Hanmi Reports Strong Loan and Deposit Growth for First Quarter 2017

2017 First Quarter Highlights:

  • First quarter net income of $13.8 million or $0.43 per diluted share.
  • Loans and leases receivable of $3.94 billion, up 10% in the first quarter on an annualized basis driven by new loan production of $202.7 million; loans receivable up 19% year-over-year.
  • Net interest income for the first quarter increased to $42.4 million, up approximately 1% from the prior quarter and nearly 10% year-over-year.
  • Net interest margin, excluding acquisition accounting, was 3.85% compared with 3.86% for the prior quarter and 3.68% a year ago.
  • Deposits of $4.08 billion, up nearly 29% in the first quarter on an annualized basis due to an increase in money market and savings deposits; deposits are up 17% year-over-year.
  • Issued $100 million of fixed-to-floating rate subordinated debt with initial annual interest rate of 5.45% with total risk-based capital ratio improving 228 basis points to 16.14%.

LOS ANGELES, April 18, 2017 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ:HAFC) (or “Hanmi”), the parent company of Hanmi Bank (the “Bank”) today reported net income for the 2017 first quarter of $13.8 million or $0.43 per diluted share, compared with $14.4 million, or $0.45 per diluted share for the 2016 fourth quarter and $14.8 million, or $0.46 per diluted share for the 2016 first quarter.

Mr. C. G. Kum, President and Chief Executive Officer, said, “Hanmi’s first quarter results represent a good start to the year with strong loan and deposit growth, improving asset quality and a successful debt capital raise. Robust origination activity drove loans receivable 10% higher on an annualized basis in the first quarter and up more than 19% from a year ago, while net interest income grew nearly 10% year-over-year. During the quarter we continued to benefit from our C&I lending efforts with solid performance from our Commercial Equipment Leasing division. Importantly, credit quality remained excellent with nonperforming assets declining to 36 basis points of total assets and net recoveries in the quarter of $803,000. In addition, I continue to be very pleased with our deposit franchise, and in particular, the strength of our retail branch network as our money market and savings balances grew more than 15% in the quarter. As a result, total deposits increased nearly 29% on an annualized basis in the quarter and 17% compared to last year.”

Mr. Kum concluded, “During the quarter we successfully completed a public offering and sale of $100 million of subordinated notes that qualify as regulatory capital. The offering was significantly over-subscribed reflecting investors’ confidence in the Hanmi franchise. This further strengthens our total risk-based capital position and will support our continued loan growth in 2017 and beyond.”

Quarterly Highlights
(In thousands, except per share data)

For the Three Months Ended Amount Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Net income$ 13,783 $ 14,416 $ 13,121 $ 14,148 $ 14,804 $ (633) $ (1,021)
Net income per diluted common share$ 0.43 $ 0.45 $ 0.41 $ 0.44 $ 0.46 $ (0.02) $ (0.03)
Assets$ 4,811,821 $ 4,701,346 $ 4,402,180 $ 4,441,333 $ 4,310,748 $ 110,475 $ 501,073
Loans and leases receivable$ 3,943,951 $ 3,844,769 $ 3,552,659 $ 3,449,310 $ 3,306,479 $ 99,182 $ 637,472
Deposits$ 4,083,165 $ 3,809,737 $ 3,771,207 $ 3,589,289 $ 3,499,992 $ 273,428 $ 583,173
Return on average assets 1.18% 1.26% 1.19% 1.32% 1.41% -0.08% -0.23%
Return on average stockholders' equity 10.46% 10.84% 9.88% 10.98% 11.92% -0.38% -1.46%
Net interest margin (1) 3.89% 3.96% 3.86% 4.02% 3.98% -0.07% -0.09%
Net interest margin excluding acquisition accounting (1) 3.85% 3.86% 3.75% 3.84% 3.68% -0.01% 0.17%
Efficiency ratio 54.95% 51.77% 58.72% 56.46% 57.25% 3.18% -2.30%
Efficiency ratio excluding merger and integration costs 55.01% 51.15% 58.72% 56.46% 57.25% 3.86% -2.24%
Tangible common equity to tangible assets (2) 10.98% 11.05% 12.04% 11.79% 11.82% -0.07% -0.84%
Tangible common equity per common share (2)$ 16.26 $ 16.03 $ 16.42 $ 16.23 $ 15.79 $ 0.23 $ 0.47
(1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.
(2) Refer to "Non-GAAP Financial Measures" for further details.

Results of Operations
First quarter net interest income increased 0.7% to $42.4 million from $42.1 million in the fourth quarter primarily from the solid expansion of loans and leases receivable, partially offset by an increase in deposit and borrowing interest expense. Average money market and savings deposits increased 7.8% and average borrowings increased 54.9%. During the quarter, Hanmi issued $100 million of 10-year subordinated notes effective March 22, 2017 at a fixed rate of 5.45% for the first five years, and a floating rate of three-month LIBOR plus 3.315% thereafter.

As of or For the Three Months Ended (in thousands) Percentage Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
Net Interest Income 2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Interest and fees on loans and leases(1)$ 45,378 $ 43,780 $ 41,150 $ 40,645 $ 39,067 3.7% 16.2%
Interest on securities 2,520 2,550 2,701 2,886 3,017 -1.2% -16.5%
Dividends on FRB and FHLB stock 374 927 419 579 542 -59.7% -31.0%
Interest on deposits in other banks 77 55 55 49 48 40.0% 60.4%
Total interest and dividend income$ 48,349 $ 47,312 $ 44,325 $ 44,159 $ 42,674 2.2% 13.3%
Interest on deposits 5,154 4,799 4,358 3,684 3,727 7.4% 38.3%
Interest on borrowings 468 207 179 299 195 126.1% 140.0%
Interest on subordinated debentures 373 241 206 196 183 54.8% 103.8%
Total interest expense 5,995 5,247 4,743 4,179 4,105 14.3% 46.0%
Net interest income$ 42,354 $ 42,065 $ 39,582 $ 39,980 $ 38,569 0.7% 9.8%
(1) Includes loans held for sale.

Net interest margin (on a taxable equivalent basis) for the first quarter of 2017 was 3.89% compared with 3.96% for the fourth quarter of 2016. The decrease in net interest margin for the first quarter compared with the preceding quarter was primarily due to the 2016 fourth quarter special FHLB dividend of $559,000.

For the Three Months Ended (in thousands) Percentage Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
Average Earning Assets and Interest-bearing Liabilities 2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Loans (1)$3,881,686 $3,690,955 $ 3,477,428 $3,328,416 $3,192,832 5.2% 21.6%
Securities 526,549 530,241 589,832 657,756 682,370 -0.7% -22.8%
FRB and FHLB stock 16,385 16,385 19,207 30,808 30,497 0.0% -46.3%
Interest-bearing deposits in other banks 38,600 40,548 43,678 38,598 44,089 -4.8% -12.4%
Average interest-earning assets$4,463,220 $4,278,129 $ 4,130,145 $4,055,578 $3,949,788 4.3% 13.0%
Demand: interest-bearing$ 97,602 $ 95,399 $ 93,852 $ 96,397 $ 95,560 2.3% 2.1%
Money market and savings 1,406,903 1,305,565 1,141,747 944,355 902,037 7.8% 56.0%
Time deposits 1,173,184 1,165,828 1,244,127 1,268,127 1,346,567 0.6% -12.9%
Average interest-bearing deposits 2,677,689 2,566,792 2,479,726 2,308,879 2,344,164 4.3% 14.2%
Borrowings 270,500 174,674 152,935 278,077 181,868 54.9% 48.7%
Subordinated debentures 30,950 18,919 18,844 18,781 18,722 63.6% 65.3%
Average interest-bearing liabilities$2,979,139 $2,760,385 $ 2,651,505 $2,605,737 $2,544,754 7.9% 17.1%
(1) Includes loans held for sale.


For the Three Months Ended Percentage Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
Average Yields and Rates2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Loans (1)4.74% 4.72% 4.71% 4.91% 4.92% 0.0% -0.2%
Securities (2)2.30% 2.31% 2.18% 2.07% 2.07% 0.0% 0.2%
FRB and FHLB stock9.26% 22.63% 8.73% 7.52% 7.11% -13.4% 2.2%
Interest-bearing deposits in other banks0.81% 0.54% 0.50% 0.51% 0.44% 0.3% 0.4%
Interest-earning assets4.44% 4.45% 4.32% 4.43% 4.40% 0.0% 0.0%
Interest-bearing deposits0.78% 0.74% 0.70% 0.64% 0.64% 0.0% 0.1%
Borrowings0.70% 0.47% 0.47% 0.43% 0.43% 0.2% 0.3%
Subordinated debentures4.82% 5.07% 4.35% 4.20% 3.93% -0.3% 0.9%
Interest-bearing liabilities0.82% 0.76% 0.71% 0.65% 0.65% 0.1% 0.2%
Net interest margin (taxable equivalent basis)3.89% 3.96% 3.86% 4.02% 3.98% -0.1% -0.1%
Cost of deposits0.54% 0.50% 0.47% 0.43% 0.43% 0.0% 0.1%
(1) Includes loans held for sale.
(2) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

For the first quarter of 2017, Hanmi recorded a negative provision for loan losses of $0.1 million, which was related to Purchased Credit Impaired (“PCI”) loans from the 2014 acquisition. For the prior quarter, the provision for loan losses was $0.2 million.

First quarter noninterest income decreased $0.9 million or 10.5% to $7.2 million from $8.1 million for the fourth quarter of 2016 primarily due to a $1.4 million decrease in disposition gains on PCI loans offset by a $0.7 million increase in other operating income. The increase in other operating income is primarily related to a $0.3 million increase in servicing fee income resulting from lower amortization of servicing assets and liabilities, and a $0.4 million increase associated with upcharge fees. Disposition gains on PCI loans were $0.2 million for the first quarter of 2017, compared with $1.6 million for the prior quarter. PCI loans from the 2014 acquisition were $9.0 million at the end of the first quarter of 2017, down 9.1% from the prior quarter. Gains on sales of SBA loans were $1.5 million for the first quarter 2017, down from $1.8 million from the fourth quarter of 2016 as the volume of SBA loans sold decreased to $19.6 million from $27.8 million for the preceding quarter.

For the Three Months Ended (in thousands) Percentage Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
Noninterest Income 2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Service charges on deposit accounts$ 2,528 $ 2,599 $ 2,883 $ 2,898 $ 3,001 -2.7% -15.8%
Trade finance and other service charges and fees 1,047 1,132 992 1,064 1,044 -7.5% 0.3%
Other operating income 1,726 991 2,348 1,674 1,399 74.2% 23.4%
Service charges, fees & other 5,301 4,722 6,223 5,636 5,444 12.3% -2.6%
Gain on sale of SBA loans 1,464 1,787 1,616 1,774 858 -18.1% 70.6%
Disposition gain on PCI loans 183 1,559 789 1,963 659 -88.3% -72.2%
Net gain on sales of securities 269 - 46 - - 0.0% 0.0%
Total noninterest income$ 7,217 $ 8,068 $ 8,674 $ 9,373 $ 6,961 -10.5% 3.7%

Noninterest expense for the first quarter increased $1.3 million, or 5.0%, to $27.2 million from $26.0 million primarily due to a $0.9 million increase in salaries and employee benefits expenses and a $0.6 million decline in OREO income. Salaries and employee benefits expenses are typically higher in the first quarter due to the seasonal impact of elevated payroll taxes and employee benefits. As a result of the increase in noninterest expense, as well as lower noninterest income, the efficiency ratio increased to 55.0% in the first quarter from 51.8% in the prior quarter.

For the Three Months Ended (in thousands) Percentage Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Noninterest Expense
Salaries and benefits$ 17,104 $ 16,246 $ 15,950 $ 16,061 $ 15,698 5.3% 9.0%
Occupancy and equipment 3,982 3,641 3,917 3,938 3,496 9.4% 13.9%
Data processing 1,631 1,455 1,330 1,454 1,436 12.1% 13.6%
Supplies and communication 635 683 821 709 736 -7.0% -13.7%
Advertising and promotion 802 1,140 1,153 1,094 522 -29.6% 53.6%
Other operating expenses 3,218 3,136 5,093 4,424 3,715 2.6% -13.4%
subtotal 27,372 26,301 28,264 27,680 25,603 4.1% 6.9%
OREO expense (income) (101) (658) 73 183 465 -84.7% -121.7%
Merger and integration costs (31) 312 - - - -109.9% 0.0%
Total noninterest expense$ 27,240 $ 25,955 $ 28,337 $ 27,863 $ 26,068 5.0% 4.5%

Hanmi recorded a provision for income taxes of $8.6 million for the first quarter of 2017, representing an effective tax rate of 38.5%, compared with $9.6 million, representing an effective tax rate of 40.0%, for the preceding quarter and $6.2 million, representing an effective tax rate 29.5% for the first quarter of 2016. The first quarter of 2016 included a $1.8 million benefit arising from the finalization of the 2014 amended tax returns.

Financial Position
Total assets were $4.81 billion at March 31, 2017, a 2.3% increase from $4.70 billion at December 31, 2016. The increase in total assets was primarily due to an increase in loans and leases receivable.

Loans and leases receivable, before the allowance for loan and lease losses, were $3.95 billion at March 31, 2017, up 2.6% from $3.85 billion at December 31, 2016. The increase in loans and leases from the prior quarter reflects Hanmi’s strong loan production and the acquisition and commencement of the Commercial Equipment Leasing division in the 2016 fourth quarter. Loans held for sale, representing the guaranteed portion of SBA loans, were $8.8 million at March 31, 2017 compared with $9.3 million at the end of the 2016 fourth quarter.

Loans and leases receivable, before the allowance for loan and lease losses, increased 19.5% from $3.31 billion the first quarter last year, primarily due to strong loan production over the last twelve months, as well as last year’s acquisition and commencement of the Commercial Equipment Leasing division.

As of (in thousands) Percentage Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Loan and Lease Portfolio
Commercial real estate loans$ 2,991,123 $ 2,939,608 $ 2,880,012 $ 2,835,076 $ 2,729,527 1.8% 9.6%
Residential real estate loans 359,152 338,767 330,675 296,496 256,488 6.0% 40.0%
Commercial and industrial loans 316,284 300,220 319,656 293,073 295,632 5.4% 7.0%
Lease receivable 259,591 243,294 - - - 6.7% 0.0%
Consumer loans 17,801 22,880 22,316 24,665 24,832 -22.2% -28.3%
Loans and leases receivable 3,943,951 3,844,769 3,552,659 3,449,310 3,306,479 2.6% 19.3%
Loans held for sale 8,849 9,316 6,425 12,833 2,583 -5.0% 242.6%
Total loans$ 3,952,800 $ 3,854,085 $ 3,559,084 $ 3,462,143 $ 3,309,062 2.6% 19.5%
Acquired Loans(1)
PCI loans, net of discounts$ 8,960 $ 9,863 $ 15,540 $ 15,020 $ 19,834 -9.2% -54.8%
Non-PCI loans, net of discounts 101,062 104,733 108,434 117,750 139,869 -3.5% -27.7%
Total acquired loans$ 110,022 $ 114,596 $ 123,974 $ 132,770 $ 159,703 -4.0% -31.1%
(1) Includes UCB acquired only.

New loan production for the 2017 first quarter was $202.7 million while payoffs were $67.6 million compared with $227.1 million and $82.1 million for the fourth quarter last year. First quarter 2017 new loan production was comprised of $116.2 million of commercial real estate loans, $16.9 million of commercial and industrial loans, $29.7 million of SBA loans, and $0.4 million of consumer loans and $39.5 million of commercial leases. Loan purchases for the 2017 first quarter were $33.6 million, compared with $26.9 million in the fourth quarter of 2016. For the first quarter of 2017, commercial real estate loans as a percentage of total loans and leases decreased to 75.7% compared with 82.5% for the same period last year.

Deposits increased to $4.08 billion at the end of the 2017 first quarter from $3.81 billion at the end of the preceding quarter. Money market and savings deposits led this growth increasing 15.4%. Total demand deposits increased 3.1% with non-interest bearing increasing 3.2% and interest-bearing increasing 2.7%. The loans to deposits ratio at March 31, 2017 declined to 96.6% from 100.9% at December 31, 2016.

Deposits increased 16.7% from $3.50 billion in the first quarter last year, primarily due to the strength of our retail branch network as our money market and savings balance increased 64.7% compared a year ago.

As of (in thousands) Percentage Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Deposit Portfolio
Demand: noninterest-bearing$ 1,241,272 $ 1,203,240 $ 1,231,967 $ 1,189,528 $ 1,172,444 3.2% 5.9%
Demand: interest-bearing 99,433 96,856 94,272 92,776 99,141 2.7% 0.3%
Money market and savings 1,534,578 1,329,324 1,242,502 1,023,421 931,915 15.4% 64.7%
Time deposits of $250,000 or less 731,445 734,383 819,471 891,197 948,346 -0.4% -22.9%
Time deposits of more than $250,000 476,437 445,934 382,995 392,367 348,146 6.8% 36.8%
Total deposits$ 4,083,165 $ 3,809,737 $ 3,771,207 $ 3,589,289 $ 3,499,992 7.2% 16.7%

At March 31, 2017, stockholders’ equity was $539.5 million, compared with $531.0 million at December 31, 2016. Tangible common stockholders’ equity was $526.7 million, or 10.98% of tangible assets, compared with $518.1 million, or 11.05% of tangible assets at December 31, 2016. Tangible book value per share was $16.26, up from $16.03 from the preceding quarter.

Hanmi continues to remain well capitalized, with a Tier 1 risk-based capital ratio of 12.91% and a Total risk-based capital ratio of 16.14% at March 31, 2017, versus 13.02% and 13.86%, respectively, at December 31, 2016.

As of Amount Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Regulatory Capital ratios (1)
Hanmi Financial
Total risk-based capital16.14% 13.86% 14.99% 15.16% 15.37% 2.3% 0.8%
Tier 1 risk-based capital12.91% 13.02% 13.89% 14.00% 14.15% -0.1% -1.2%
Common equity tier 1 capital12.53% 12.73% 13.73% 13.85% 13.99% -0.2% -1.5%
Tier 1 leverage capital ratio11.22% 11.53% 11.68% 11.69% 11.70% -0.3% -0.5%
Hanmi Bank
Total risk-based capital15.88% 13.64% 14.61% 14.58% 14.78% 2.2% 1.1%
Tier 1 risk-based capital15.04% 12.80% 13.50% 13.43% 13.56% 2.2% 1.5%
Common equity tier 1 capital15.04% 12.80% 13.50% 13.43% 13.56% 2.2% 1.5%
Tier 1 leverage capital ratio13.08% 11.33% 11.36% 11.21% 11.22% 1.8% 1.9%
(1) Preliminary ratios for March 31, 2017

Hanmi declared a cash dividend of $0.19 per common share on its common stock in the 2017 first quarter, with the same as the prior quarter. The dividend was paid on February 23, 2017, to stockholders of record as of the close of business on February 7, 2017.

Asset Quality
Nonperforming loans, excluding PCI loans, were $12.8 million at the end of the first quarter of 2017, or 0.32% of loans, compared with $11.4 million at the end of the fourth quarter of 2016, or 0.30% of loans.

OREO was $4.6 million at the end of the first quarter of 2017, down from $7.5 million at the end of the prior quarter. Nonperforming assets were $17.4 million at the end of the first quarter of 2017, or 0.36% of assets, compared with 0.40% of assets at the end of the prior quarter.

Gross charge-offs for the first quarter of 2017 were $186,000, compared with $7.3 million for the preceding quarter. The fourth quarter included a charge-off of a $5.0 million PCI loan from the 2014 acquisition that had been substantially reserved for in prior periods. Recoveries of previously charged-off loans for the first quarter of 2017 were $989,000 compared with $625,000 for the preceding quarter. As a result, there were net recoveries of $803,000 for the first quarter of 2017, compared to net charge-offs of $6.7 million for the preceding quarter.

The allowance for loan and lease losses was $33.2 million as of March 31, 2017, generating an allowance of loan losses to loans receivable ratio of 0.84% the same as at December 31, 2016.

As of or for the Three Months Ended (in thousands) Amount Change
March 31, December 31, September 30, June 30, March 31, Q1-17 Q1-17
2017 2016 2016 2016 2016 vs. Q4-16 vs. Q1-16
Asset Quality
Nonperforming assets (1):
Nonaccrual Non-PCI loans$ 12,774 $ 11,406 $ 10,948 $ 12,341 $ 16,276 $ 1,368 $ (3,502)
Loans 90 days or more past due and still accruing - - - - - - -
Nonperforming Non-PCI loans 12,774 11,406 10,948 12,341 16,276 1,368 (3,502)
OREO, net 4,636 7,484 10,971 11,846 9,411 (2,848) (4,775)
Nonperforming assets$ 17,410 $ 18,890 $ 21,919 $ 24,187 $ 25,687 $ (1,480) $ (8,277)
Delinquent loans:
Loans, 30 to 89 days past due and still accruing$ 6,273 $ 5,718 $ 1,066 $ 1,517 $ 5,974 $ 555 $ 299
Delinquent loans to loans 0.16% 0.15% 0.03% 0.04% 0.18% 0.01% -0.02%
Allowance for loan and lease losses:
Balance at beginning of period$ 32,429 $ 38,972 $ 39,707 $ 41,026 $ 42,935
Loan and lease loss provision (income) (80) 151 (1,450) (1,515) (1,525)
Net loan charge-offs (recoveries) (803) 6,694 (715) (196) 384
Balance at end of period$ 33,152 $ 32,429 $ 38,972 $ 39,707 $ 41,026
Asset quality ratios:
Nonperforming Non-PCI loans to loans (1) 0.32% 0.30% 0.31% 0.36% 0.50%
Nonperforming assets to assets (1) 0.36% 0.40% 0.50% 0.54% 0.60%
Net loan charge-offs (recoveries) to average loans (3) -0.08% 0.73% -0.08% -0.02% 0.05%
Allowance for loan losses to loans 0.84% 0.84% 1.10% 1.15% 1.24%
Allowance for loan losses to nonperforming Non-PCI loans (1) (2) 252.54% 275.80% 305.43% 277.60% 217.38%
Allowance for off-balance sheet items:
Balance at beginning of period$ 1,184 $ 1,491 $ 1,475 $ 1,220 $ 986
Provision (income) for off-balance sheet items - (307) 16 255 234
Balance at end of period$ 1,184 $ 1,184 $ 1,491 $ 1,475 $ 1,220
(1) Excludes PCI loans
(2) Excludes allowance for loan losses allocated to PCI loans
(3) Annualized

Conference Call
Management will host a conference call today, April 18, 2017 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 41 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 real estate, commercial, 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 Corporation, 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 and lease losses; credit quality and the effect of credit quality on our provision for loan and lease losses and allowance for loan and lease 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, 2016, 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
2017 2016 Change 2016 Change
Assets
Cash and due from banks$ 138,592 $ 147,235 -5.9% $ 137,464 0.8%
Securities available for sale, at fair value 548,010 516,964 6.0% 675,032 -18.8%
Loans held for sale, at the lower of cost or fair value 8,849 9,316 -5.0% 2,583 242.6%
Loans and leases receivable, net of allowance for loan and lease losses 3,910,799 3,812,340 2.6% 3,265,453 19.8%
Accrued interest receivable 10,774 10,987 -1.9% 10,626 1.4%
Customers' liability on acceptances 932 978 -4.7% 2,809 -66.8%
Servicing assets 10,609 10,564 0.4% 11,452 -7.4%
Premises and equipment, net 28,350 28,698 -1.2% 30,112 -5.9%
Goodwill and other intangible assets, net 12,797 12,889 -0.7% 1,619 690.4%
Federal Home Loan Bank ("FHLB") stock, at cost 16,385 16,385 0.0% 16,385 0.0%
Federal Reserve Bank ("FRB") stock, at cost - - - 14,423 -100.0%
Other real estate owned ("OREO"), net 4,636 7,484 -38.1% 9,411 -50.7%
Income tax asset 40,049 48,047 -16.6% 56,456 -29.1%
Bank-owned life insurance 49,722 49,440 0.6% 48,612 2.3%
Prepaid expenses and other assets 31,317 30,019 4.3% 28,311 10.6%
Total assets$ 4,811,821 $ 4,701,346 2.3% $ 4,310,748 11.6%
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing$ 1,241,272 $ 1,203,240 3.2% $ 1,172,444 5.9%
Interest-bearing 2,841,893 2,606,497 9.0% 2,327,548 22.1%
Total deposits 4,083,165 3,809,737 7.2% 3,499,992 16.7%
Accrued interest payable 2,619 2,567 2.0% 3,249 -19.4%
Bank's liability on acceptances 932 978 -4.7% 2,809 -66.8%
FHLB advances 50,000 315,000 -84.1% 250,000 -80.0%
Subordinated debentures 116,795 18,978 515.4% 18,759 522.6%
Accrued expenses and other liabilities 18,768 23,061 -18.6% 25,079 -25.2%
Total liabilities 4,272,279 4,170,321 2.4% 3,799,888 12.4%
Stockholders' equity:
Common stock 33 33 0.0% 33 0.0%
Additional paid-in capital 563,151 562,446 0.1% 558,945 0.8%
Accumulated other comprehensive income (loss) (1,603) (2,394) -33.0% 5,364 -129.9%
Retained earnings 49,395 41,726 18.4% 16,742 195.0%
Less treasury stock (71,434) (70,786) 0.9% (70,224) 1.7%
Total stockholders' equity 539,542 531,025 1.6% 510,860 5.6%
Total liabilities and stockholders' equity$ 4,811,821 $ 4,701,346 2.3% $ 4,310,748 11.6%


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
2017 2016 Change 2016 Change
Interest and dividend income:
Interest and fees on loans$ 45,378 $ 43,780 3.7% $ 39,067 16.2%
Interest on securities 2,520 2,550 -1.2% 3,017 -16.5%
Dividends on FRB and FHLB stock 374 927 -59.7% 542 -31.0%
Interest on deposits in other banks 77 55 40.0% 48 60.4%
Total interest and dividend income 48,349 47,312 2.2% 42,674 13.3%
Interest expense:
Interest on deposits 5,154 4,799 7.4% 3,727 38.3%
Interest on FHLB advances 468 207 126.1% 195 140.0%
Interest on subordinated debentures 373 241 54.8% 183 103.8%
Total interest expense 5,995 5,247 14.3% 4,105 46.0%
Net interest income before provision for loan and lease losses 42,354 42,065 0.7% 38,569 9.8%
Loan and lease loss provision (income) (80) 151 -153.0% (1,525) -94.8%
Net interest income after provision for loan and lease losses 42,434 41,914 1.2% 40,094 5.8%
Noninterest income:
Service charges on deposit accounts 2,528 2,599 -2.7% 3,001 -15.8%
Trade finance and other service charges and fees 1,047 1,132 -7.5% 1,044 0.3%
Gain on sale of Small Business Administration ("SBA") loans 1,464 1,787 -18.1% 858 70.6%
Disposition gains on Purchased Credit Impaired ("PCI") loans 183 1,559 -88.3% 659 -72.2%
Net gain on sales of securities 269 - - - -
Other operating income 1,726 991 74.2% 1,399 23.4%
Total noninterest income 7,217 8,068 -10.5% 6,961 3.7%
Noninterest expense:
Salaries and employee benefits 17,104 16,246 5.3% 15,698 9.0%
Occupancy and equipment 3,982 3,641 9.4% 3,496 13.9%
Data processing 1,631 1,455 12.1% 1,436 13.6%
Professional fees 1,148 1,311 -12.4% 1,464 -21.6%
Supplies and communications 635 683 -7.0% 736 -13.7%
Advertising and promotion 802 1,140 -29.6% 522 53.6%
OREO expense (income) (101) (658) -84.7% 465 -121.7%
Merger and integration costs (31) 312 -109.9% - -
Other operating expenses 2,070 1,825 13.4% 2,251 -8.0%
Total noninterest expense 27,240 25,955 5.0% 26,068 4.5%
Income before provision for income taxes 22,411 24,027 -6.7% 20,987 6.8%
Income tax expense 8,628 9,611 -10.2% 6,183 39.5%
Net income$ 13,783 $ 14,416 -4.4% $ 14,804 -6.9%
Basic earnings per share:$ 0.43 $ 0.45 $ 0.46
Diluted earnings per share:$ 0.43 $ 0.45 $ 0.46
Weighted-average shares outstanding:
Basic 32,001,766 31,956,822 31,846,371
Diluted 32,191,458 32,149,625 31,928,103
Common shares outstanding 32,392,580 32,330,747 32,249,512


Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(In thousands, except ratios)
Three Months Ended
March 31, 2017 December 31, 2016 March 31, 2016
InterestAverage InterestAverage InterestAverage
Average Income /Yield / Average Income /Yield / Average Income /Yield /
Balance ExpenseRate Balance ExpenseRate Balance ExpenseRate
Average Assets
Interest-earning assets:
Loans (1)$ 3,881,686 $ 45,3784.74% $ 3,690,955 $ 43,7804.72% $ 3,192,832 $ 39,0674.92%
Securities (2) 526,549 3,0262.30% 530,241 3,0572.31% 682,370 3,5292.07%
FRB and FHLB stock 16,385 3749.26% 16,385 92722.63% 30,497 5427.11%
Interest-bearing deposits in other banks 38,600 770.81% 40,548 550.54% 44,089 480.44%
Total interest-earning assets 4,463,220 48,8554.44% 4,278,129 47,8194.45% 3,949,788 43,1864.40%
Noninterest-earning assets:
Cash and due from banks 117,802 115,211 114,664
Allowance for loan and lease losses (32,842) (39,235) (42,519)
Other assets 190,041 192,001 199,143
Total noninterest-earning assets 275,001 267,977 271,288
Average total assets$ 4,738,221 $ 4,546,106 $ 4,221,076
Average Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Demand: interest-bearing$ 97,602 $ 190.08% $ 95,399 $ 190.08% $ 95,560 $ 190.08%
Money market and savings 1,406,903 2,6660.77% 1,305,565 2,3400.71% 902,037 1,0840.48%
Time deposits 1,173,184 2,4690.85% 1,165,828 2,4400.83% 1,346,567 2,6240.78%
Total interest-bearing deposits 2,677,689 5,1540.78% 2,566,792 4,7990.74% 2,344,164 3,7270.64%
FHLB advances 270,500 4680.70% 174,674 2070.47% 181,868 1950.43%
Subordinated debentures 30,950 3734.82% 18,919 2415.07% 18,722 1833.93%
Total interest-bearing liabilities 2,979,139 5,9950.82% 2,760,385 5,2470.76% 2,544,754 4,1050.65%
Noninterest-bearing liabilities:
Demand deposits: noninterest-bearing 1,196,151 1,229,042 1,138,822
Other liabilities 28,658 27,497 38,031
Total noninterest-bearing liabilities 1,224,809 1,256,539 1,176,853
Total liabilities 4,203,948 4,016,924 3,721,607
Stockholders' equity 534,273 529,182 499,469
Average Total liabilities and stockholders' equity$ 4,738,221 $ 4,546,106 $ 4,221,076
Net interest income (taxable equivalent basis) (2) $ 42,860 $ 42,572 $ 39,081
Cost of deposits 0.54% 0.50% 0.43%
Net interest spread 3.62% 3.69% 3.75%
Net interest margin 3.89% 3.96% 3.98%
(1) Includes loans held for sale
(2) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

Non-GAAP Financial Measures

Acquisition Accounting

Core loan yield, core deposit costs, net interest income and net interest margin excluding acquisition accounting are 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 results of operations. The calculation of these measures is illustrated below. 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 results 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:

Impact of the Acquisition Accounting Adjustment
Fore the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Core loan yield 4.68% 4.63% 4.63% 4.78% 4.67%
Accretion of discount on purchased loans 0.06% 0.09% 0.08% 0.13% 0.25%
As reported 4.74% 4.72% 4.71% 4.91% 4.92%
Core deposit cost 0.55% 0.54% 0.54% 0.52% 0.54%
Accretion of time deposits premium 0.01% 0.04% 0.07% 0.09% 0.11%
As reported 0.54% 0.50% 0.47% 0.43% 0.43%
Fore the Three Months Ended
March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016
Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
(in thousands)
Net interest income and net interest margin excluding acquisition accounting (1)$ 42,230 3.85% $ 41,489 3.86% $ 38,874 3.75% $ 38,671 3.84% $ 36,164 3.68%
Accretion of discount on Non-PCI loans 527 0.04% 781 0.07% 648 0.06% 994 0.10% 1,754 0.18%
Accretion of discount on PCI loans 54 0.00% 78 0.01% 26 0.00% 97 0.01% 277 0.03%
Accretion of time deposits premium 126 0.01% 314 0.03% 610 0.06% 791 0.08% 942 0.10%
Amortization of subordinated debentures discount (77) -0.01% (90) -0.01% (67) -0.01% (62) -0.01% (56) -0.01%
Net impact 630 0.04% 1,083 0.10% 1,217 0.11% 1,820 0.18% 2,917 0.30%
As reported, on a fully taxable equivalent basis (1)$ 42,860 3.89% $ 42,572 3.96% $ 40,091 3.86% $ 40,491 4.02% $ 39,081 3.98%
(1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

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, per share data and ratios)
March 31, December 31, September 30, June 30, March 31,
Hanmi Financial Corporation 2017 2016 2016 2016 2016
Assets$ 4,811,821 $ 4,701,346 $ 4,402,180 $ 4,441,333 $ 4,310,748
Less goodwill (11,031) (11,031) - - -
Less other intangible assets (1,766) (1,858) (1,456) (1,537) (1,619)
Tangible assets$ 4,799,024 $ 4,688,457 $ 4,400,724 $ 4,439,796 $ 4,309,129
Common Stockholders' equity$ 539,542 $ 531,025 $ 531,198 $ 525,185 $ 510,860
Less goodwill (11,031) (11,031) - - -
Less other intangible assets (1,766) (1,858) (1,456) (1,537) (1,619)
Tangible Common stockholders' equity$ 526,745 $ 518,136 $ 529,742 $ 523,648 $ 509,241
Common Stockholders' equity to assets 11.21% 11.30% 12.07% 11.82% 11.85%
Tangible common equity to tangible assets 10.98% 11.05% 12.04% 11.79% 11.82%
Common shares outstanding 32,392,580 32,330,747 32,252,774 32,260,320 32,249,512
Tangible common equity per common share$ 16.26 $ 16.03 $ 16.42 $ 16.23 $ 15.79


Investor Contacts: Romolo (Ron) Santarosa Senior Executive Vice President & Chief Financial Officer 213-427-5636 Richard Pimentel Senior Vice President & Corporate Finance Officer 213-427-3191 Lasse Glassen Investor Relations Addo Investor Relations 310-829-5400

Source:Hanmi Bank