.91% 13.77%
Hanmi Bank
Total risk-based capital 14.90% 15.18% 17.23%
Tier 1 risk-based capital 13.70% 13.93% 15.96%
Common equity tier 1 captial 13.70% -- --
Tier 1 leverage capital ratio 10.00% 10.39% 13.18%
(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
Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(In thousands)
Three Months Ended
March 31, 2015 December 31, 2014 March 31, 2014
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 $ 2,821,616 $ 37,250 5.35% $ 2,719,692 $ 36,457 5.32% $ 2,257,162 $ 27,329 4.91%
Municipal securities-taxable 16,906 163 3.86% 16,646 164 3.94% 31,220 328 4.20%
Municipal securities-tax exempt 4,339 31 2.84% 4,423 31 2.78% 13,202 117 3.54%
Obligations of other U.S. government agencies 85,703 404 1.89% 139,872 599 1.71% 83,565 405 1.94%
Other debt securities 864,492 3,287 1.52% 921,403 3,690 1.60% 382,113 1,804 1.89%
Equity securities 30,267 482 6.37% 30,262 492 6.50% 25,256 404 6.40%
Federal funds sold -- -- 0.00% -- -- 0.00% 11 -- 0.00%
Interest-bearing deposits in other banks 78,495 48 0.25% 73,348 40 0.22% 33,140 21 0.26%
Total interest-earning assets 3,901,818 41,665 4.33% 3,905,646 41,473 4.21% 2,825,669 30,408 4.36%
Noninterest-earning assets:
Cash and cash equivalents 86,313 87,410 77,397
Allowance for loan losses (53,319) (52,155) (58,655)
Other assets 246,593 246,658 133,528
Total noninterest-earning assets 279,587 281,913 152,270
Total assets $ 4,181,405 $ 4,187,559 $ 2,977,939
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Savings $ 120,254 $ 114 0.38% $ 120,332 $ 153 0.50% $ 116,471 $ 403 1.40%
Money market checking and NOW accounts 782,432 885 0.46% 800,490 884 0.44% 591,593 767 0.53%
Time deposits of $100,000 or more 900,144 1,608 0.72% 919,195 1,632 0.70% 500,095 887 0.72%
Other time deposits 692,898 1,173 0.69% 716,216 1,240 0.69% 492,114 1,164 0.96%
FHLB advances 127,778 56 0.18% 78,478 35 0.18% 56,886 48 0.34%
Rescinded stock obligation 438 -- 0.00% 13,426 -- 0.00% -- -- 0.00%
Subordinated debentures 18,557 145 3.17% 18,514 162 3.47% -- -- 0.00%
Total interest-bearing liabilities 2,642,501 3,981 0.61% 2,666,651 4,106 0.61% 1,757,159 3,269 0.75%
Noninterest-bearing liabilities:
Demand deposits 1,030,939 1,021,881 800,027
Other liabilities 48,304 48,041 15,633
Total noninterest-bearing liabilities 1,079,243 1,069,922 815,660
Total liabilities 3,721,744 3,736,573 2,572,819
Stockholders' equity 459,661 450,986 405,120
Total liabilities and stockholders' equity $ 4,181,405 $ 4,187,559 $ 2,977,939
Net interest income $ 37,684 $ 37,367 $ 27,139
Cost of deposits 0.43% 0.43% 0.52%
Net interest spread 3.72% 3.60% 3.61%
Net interest margin 3.92% 3.80% 3.90%

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)
March 31, December 31, March 31,
Hanmi Financial Corporation 2015 2014 2014
Assets $ 4,083,887 $ 4,232,443 $ 3,095,758
Less other intangible assets (1,985) (2,080) (1,130)
Tangible assets $ 4,081,902 $ 4,230,363 $ 3,094,628
Stockholders' equity $ 467,470 $ 453,387 $ 413,511
Less other intangible assets (1,985) (2,080) (1,130)
Tangible stockholders' equity $ 465,485 $ 451,307 $ 412,381
Stockholders' equity to assets 11.45% 10.71% 13.36%
Tangible common equity to tangible assets 11.40% 10.67% 13.33%
Common shares outstanding 31,933,634 31,910,203 31,795,108
Tangible common equity per common share $ 14.58 $ 14.14 $ 12.97

CONTACT: Michael McCall EVP & Chief Financial Officer 213-427-5701 Christina Lee FVP & Senior Strategy Officer 213-427-5631 Lasse Glassen Investor Relations (Addo Communications) 310-829-5400Source:Hanmi Bank