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Hanmi Reports Strong 2015 Second Quarter Results

LOS ANGELES, July 23, 2015 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ:HAFC) (or "Hanmi"), the holding company for Hanmi Bank (the "Bank"), today reported second quarter net income increased 26.5% to $14.0 million, or $0.44 per diluted share, compared with $11.1 million, or $0.35 per diluted share, for the first quarter of 2015 and was up 26.6% from $11.0 million, or $0.35 per diluted share, for the year-ago period.

For the first six months of 2015, net income increased 13.6% to $25.0 million, or $0.78 per diluted share, compared with $22.0 million, or $0.69 per diluted share, for the first six months of 2014.

Mr. C. G. Kum, President and Chief Executive Officer, said, "Our second quarter results reflect the early success of our expansion efforts and improving profitability across the enterprise. While the net growth in our loans reflected a high level of payoffs, our $208 million of organic loan production increased 54% since last quarter and was 81% higher than the second quarter last year. Our loan pipeline for the third quarter is strong. Our net income for the second quarter grew 27% to $14 million driven by our ongoing initiatives to improve operating efficiencies and reduce expenses. The platforms we have in California, Texas and Illinois together with the commencement of our Healthcare Banking Group will allow us to grow our brand, expand our customer base and generate long-term sustainable growth."

Quarter Results
(In thousands, except per share data)
As of or for the Three Months Ended As of or for the Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2015 2015 2014 2015 2014
Net income $ 13,984 $ 11,054 $ 11,042 $ 25,038 $ 22,033
Net income per diluted common share $ 0.44 $ 0.35 $ 0.35 $ 0.78 $ 0.69
Assets $ 3,970,770 $ 4,084,015 $ 3,094,775 $ 3,970,770 $ 3,094,775
Loans receivable, net $ 2,826,086 $ 2,767,080 $ 2,300,810 $ 2,826,086 $ 2,300,810
Deposits $ 3,439,781 $ 3,552,676 $ 2,544,849 $ 3,439,781 $ 2,544,849
Return on average assets 1.39% 1.07% 1.54% 1.23% 1.52%
Pre-tax, pre-provision earnings on average assets 2.10% 1.61% 1.94% 1.85% 2.03%
Return on average stockholders' equity 11.83% 9.75% 11.05% 10.81% 11.01%
Net interest margin 3.97% 3.89% 3.82% 3.93% 3.86%
Net interest margin (excluding purchase accounting) 3.48% 3.28% 3.82% 3.38% 3.86%
Efficiency ratio 56.23% 65.63% 55.56% 60.93% 54.48%
Efficiency ratio (excluding merger and integration costs) 55.95% 62.30% 55.34% 59.12% 54.25%
Tangible common equity to tangible assets 11.86% 11.40% 13.78% 11.86% 13.78%
Tangible common equity per common share $ 14.73 $ 14.58 $ 13.38 $ 14.73 $ 13.38

Financial Highlights (as of or for the quarter ended June 30, 2015, compared with March 31, 2015 or June 30, 2014)

  • Net income of $14.0 million increased 26.5% from the first quarter.
  • Noninterest expense fell 14.5% or $4.6 million from the prior quarter, with the efficiency ratio improving to 56.23% from 65.63%.
  • New loan production (excluding loan purchases of $20.6 million) of $208.1 million, up 54.3% from the first quarter and 80.6% from the year-ago period.
  • Continued strong asset quality, with non-performing assets at 1.00% of total assets and a negative provision for loan losses of $2.5 million for the 2015 second quarter.
  • A cash dividend of $0.11 per share was paid on July 15, 2015.

Results of Operations

Second quarter net interest income, before the provision for loan losses, declined 1.0% to $37.1 million from $37.5 million for the preceding quarter as the decline in interest-earning assets offset the improvement in net interest margin. Compared with the second quarter last year, net interest income improved 36.6% principally on higher interest-earning assets arising from the CBI acquisition. Year-to-date, net interest income, before the provision for loan losses, improved 37.4% to $74.6 million compared with $54.3 million for the first six months of 2014 principally because of the increase in interest-earning assets arising from the acquisition.

Net interest margin for the second quarter of 2015 was 3.97% compared with 3.89% for the first quarter of 2015 and 3.82% for the year-ago period. The increase in the net interest margin for the second quarter of 2015 was primarily due to a $605,000 special FHLB stock dividend. For the first six months of 2015, net interest margin was 3.93% compared with 3.86% for the first six months of 2014.

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

Three Months Ended Six Months Ended
June 30, March 31, June 30 June 30, June 30
2015 2015 2014 2015 2014
Interest-earning assets 4.39% 4.31% 4.27% 4.35% 4.31%
Interest-bearing liabilities 0.64% 0.61% 0.74% 0.63% 0.75%
Net interest spread 3.75% 3.70% 3.53% 3.72% 3.56%
Net interest margin 3.97% 3.89% 3.82% 3.93% 3.86%

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

Three Months Ended Six Months
June 30, March 31 Ended
2015 2015 June 30, 2015
Core loan yield 4.78% 4.70% 4.74%
Accretion of discount on purchased loans 0.43% 0.62% 0.53%
As reported 5.21% 5.32% 5.27%
Core deposit cost 0.61% 0.62% 0.62%
Accretion of time deposits premium 0.17% 0.19% 0.18%
As reported 0.44% 0.43% 0.44%
Three Months Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2015
Amount Rate Amount Rate Amount Rate
(In thousands)
Net interest income and net interest margin excluding purchase accounting $ 32,568 3.48% $ 31,546 3.28% $ 64,114 3.38%
Accretion of discount on Non-PCI loans 2,606 0.28% 3,511 0.36% 6,117 0.32%
Accretion of discount on PCI loans 467 0.05% 843 0.09% 1,310 0.07%
Accretion of time deposits premium 1,504 0.16% 1,606 0.16% 3,110 0.16%
Amortization of subordinated debentures discount (41) -- (38) -- (79) --
Net impact 4,536 0.49% 5,922 0.61% 10,458 0.55%
As reported $ 37,104 3.97% $ 37,468 3.89% $ 74,572 3.93%

Net interest margin for the second quarter, excluding the effects of acquisition accounting, increased 20 basis points from the first quarter principally from the reduction in lower-yielding securities and the FHLB special dividend.

For the second quarter of 2015, Hanmi recorded a negative provision for loan losses of $2.5 million, which included an $84,000 reversal of impairment reserves on PCI loans. For the prior quarter, the negative provision for loan losses was $2.0 million, which was net of a $414,000 provision for impairment reserves on PCI loans. For the year ago period, the negative provision for loan losses was $3.9 million, which included no provision or reversal of impairment reserves on PCI loans.

Hanmi recorded a negative loan loss provision of $4.5 million for the first six months of 2015, compared with a negative provision for loan losses of $7.2 million for the first six months of 2014.

Noninterest income increased 2.6% to $11.1 million for the second quarter of 2015 compared with $10.9 million for the first quarter of 2015 and increased 102.9% from $5.5 million for the year-ago period. Service charges on deposit accounts were $3.2 million for the second quarter of 2015, unchanged from the first quarter of 2015 and up from $2.6 million for the second quarter last year. Gains on sales of SBA loans were $1.6 million for the second quarter 2015, compared with $1.7 million for the first quarter of 2015 and $498,000 for the year-ago period. Net gain on sales of securities were $1.9 million for the second quarter of 2015 compared with $2.2 million for the first quarter of 2015 and $364,000 for the second quarter last year. Disposition gains on PCI loans were $2.5 million for the second quarter of 2015, compared with $1.2 million for the prior quarter. There were no disposition gains for the same period a year-ago.

Noninterest expense declined 14.5% to $27.1 million from $31.7 million for the preceding quarter but increased 49.5% from $18.1 million for the second quarter last year. Salary and employee benefits costs declined 5.1% to $15.5 million compared with $16.4 million for the first quarter of 2015 as a result of the integration of CBI into Hanmi and the closing of three branches, but increased 51.2% from $10.3 million for the second quarter of 2014 due to the acquisition. Merger and integration costs declined to $136,000 for the second quarter of 2015 from $1.6 million for the preceding quarter but were up from $72,000 for the second quarter last year. Professional fees decreased to $1.7 million for the second quarter of 2015 from $2.3 million for the preceding quarter but were up from $652,000 for the second quarter last year. Advertising and promotion expense increased to $1.0 million compared with $523,000 for the first quarter and $753,000 for the prior year second quarter. These increases were due to our re-branding initiative. We anticipate further expense reductions for the remainder of 2015 resulting from the closure of an additional four branches in August 2015.

Hanmi recorded a provision for income taxes of $9.6 million for the second quarter of 2015, representing an effective tax rate of 40.75%, compared with $7.5 million, representing an effective tax rate of 40.53%, for the preceding quarter and $6.9 million, representing an effective rate of 37.37% for the second quarter of 2014.

Balance Sheet

Total assets were $3.97 billion at June 30, 2015, a 2.8% decrease from $4.08 billion at March 31, 2015 and a 28.3% increase from $3.09 billion a year ago. The year-over-year increase in total assets was primarily due to the acquisition of CBI.

Loans receivable, net of the allowance for loan losses, were $2.83 billion at June 30, 2015, up 2.1% from $2.77 billion at March 31, 2015 and up 22.8% from $2.30 billion at June 30, 2014. The increase in loans from the end of the 2014 second quarter reflects the CBI acquisition completed in the 2014 third quarter. Loans held for sale, representing the guaranteed portion of SBA loans, were $4.2 million at June 30, 2015 compared with $8.7 million at the end of the 2015 first quarter and $3.8 million at the end of the 2014 second quarter.

New loan production for the 2015 second quarter, excluding loan purchases, reached $208.1 million, 54.6% higher than the first quarter and outpaced $155.3 million of loan payoffs and payments. 2015 second quarter new loan production was comprised of $155.9 million of commercial real estate loans, $30.2 million of commercial and industrial loans, $19.9 million of SBA loans, and $2.1 million of consumer loans. Loan purchases for the 2015 second quarter were $20.6 million while SBA loan sales were $19.3 million. For the 2015 first quarter, new loan production was $134.9 million while loan payoffs and payments were $122.0 million. Loan purchases for the 2015 first quarter were $44.0 million and SBA loan sales were $19.9 million.

Deposits were $3.44 billion at the end of the 2015 second quarter, compared with $3.55 billion at the end of the preceding quarter and $2.54 billion at the end of the second quarter of 2014. The cost of deposits was 0.44% for the second quarter of 2015 compared with 0.43% for the first quarter of 2015 and 0.50% for the second quarter a year ago.

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

June 30, March 31, June 30,
2015 2015 2014
Demand-noninterest-bearing 30.9% 30.0% 35.8%
Savings 3.5% 3.3% 4.3%
Money market checking and NOW accounts 22.7% 22.7% 21.9%
Time deposits 42.9% 44.0% 38.0%
Total deposits 100.0% 100.0% 100.0%

At June 30, 2015, stockholders' equity was $472.7 million, compared with $467.5 million and $426.3 million at March 31, 2015 and June 30, 2014, respectively. Tangible common stockholders' equity was $470.9 million, or 11.86% of tangible assets, compared with $465.5 million, or 11.40% of tangible assets, and $426.3 million, or 13.78%, of tangible assets, at March 31, 2015 and June 30, 2014, respectively. Tangible book value per share was $14.73, compared with $14.58 and $13.38 at March 31, 2015 and June 30, 2014, respectively. On July 15, 2015, Hanmi paid a cash dividend of $0.11 per share, representing an aggregate dividend of $3.5 million.

Asset Quality

Nonperforming loans, excluding PCI loans, were $28.0 million at the end of the second quarter of 2015, or 0.97% of gross loans, compared with $29.3 million at the end of the first quarter of 2015, or 1.04% of gross loans and $25.4 million, or 1.08% of total loans at the end of the second quarter last year. Troubled debt restructurings were $21.9 million at June 30, 2015, compared with $26.0 million at March 31, 2015 and $23.6 million at June 30, 2014. Restructured loans included in nonperforming loans were $13.3 million at June 30, 2015, compared with $11.1 million at the end of the same quarter last year.

OREO was $11.9 million at the end of the second quarter of 2015, down from $12.1 million at the end of the prior quarter. OREO primarily resulted from the 2014 third quarter CBI acquisition. Classified loans were $44.8 million, or 1.56% of gross loans, at June 30, 2015, compared with $56.1 million, or 1.99% of gross loans, at March 31, 2015 and $46.2 million, or 1.96% of gross loans, a year ago. Nonperforming assets were $39.9 million at the end of the second quarter of 2015, or 1.00% of assets, compared with 1.01% of assets at the end of the prior quarter and 0.88% of assets at the end of the same quarter last year.

For the second quarter of 2015, recoveries of previously charged-off loans were $1.4 million, compared with $2.0 million for the preceding quarter and $1.7 million for the second quarter of 2014. Gross charge-offs for the second quarter of 2015 were $1.2 million, compared with $86,000 for the preceding quarter and $2.5 million for the same period a year ago. As a result, there were net recoveries of $272,000 for the second quarter of 2015, compared with net recoveries of $1.9 million for the preceding quarter and net charge-offs of $806,000 for the year ago period.

The allowance for loan losses was $50.8 million as of June 30, 2015, generating an allowance of loan losses to gross loans ratio of 1.77% compared with 1.88% as of March 31, 2015 and 2.21% as of June 30, 2014.

Conference Call

Management will host a conference call today, July 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, California, Hanmi Financial Corporation owns Hanmi Bank, which serves multi-ethnic communities through its network of 46 full-service branches and 6 loan production offices in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Washington and Georgia. Hanmi Bank specializes in commercial real estate, C&I, SBA and trade finance lending to small and middle market businesses. 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 loan 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)
June 30, March 31, Percentage June 30, Percentage
2015 2015 Change 2014 Change
Assets
Cash and cash equivalents $ 153,231 $ 182,054 -15.8% $ 123,782 23.8%
Securities available for sale, at fair value 728,683 858,064 -15.1% 505,977 44.0%
Loans held for sale, at the lower of cost or fair value 4,158 8,677 -52.1% 3,842 8.2%
Loans receivable, net of allowance for loan losses 2,826,086 2,767,080 2.1% 2,300,810 22.8%
Accrued interest receivable 8,133 9,238 -12.0% 6,355 28.0%
Premises and equipment, net 30,656 30,934 -0.9% 13,929 120.1%
Other real estate owned ("OREO"), net 11,857 12,114 -2.1% 1,714 591.8%
Customers' liability on acceptances 1,638 2,598 -37.0% 3,186 -48.6%
Servicing assets 13,125 13,321 -1.5% 6,355 106.5%
Other intangible assets, net 1,890 1,985 -4.8% -- --
Investment in Federal Home Loan Bank ("FHLB") stock, at cost 16,385 17,581 -6.8% 16,385 0.0%
Investment in Federal Reserve Bank ("FRB") stock, at cost 13,517 12,273 10.1% 11,514 17.4%
Income tax asset 82,819 86,478 -4.2% 53,160 55.8%
Bank-owned life insurance 48,041 47,795 0.5% 30,147 59.4%
Prepaid expenses and other assets 30,551 33,823 -9.7% 17,619 73.4%
Total assets $ 3,970,770 $ 4,084,015 -2.8% $ 3,094,775 28.3%
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 1,061,823 $ 1,064,695 -0.3% $ 910,320 16.6%
Interest-bearing 2,377,958 2,487,981 -4.4% 1,634,529 45.5%
Total deposits 3,439,781 3,552,676 -3.2% 2,544,849 35.2%
Accrued interest payable 3,443 3,497 -1.5% 3,423 0.6%
Bank's liability on acceptances 1,638 2,598 -37.0% 3,186 -48.6%
FHLB advances -- -- -- 97,000 -100.0%
Servicing liabilities 5,368 5,529 -2.9% 103 5111.7%
FDIC loss sharing liability 116 543 -78.6% -- --
Rescinded stock obligation 150 150 0.0% -- --
Subordinated debentures 18,623 18,582 0.2% -- --
Accrued expenses and other liabilities 28,911 32,970 -12.3% 19,866 45.5%
Total liabilities 3,498,030 3,616,545 -3.3% 2,668,427 31.1%
Stockholders' equity:
Common stock 257 257 0.0% 257 0.0%
Additional paid-in capital 556,289 555,710 0.1% 553,741 0.5%
Accumulated other comprehensive income (loss) 423 6,199 -93.2% (2,150) -119.7%
Accumulated deficit (14,371) (24,838) -42.1% (55,642) -74.2%
Less treasury stock (69,858) (69,858) 0.0% (69,858) 0.0%
Total stockholders' equity 472,740 467,470 1.1% 426,348 10.9%
Total liabilities and stockholders' equity $ 3,970,770 $ 4,084,015 -2.8% $ 3,094,775 28.3%
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In thousands, except share and per share data)
Three Months Ended
June 30, March 31, Percentage June 30, Percentage
2015 2015 Change 2014 Change
Interest and dividend income:
Interest and fees on loans $ 36,915 $ 37,034 -0.3% $ 27,522 34.1%
Taxable interest on securities 2,959 3,854 -23.2% 2,375 24.6%
Tax-exempt interest on securities 20 20 0.0% 20 0.0%
Interest on interest-bearing deposits in other banks 40 48 -16.7% 18 122.2%
Dividends on FRB stock 201 184 9.2% 172 16.9%
Dividends on FHLB stock 915 298 207.0% 236 287.7%
Total interest and dividend income 41,050 41,438 -0.9% 30,343 35.3%
Interest expense:
Interest on deposits 3,802 3,780 0.6% 3,153 20.6%
Interest on FHLB advances 4 56 -92.9% 30 -86.7%
Interest on subordinated debentures 151 145 4.1% -- --
Total interest expense 3,957 3,981 -0.6% 3,183 24.3%
Net interest income before provision for loan losses 37,093 37,457 -1.0% 27,160 36.6%
Negative provision for loan losses (2,495) (1,985) 25.7% (3,866) -35.5%
Net interest income after provision for loan losses 39,588 39,442 0.4% 31,026 27.6%
Noninterest income:
Service charges on deposit accounts 3,169 3,211 -1.3% 2,568 23.4%
Trade finance and other service charges and fees 1,109 1,267 -12.5% 1,166 -4.9%
Gain on sale of SBA loans 1,573 1,684 -6.6% 498 215.9%
Net gain on sales of securities 1,912 2,184 -12.5% 364 425.3%
Disposition gains on PCI loans 2,470 1,222 102.1% -- --
Other operating income 900 1,282 -29.8% 892 0.9%
Total noninterest income 11,133 10,850 2.6% 5,488 102.9%
Noninterest expense:
Salaries and employee benefits 15,542 16,384 -5.1% 10,280 51.2%
Occupancy and equipment 4,224 4,303 -1.8% 2,469 71.1%
Merger and integration costs 136 1,611 -91.6% 72 88.9%
Data processing 1,335 2,132 -37.4% 1,112 20.1%
OREO expense (13) 417 -103.1% -- --
Professional fees 1,701 2,341 -27.3% 652 160.9%
Supplies and communications 928 830 11.8% 595 56.0%
Advertising and promotion 1,046 523 100.0% 753 38.9%
Other operating expenses 2,219 3,163 -29.8% 2,206 0.6%
Total noninterest expense 27,118 31,704 -14.5% 18,139 49.5%
Income from continuing operations before provision for income taxes 23,603 18,588 27.0% 18,375 28.5%
Provision for income taxes 9,619 7,534 27.7% 6,866 40.1%
Income from continuing operations, net of taxes $ 13,984 $ 11,054 26.5% $ 11,509 21.5%
Discontinued operations
Loss from operations of discontinued subsidiaries $ -- $ -- -- $ (1) -100.0%
Income tax expense -- -- -- 466 -100.0%
Loss from discontinued operations -- -- -- (467) -100.0%
Net income $ 13,984 $ 11,054 26.5% $ 11,042 26.6%
Basic earnings per share:
Income from continuing operations, net of taxes $ 0.44 $ 0.35 $ 0.36
Income from discontinued operations, net of taxes -- -- (0.01)
Basic earnings per share $ 0.44 $ 0.35 $ 0.35
Diluted earnings per share:
Income from continuing operations, net of taxes $ 0.44 $ 0.35 $ 0.36
Income from discontinued operations, net of taxes -- -- (0.01)
Diluted earnings per share $ 0.44 $ 0.35 $ 0.35
Weighted-average shares outstanding:
Basic 31,774,692 31,747,299 31,681,033
Diluted 32,081,957 32,026,723 31,974,253
Common shares outstanding 31,974,842 31,933,634 31,860,956
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income, Continued (Unaudited)
(In thousands, except share and per share data)
Six Months Ended
June 30, June 30, Percentage
2015 2014 Change
Interest and dividend income:
Interest and fees on loans $ 73,949 $ 54,851 34.8%
Taxable interest on securities 6,813 4,912 38.7%
Tax-exempt interest on securities 40 96 -58.3%
Interest on interest-bearing deposits in other banks 88 38 131.6%
Dividends on FRB stock 385 340 13.2%
Dividends on FHLB stock 1,213 472 157.0%
Total interest and dividend income 82,488 60,709 35.9%
Interest expense:
Interest on deposits 7,582 6,375 18.9%
Interest on FHLB advances 60 78 -23.1%
Interest on subordinated debentures 296 -- --
Total interest expense 7,938 6,453 23.0%
Net interest income before provision for loan losses 74,550 54,256 37.4%
Negative provision for loan losses (4,480) (7,166) -37.5%
Net interest income after provision for loan losses 79,030 61,422 28.7%
Noninterest income:
Service charges on deposit accounts 6,380 5,041 26.6%
Trade finance and other service charges and fees 2,376 2,188 8.6%
Gain on sale of SBA loans 3,257 1,045 211.7%
Net gain on sales of securities 4,096 1,785 129.5%
Disposition gains on PCI loans 3,693 -- --
Other operating income 2,181 1,643 32.7%
Total noninterest income 21,983 11,702 87.9%
Noninterest expense:
Salaries and employee benefits 31,926 20,539 55.4%
Occupancy and equipment 8,527 4,866 75.2%
Merger and integration costs 1,747 157 1012.7%
Data processing 3,467 2,270 52.7%
OREO expense 404 5 7980.0%
Professional fees 4,042 1,400 188.7%
Supplies and communications 1,758 1,097 60.3%
Advertising and promotion 1,569 1,333 17.7%
Other operating expenses 5,382 4,270 26.0%
Total noninterest expense 58,822 35,937 63.7%
Income from continuing operations before provision for income taxes 42,191 37,187 13.5%
Provision for income taxes 17,153 14,710 16.6%
Income from continuing operations, net of taxes $ 25,038 $ 22,477 11.4%
Discontinued operations
Income from operations of discontinued subsidiary
(including gain on disposal of $51 in the second quarter of 2014)
$ -- $ 37 -100.0%
Income tax expense -- 481 -100.0%
Loss from discontinued operations -- (444) -100.0%
Net income $ 25,038 $ 22,033 13.6%
--
Basic earnings per share:
Income from continuing operations, net of taxes $ 0.79 $ 0.71
Income from discontinued operations, net of taxes -- (0.01)
Basic earnings per share $ 0.79 $ 0.70
Diluted earnings per share:
Income from continuing operations, net of taxes $ 0.78 $ 0.70
Income from discontinued operations, net of taxes -- (0.01)
Diluted earnings per share $ 0.78 $ 0.69
Weighted-average shares outstanding:
Basic 31,761,067 31,670,436
Diluted 32,053,380 31,950,313
Common shares outstanding 31,974,842 31,860,956
Hanmi Financial Corporation and Subsidiaries
Selected Financial Data (Unaudited)
(In thousands)
As of or for the Three Months Ended As of or for the Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2015 2015 2014 2015 2014
Average balances:
Average gross loans, net of deferred loan costs (1) $ 2,839,601 $ 2,821,616 $ 2,298,996 $ 2,829,813 $ 2,278,193
Average securities 844,064 1,001,707 526,474 922,245 530,890
Average interest-earning assets 3,749,011 3,901,818 2,854,031 3,823,942 2,839,927
Average assets 4,023,750 4,181,524 3,001,050 4,101,420 2,989,551
Average deposits 3,484,267 3,526,663 2,522,269 3,505,379 2,511,345
Average borrowings 26,233 146,335 39,146 85,953 47,967
Average interest-bearing liabilities 2,467,440 2,642,063 1,718,887 2,554,301 1,737,917
Average stockholders' equity 474,134 459,784 417,874 467,019 411,526
Average tangible equity 472,183 457,738 417,874 465,020 410,951
Performance ratios:
Return on average assets (2) (3) 1.39% 1.07% 1.54% 1.23% 1.52%
Pre-tax, pre-provision earnings on average assets (2) (3) 2.10% 1.61% 1.94% 1.85% 2.03%
Return on average stockholders' equity (2) (3) 11.83% 9.75% 11.05% 10.81% 11.01%
Return on average tangible equity (2) (3) 11.88% 9.79% 11.05% 10.86% 11.03%
Efficiency ratio 56.23% 65.63% 55.56% 60.93% 54.48%
Efficiency ratio (excluding merger and integration costs) 55.95% 62.30% 55.34% 59.12% 54.25%
Net interest spread (2) (4) 3.75% 3.70% 3.53% 3.72% 3.56%
Net interest spread (excluding purchase accounting) (2) (4) 3.18% 3.01% 3.53% 3.09% 3.56%
Net interest margin (2) (4) 3.97% 3.89% 3.82% 3.93% 3.86%
Net interest margin (excluding purchase accounting) (2) (4) 3.48% 3.28% 3.82% 3.38% 3.86%
Average stockholders' equity to average assets 11.78% 11.00% 13.92% 11.39% 13.77%
Allowance for loan losses:
Balance at beginning of period $ 52,951 $ 52,666 $ 56,593 $ 52,666 $ 57,555
Negative provision for loan losses (2,403) (1,673) (3,901) (4,076) (7,510)
Net recoveries (charge-offs) 272 1,958 (806) 2,230 1,841
Balance at end of period $ 50,820 $ 52,951 $ 51,886 $ 50,820 $ 51,886
Asset quality ratios:
Nonperforming Non-PCI loans to gross loans (5) 0.97% 1.04% 1.08% 0.97% 1.08%
Nonperforming assets to assets (5) 1.00% 1.01% 0.88% 1.00% 0.88%
Nonperforming Non-PCI loans to allowance for loan losses (5) 55.14% 55.25% 48.92% 55.14% 48.92%
Net loan recoveries to average gross loans (2) -0.04% -0.28% 0.14% -0.08% -0.08%
Allowance for loan losses to gross loans 1.77% 1.88% 2.21% 1.77% 2.21%
Allowance for loan losses to nonperforming Non-PCI loans 181.35% 180.98% 204.43% 181.35% 204.43%
Allowance for off-balance sheet items:
Balance at beginning of period $ 1,054 $ 1,366 $ 1,557 $ 1,366 $ 1,248
(Negative provision) provision for loan losses (92) (312) 35 (404) 344
Balance at end of period $ 962 $ 1,054 $ 1,592 $ 962 $ 1,592
Nonperforming assets (5):
Nonaccrual Non-PCI loans $ 28,023 $ 29,258 $ 25,381
Loans 90 days or more past due and still accruing -- -- --
Nonperforming Non-PCI loans 28,023 29,258 25,381
OREO, net 11,857 12,114 1,714
Nonperforming assets 39,880 41,372 27,095
Nonperforming loans in loans held for sale -- -- --
Nonperforming assets $ 39,880 $ 41,372 $ 27,095
Delinquent loans, 30 to 89 days past due and still accruing $ 9,007 $ 14,175 $ 5,290
Delinquent loans to gross loans 0.31% 0.50% 0.23%
Gross PCI loans $ 33,908 $ 40,941 --
Hanmi Financial Corporation and Subsidiaries
Selected Financial Data, Continued (Unaudited)
(In thousands)
June 30, March 31, June 30,
2015 2015 2014
Loan portfolio:
Real estate loans $ 2,413,540 $ 2,383,426 $ 1,981,522
Residential loans 173,126 156,513 108,561
Commercial and industrial loans 261,189 250,632 230,309
Consumer loans 26,317 25,986 28,843
Gross loans 2,874,172 2,816,557 2,349,235
Deferred loan costs 2,734 3,474 3,461
Gross loans, net of deferred loan costs 2,876,906 2,820,031 2,352,696
Allowance for loan losses (50,820) (52,951) (51,886)
Loans receivable, net 2,826,086 2,767,080 2,300,810
Loans held for sale, at the lower of cost or fair value 4,158 8,677 3,842
Total loans receivable, net $ 2,830,244 $ 2,775,757 $ 2,304,652
Loan mix:
Real estate loans 84.0% 84.6% 84.4%
Residential loans 6.0% 5.6% 4.6%
Commercial and industrial loans 9.1% 8.9% 9.8%
Consumer loans 0.9% 0.9% 1.2%
Total loans 100.0% 100.0% 100.0%
Deposit portfolio:
Demand-noninterest-bearing $ 1,061,823 $ 1,064,695 $ 910,320
Savings 119,474 118,328 110,552
Money market checking and NOW accounts 779,684 807,965 557,887
Time deposits 1,478,800 1,561,688 966,090
Total deposits $ 3,439,781 $ 3,552,676 $ 2,544,849
Deposit mix:
Demand-noninterest-bearing 30.9% 30.0% 35.8%
Savings 3.5% 3.3% 4.3%
Money market checking and NOW accounts 22.7% 22.7% 21.9%
Time deposits 42.9% 44.0% 38.0%
Total deposits 100.0% 100.0% 100.0%
Capital ratios:
Hanmi Financial
Total risk-based capital 15.64% 15.40% 17.92%
Tier 1 risk-based capital 14.39% 14.15% 16.65%
Common equity tier 1 capital 14.39% 14.15% --
Tier 1 leverage capital ratio 11.52% 10.78% 14.09%
Hanmi Bank
Total risk-based capital 15.57% 15.33% 17.17%
Tier 1 risk-based capital 14.32% 14.08% 15.91%
Common equity tier 1 capital 14.32% 14.08% --
Tier 1 leverage capital ratio 11.47% 10.72% 13.49%
(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
June 30, 2015 March 31, 2015 June 30, 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 (1) $ 2,839,601 $ 36,915 5.21% $ 2,821,616 $ 37,034 5.32% $ 2,298,996 $ 27,522 4.80%
Municipal securities-taxable 16,272 155 3.81% 16,906 163 3.86% 19,151 191 3.99%
Municipal securities-tax exempt 3,670 31 3.35% 4,339 31 2.84% 4,428 31 2.78%
Obligations of other U.S. government agencies 63,512 315 1.98% 85,703 404 1.89% 85,160 401 1.88%
Other debt securities 730,672 2,489 1.36% 864,492 3,287 1.52% 390,435 1,783 1.83%
Equity securities 29,938 1,116 14.91% 30,267 482 6.37% 27,300 408 5.98%
Interest-bearing deposits in other banks 65,346 40 0.25% 78,495 48 0.25% 28,561 18 0.25%
Total interest-earning assets 3,749,011 41,061 4.39% 3,901,818 41,449 4.31% 2,854,031 30,354 4.27%
Noninterest-earning assets:
Cash and cash equivalents 89,313 86,313 70,660
Allowance for loan losses (53,159) (53,319) (57,127)
Other assets 238,585 246,712 133,486
Total noninterest-earning assets 274,739 279,706 147,019
Total assets $ 4,023,750 $ 4,181,524 $ 3,001,050
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Savings $ 119,520 $ 106 0.36% $ 120,254 $ 114 0.38% $ 115,667 $ 372 1.29%
Money market checking and NOW accounts 796,664 928 0.47% 782,432 885 0.46% 572,949 759 0.53%
Time deposits 1,525,023 2,768 0.73% 1,593,042 2,781 0.71% 991,125 2,022 0.82%
FHLB advances 7,637 4 0.21% 127,778 56 0.18% 39,146 30 0.31%
Subordinated debentures 18,596 151 3.26% 18,557 145 3.17% -- -- 0.00%
Total interest-bearing liabilities 2,467,440 3,957 0.64% 2,642,063 3,981 0.61% 1,718,887 3,183 0.74%
Noninterest-bearing liabilities:
Demand deposits 1,043,060 1,030,935 842,528
Other liabilities 39,116 48,742 21,761
Total noninterest-bearing liabilities 1,082,176 1,079,677 864,289
Total liabilities 3,549,616 3,721,740 2,583,176
Stockholders' equity 474,134 459,784 417,874
Total liabilities and stockholders' equity $ 4,023,750 $ 4,181,524 $ 3,001,050
Net interest income $ 37,104 $ 37,468 $ 27,171
Cost of deposits 0.44% 0.43% 0.50%
Net interest spread 3.75% 3.70% 3.53%
Net interest margin 3.97% 3.89% 3.82%
Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid, Continued (Unaudited)
(In thousands)
Six Months Ended
June 30, 2015 June 30, 2014
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 costs (1) $ 2,829,813 $ 73,949 5.27% $ 2,278,193 $ 54,851 4.86%
Municipal securities-taxable 16,587 318 3.83% 25,152 520 4.13%
Municipal securities-tax exempt 4,003 62 3.07% 8,790 148 3.36%
Obligations of other U.S. government agencies 74,546 719 1.93% 84,367 806 1.91%
Other debt securities 797,213 5,776 1.45% 386,297 3,586 1.86%
Equity securities 29,896 1,598 10.69% 26,284 812 6.18%
Federal funds sold -- -- 0.00% 6 -- 0.00%
Interest-bearing deposits in other banks 71,884 88 0.25% 30,838 38 0.25%
Total interest-earning assets 3,823,942 82,510 4.35% 2,839,927 60,761 4.31%
Noninterest-earning assets:
Cash and cash equivalents 87,842 74,010
Allowance for loan losses (53,238) (57,887)
Other assets 242,874 133,501
Total noninterest-earning assets 277,478 149,624
Total assets $ 4,101,420 $ 2,989,551
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Savings $ 119,884 $ 220 0.37% $ 116,067 $ 776 1.35%
Money market checking and NOW accounts 789,587 1,813 0.46% 582,219 1,526 0.53%
Time deposits 1,558,877 5,549 0.72% 991,664 4,073 0.83%
FHLB advances 67,376 60 0.18% 47,967 78 0.33%
Subordinated debentures 18,577 296 3.21% -- -- 0.00%
Total interest-bearing liabilities 2,554,301 7,938 0.63% 1,737,917 6,453 0.75%
Noninterest-bearing liabilities:
Demand deposits 1,037,031 821,395
Other liabilities 43,069 18,713
Total noninterest-bearing liabilities 1,080,100 840,108
Total liabilities 3,634,401 2,578,025
Stockholders' equity 467,019 411,526
Total liabilities and stockholders' equity $ 4,101,420 $ 2,989,551
Net interest income $ 74,572 $ 54,308
Cost of deposits 0.44% 0.51%
Net interest spread 3.72% 3.56%
Net interest margin 3.93% 3.86%
(1) Includes loans held for sale

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)
June 30, March 31, June 30,
Hanmi Financial Corporation 2015 2015 2014
Assets $ 3,970,770 $ 4,084,015 $ 3,094,775
Less other intangible assets (1,890) (1,985) --
Tangible assets $ 3,968,880 $ 4,082,030 $ 3,094,775
Stockholders' equity $ 472,740 $ 467,470 $ 426,348
Less other intangible assets (1,890) (1,985) --
Tangible stockholders' equity $ 470,850 $ 465,485 $ 426,348
Stockholders' equity to assets 11.91% 11.45% 13.78%
Tangible common equity to tangible assets 11.86% 11.40% 13.78%
Common shares outstanding 31,974,842 31,933,634 31,860,956
Tangible common equity per common share $ 14.73 $ 14.58 $ 13.38

CONTACT: Romolo (Ron) Santarosa Senior Executive Vice President, Corporate Finance and Strategy 213-427-5636 Michael McCall Executive Vice President & Chief Financial Officer 213-427-5701 Lasse Glassen Investor Relations Addo Communications 310-829-5400

Source:Hanmi Bank