Form 8-K HANMI FINANCIAL CORP For: Nov 07
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section�13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 7, 2014�
HANMI FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 000-30421 | 95-4788120 |
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 3660 Wilshire Boulevard, Penthouse Suite A Los Angeles, California |
90010 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: � (213) 382-2200
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| � � | [ ��] � | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| � � | [ ��] � | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| � � | [ ��] � | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| � � | [ ��] � | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
This information set forth under "Item 2.02. Results of Operations and Financial Condition," including Exhibit 99.1 attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
On November 7, 2014, Hanmi Financial Corporation ("Hanmi Financial") issued a press release announcing its financial results for the quarter ended September 30, 2014. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K.
Item 9.01. Financial Statements and Exhibits.
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, 2013, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K that we will file hereafter, which could cause actual results to differ from those projected. We undertake no obligation to update such forward-looking statements except as required by law.
(d) Exhibits
99.1
Press release issued by Hanmi Financial dated November 7, 2014.
SIGNATURE
����Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| � | � | HANMI FINANCIAL CORPORATION
(Registrant) |
| November 7, 2014
(Date) |
� | /s/ � C. G. KUM
C. G. Kum President and Chief Executive Officer |
EXHIBIT INDEX
| Exhibit No. | Description |
| 99.1 | Press Release, dated November 7, 2014.* |
| * | Deemed "furnished" and not "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing. |
EXHIBIT 99.1
Hanmi Reports Strong Financial Results for the Third Quarter 2014
Net Income Increases to $13.3 Million, or $0.41 Per Share
Completed Acquisition of Central Bancorp, Inc.
LOS ANGELES, Nov. 7, 2014 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (Nasdaq: HAFC) (or "Hanmi"), the holding company for Hanmi Bank (the "Bank"), today reported third quarter 2014 net income totaled $13.3 million, or $0.41 per diluted share. In the second quarter of 2014, Hanmi earned $11.0 million, or $0.35 per diluted share, and earned $10.4 million, or $0.33 per diluted share, for the third quarter of 2013.
In the first nine months of 2014, net income increased 18.0% to $35.3 million, or $1.10 per diluted share, compared to $29.9 million, or $0.95 per diluted share, in the first nine months of 2013. Earnings from continuing operations increased 20.1%, to $35.8 million in the first nine months of 2014, from $29.8 million in the first nine months of 2013.
Hanmi's acquisition of Central Bancorp, Inc. ("CBI"), the parent company of United Central Bank, was completed on August 31, 2014. The combined companies began operating as Hanmi Financial Corporation and Hanmi Bank, respectively, with banking operations conducted under the Hanmi Bank brand effective as of September 1, 2014. Third quarter 2014 financial results reflect two months of stand-alone operations of Hanmi and one month of combined operations following the completion of the acquisition. Nine-month 2014 financial results reflect eight months of stand-alone operations of Hanmi and one month of combined operations.
Third quarter financial results reflect the impact of the following significant items recorded in conjunction with the CBI acquisition:
- $6.6 million bargain purchase gain
- $3.4 million merger and integration costs
Mr. C. G. Kum, President and Chief Executive Officer, said, "I am very pleased with our third quarter results, which reflect strong growth and the initial benefits from our acquisition of Central Bancorp, Inc. Third quarter profitability exceeded expectations with net income up 20.1% from the prior quarter. We also achieved strong organic loan production for the legacy Hanmi Bank, which totaled $169.9 million in the third quarter compared to $115.2 million in the prior quarter. Asset quality continues to improve as both nonperforming loans and classified assets, excluding PCI loans, declined during the quarter. Furthermore, we are making good progress on our ongoing initiatives to increase operating efficiencies and reduce expenses."
Mr. Kum continued, "With the acquisition of Central Bancorp, Inc. complete, our integration efforts are proceeding as planned. We have identified several areas where we believe we can continue to streamline operations, including selected branch closures, which we expect will occur in early 2015. In addition, we recently announced the hiring of two experienced Regional Presidents who will be responsible for increasing market share and driving profitable growth in Texas and Illinoistwo states where we now have a strong presence. We will look to broaden our market share from our core Korean American customer base to the wider Asian American and mainstream communities by providing our customers with the benefit of a larger product offering, improved lending capacity and enhanced customer service."
| � | � | � | � |
| Third Quarter Results | |||
| (In thousands, except per share data) | |||
| � | � | � | � |
| � | �As of�or for the Three Months Ended� | ||
| � | September 30, | June 30, | September 30, |
| � | 2014 | 2014 | 2013 (1) |
| � | � | � | � |
| Net income | �$�13,264 | �$�11,042 | �$�10,385 |
| Net income per diluted common share | �$�0.41 | �$�0.35 | �$�0.33 |
| � | � | � | � |
| Assets | �$�4,228,332 | �$�3,094,775 | �$�2,844,076 |
| Loans receivable, net | �$�2,628,091 | �$�2,300,810 | �$�2,102,621 |
| Deposits | �$�3,598,154 | �$�2,544,849 | �$�2,429,707 |
| � | � | � | � |
| Return on average assets (2) | 1.49% | 1.54% | 1.47% |
| Pre-tax, pre-provision earnings on average assets (2) | 2.05% | 1.94% | 2.40% |
| Return on average stockholders' equity (2) | 12.23% | 11.05% | 10.38% |
| Net interest margin | 3.67% | 3.94% | 4.28% |
| Efficiency ratio | 59.48% | 56.12% | 51.07% |
| Efficiency ratio (excluding merger and integration costs) | 51.89% | 55.90% | 50.18% |
| � | � | � | � |
| Tangible common equity to tangible assets | 10.25% | 13.78% | 13.92% |
| Tangible common equity per common share | �$�13.58 | �$�13.38 | �$�12.46 |
| � | � | � | � |
| (1)�Results for September 30, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle. | |||
| (2) Amount calculated based on net income from continuing operations. | |||
| � | � | � | � |
Financial Highlights
- Gross loans increased 13.9% to $2.68 billion from the preceding quarter, with $67.0 million purchased credit impaired (PCI) loans and $2.61 billion loans excluding PCI loans (Non-PCI).
- New loans (excluding loan purchases) were $169.9 million, representing $54.6 million increase from the preceding quarter.
- Deposits grew 41.4% from the prior quarter, with noninterest bearing deposits up 13.1% and representing 28.6% of deposits.
- Asset quality improved with classified loans (excluding PCI loans) declining 2.5% in the quarter and down 47.5% year-over-year; no negative loan loss provision for the quarter.
- Third quarter net income increased 20.1% to $13.3 million, or $0.41 per diluted share, compared to $11.0 million, or $0.35 per diluted share, in the prior quarter.
- Net interest margin (NIM) was 3.67% for the third quarter of 2014, down 27 basis points from the second quarter.
- A cash dividend of $0.07 per share, representing a 17% payout ratio for the quarter, was paid on October 10, 2014.
Acquisition Accounting Adjustments
As a result of the acquisition of CBI on August 31, 2014, Hanmi became the second largest Korean American bank in the United States with 49 banking offices and four loan production offices serving communities across California, Colorado, Illinois, New Jersey, New York, Texas, Virginia and Washington. The combined entity has the leading deposit market share among Korean American banks in Illinois, Texas and Virginia which complements Hanmi's substantial market share in California.
The following table shows the calculation for the bargain purchase gain recorded in the third quarter 2014:
| � | � |
| � | �(In thousands)� |
| Consideration paid: | �$�50,000 |
| Assets acquired: | � |
| Cash and cash equivalents | �197,209 |
| Securities available for sale | �664,492 |
| Loans | �294,032 |
| Premises and equipment | �17,735 |
| Other real estate owned | �28,027 |
| Income tax assets | �8,800 |
| Core deposit intangible | �2,213 |
| FDIC loss sharing assets | �9,692 |
| Bank-owned life insurance | �18,296 |
| Other assets | �19,678 |
| Liabilities assumed: | � |
| Deposits | �1,098,997 |
| Subordinated debentures | �18,473 |
| Rescinded stock obligation | �15,720 |
| FHLB advances | �10,000 |
| Other liabilities | �60,391 |
| Total identifiable net assets | �$�56,593 |
| Bargain purchase gain, net of deferred taxes | �$�6,593 |
| � | � |
Results of Operations
Third quarter net interest income, before provision for credit losses, was $30.7 million, up 9.6% from $28.0 million in the second quarter of 2014, and up 7.7% from $28.5 million for the third quarter of 2013. Interest and dividend income increased 9.5% from the preceding quarter and increased 8.0% from the third quarter a year ago, while interest expense increased 9.2% from the preceding quarter and 10.2% from the year ago quarter. Year-to-date, net interest income, before provision for credit losses, improved 6.6% to $86.6 million compared to $81.2 million for the first nine months of 2013.
Net interest margin fell 27 basis points to 3.67% for the third quarter of 2014 from the second quarter of 2014 and declined 61 basis points from a year ago. The compression in NIM primarily reflects a lower yield on securities and interest-bearing deposits acquired from CBI and the lower average yields on the new and renewing loans in the current low rate environment. For the first nine months of 2014, NIM was down 22 basis points totaling 3.86% compared to 4.08% for the first nine months of 2013. The following table details the asset yields, liability costs, spread and margin.
| � | � | � | � | � | � | � |
| � | �Three Months Ended� | Nine Months Ended | ||||
| � | September 30, | June 30, | September 30, | September 30, | � | September 30, |
| � | 2014 | 2014 | 2013 | 2014 | � | 2013 |
| � | � | � | � | � | � | � |
| Interest-earning assets | 4.09% | 4.38% | 4.75% | 4.31% | � | 4.59% |
| Interest-bearing liabilities | 0.66% | 0.74% | 0.77% | 0.72% | � | 0.81% |
| Net interest spread | 3.43% | 3.64% | 3.98% | 3.59% | � | 3.78% |
| Net interest margin | 3.67% | 3.94% | 4.28% | 3.86% | � | 4.08% |
| � | � | � | � | � | � | � |
In the third quarter of 2014, net interest income, after provision for credit losses, totaled $30.7 million, compared to $31.9 million in the second quarter of 2014, and $28.5 million in the third quarter a year ago. For the first nine months of 2014, net interest income after loan loss provision was $93.8 million, compared to $81.2 million in the first nine months of 2013. Hanmi did not record any loan loss provision in the third quarter of 2014 but recorded a negative loan loss provision totaling $7.2 million in the first nine months of 2014 and no loan loss provisions in the prior year periods.
Noninterest income was $14.3 million in the third quarter of 2014, compared to $5.1 million in the preceding quarter and $6.1 million in the year ago quarter. In the third quarter of 2014, in conjunction with the completion of the CBI acquisition, the company recorded a $6.6 million bargain purchase gain. In addition, the third quarter 2014 gain on sales of the guaranteed portion of SBA loans increased to $1.2 million from $498,000 in the preceding quarter, and $1.0 million in the third quarter a year ago, reflecting higher SBA loan production and premium. In the third quarter, SBA loan sales totaled $14.3 million, compared to $6.8 million in the preceding quarter and $15.5 million in the third quarter a year ago. Other operating income increased to $2.2 million in the third quarter of 2014, compared to $253,000 in the preceding quarter and $416,000 in the third quarter of 2013. The increase was due primarily to an $819,000 recovery realized from an OREO property and an $807,000 gain recognized from the early termination of CBI's retirement plan as of September 30, 2014.
Noninterest expense increased 44.2% to $26.8 million in the third quarter of 2014, compared to $18.6 million in the second quarter of 2014, and up 51.8% from $17.6 million in the third quarter a year ago, primarily related to the acquisition of CBI. Salary and employee benefits costs increased 25.0% to $12.8 million in the third quarter, compared to $10.3 million in the preceding quarter and grew 41.2% from $9.1 million in the third quarter of 2013. Merger and integration costs increased to $3.4 million in the third quarter, compared to $72,000 in the preceding quarter. There were no such costs in the third quarter of 2013. Professional fees increased to $1.4 million in the third quarter, compared to $652,000 in the preceding quarter and from $599,000 in the third quarter of 2013.
The third quarter provision for income taxes from continuing operations was $5.0 million, which is an effective tax rate of 27.25%, compared to $6.9 million, or 37.37%, in the second quarter of 2014 and $6.6 million, or 38.95%, in the third quarter a year ago. For the first nine months of 2014, the provision for income taxes from continuing operations was $19.7 million, or 35.48%, compared to $17.5 million, or 37.04%, in the first nine months of 2013. The sequential and year-over-year reduction in tax rate can be attributed to the adjustment for the bargain purchase gain (excluding this gain and transaction costs, an effective tax rate for the third quarter of 2014 would be 40.03%).
Balance Sheet
Assets increased $1.1 billion during the third quarter of 2014 to $4.2 billion due mainly to the acquisition of CBI on August 31, 2014. The investment portfolio increased 123.1% to $1.1 billion at September 30, 2014, from $506.0 million at June 30, 2014, and increased 194.6% from $383.1 million a year ago.
Loans receivable, net of allowance for loan losses, increased 14.2% in the quarter and 25.0% year-over-year to $2.6 billion at September 30, 2014, from $2.3 billion at June 30, 2014 and $2.1 billion a year ago. Average gross loans, net of deferred loan costs, increased to $2.5 billion for the third quarter of 2014, up from $2.3 billion for the preceding quarter and $2.2 billion for the third quarter a year ago. For the first nine months of 2014, average gross loans, net of deferred loan costs, increased to $2.4 billion from $2.1 billion in the first nine months of 2013.
Third quarter new loans totaled $169.9 million, consisting mainly of $132.2 million of commercial real estate loans, $16.0 million of C&I loans, and $20.9 million of SBA loans. Loan commitments were $201.8 million in the third quarter of 2014, which included loans approved but not funded. Excluding $57.1 million loan purchases in the prior quarter, new loans increased $54.7 million, or 47.4%, in the third quarter of 2014.
Average deposits were $2.88 billion during the third quarter, up from $2.52 billion for the preceding quarter and $2.37 billion for the third quarter of 2013. Due mainly to the CBI acquisition, the cost of deposits declined to 0.45% in the third quarter from 0.52% a year ago. The period-end deposit mix is detailed in the table below.
| � | � | � | � |
| � | September 30, | June 30, | September 30, |
| � | 2014 | 2014 | 2013 |
| � | � | � | � |
| Demand-noninterest-bearing | 28.6% | 35.8% | 32.0% |
| Savings | 3.5% | 4.4% | 4.7% |
| Money market checking and NOW accounts | 22.1% | 21.9% | 22.2% |
| Time deposits of $100,000 or more | 25.5% | 19.1% | 20.3% |
| Other time deposits | 20.3% | 18.8% | 20.8% |
| Total deposits | 100.0% | 100.0% | 100.0% |
| � | � | � | � |
| � | � | � | � |
At September 30, 2014, tangible common stockholders' equity was $433.0 million, or 10.25% of tangible assets, compared to $395.7 million, or 13.92%, of tangible assets, a year ago. Tangible book value per share was $13.58, compared to $13.38 three months earlier and $12.46 at September 30, 2013. On October 10, 2014, Hanmi paid a cash dividend of $0.07 per share, representing an aggregate dividend of $6.7 million.
Asset Quality
Asset quality continued to improve with classified loans declining 2.5% in the quarter and down 47.5% year-over-year. Nonperforming loans ("NPLs") were down to $24.0 million at the end of the quarter, compared to $25.4 million at the end of the second quarter of 2014, but were up from $22.8 million a year ago. Troubled debt restructurings ("TDRs") totaled $26.4 million at September 30, 2014, and $23.6 million at June 30, 2014. Of these TDRs, $11.2 million were included in NPLs at September 30, 2014, compared to $11.1 million at June 30, 2014. The following table shows NPLs in each category:
| � | � | � | � | � | � | � |
| � | September 30, 2014 | June 30, 2014 | September 30, 2013 | |||
| � | � | % of Total | � | % of Total | � | % of Total |
| � | �Amount� | NPLs | �Amount� | NPLs | �Amount� | NPLs |
| � | � | � | �(In thousands)� | � | � | |
| Real estate loans: | � | � | � | � | � | � |
| Commercial property | � | � | � | � | � | � |
| Retail | �$�2,062 | 8.6% | �$�2,802 | 11.0% | �$�768 | 3.4% |
| Hotel/Motel | �3,051 | 12.7% | �3,631 | 14.3% | �5,334 | 23.4% |
| Gas station | �5,208 | 21.7% | �5,356 | 21.1% | �1,812 | 8.0% |
| Other | �3,689 | 15.4% | �4,369 | 17.2% | �3,764 | 16.5% |
| Residential property | �1,516 | 6.3% | �1,162 | 4.6% | �1,659 | 7.3% |
| Commercial & industrial loans: | � | � | � | � | � | � |
| Commercial term | �6,060 | 25.2% | �5,965 | 23.5% | �7,130 | 31.3% |
| Commercial lines of credit | �674 | 2.8% | �521 | 2.1% | �830 | 3.6% |
| Consumer loans | �1,758 | 7.3% | �1,575 | 6.2% | �1,479 | 6.5% |
| Total nonperforming Non-PCI loans | �$�24,018 | 100.0% | �$�25,381 | 100.0% | �$�22,776 | 100.0% |
| � | � | � | � | � | � | � |
Other-real-estate-owned ("OREO") totaled $24.8 million at the end of the third quarter, up significantly from $1.7 million in the preceding quarter and $290,000 a year ago. This increase in OREO is primarily attributable to an addition of $22.3 million from the CBI acquisition. Classified loans (excluding PCI loans) declined to $45.0 million, or 1.68% of gross loans, at September 30, 2014, from $46.2 million, or 1.96% of gross loans, at June 30, 2014, and were down from $85.8 million, or 3.97% of gross loans, a year ago. Decline in classified loans (excluding PCI loans) reflects $3.5 million in loan upgrades, $3.0 million in repayments and others, and $1.9 million charge offs, offset by $7.2 million new classified loans in the third quarter of 2014.
In the third quarter, recoveries of previously charged-off loans totaled $663,000 compared to $1.7 million in the preceding quarter and $2.4 million in the third quarter of 2013. Gross charge-offs in the third quarter totaled $1.4 million, compared to $2.5 million in the preceding quarter and $4.6 million a year ago. As a result, there was a net charge-offs of $755,000 in the third quarter of 2014, compared to net charge-offs of $806,000 in the preceding quarter and net charge-offs of $2.2 million a year ago.
The allowance for loan losses totaled $51.2 million, a coverage ratio of 1.91% of gross loans and 213.09% of NPLs as of September 30, 2014, compared to 2.67% of gross loans and 253.07% of NPLs as of September 30, 2013. No allowance for credit losses was established on the acquired CBI loans in the third quarter of 2014.
Conference Call
Management will host a conference call today, November 7, 2014, at 8:00 a.m. PT (11:00 a.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 8:00 a.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, New Jersey and New York with 49 full-service branches as well as loan production offices in 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 "forwardlooking 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, 2013, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K that we will file hereafter, which could cause actual results to differ from those projected. We undertake no obligation to update such forward-looking statements except as required by law.
| � | � | � | � | � | � |
| Hanmi Financial Corporation and Subsidiaries | |||||
| Consolidated Balance Sheets (Unaudited) | |||||
| (In thousands) | |||||
| � | � | � | � | � | � |
| � | September 30, | June 30, | Percentage | September 30, | Percentage |
| � | 2014 | 2014 | Change | 2013 (1) | Change |
| Assets | � | � | � | � | � |
| Cash and cash equivalents | �$�197,016 | �$�123,782 | 59.2% | �$�193,854 | 1.6% |
| Securities available for sale, at fair value | �1,128,624 | �505,977 | 123.1% | �383,057 | 194.6% |
| Loans held for sale, at the lower of cost or fair value | �7,757 | �3,842 | 101.9% | �5,228 | 48.4% |
| Loans receivable, net of allowance for loan losses� | �2,628,091 | �2,300,810 | 14.2% | �2,102,621 | 25.0% |
| Accrued interest receivable | �9,880 | �6,355 | 55.5% | �6,957 | 42.0% |
| Premises and equipment, net | �31,187 | �13,929 | 123.9% | �14,205 | 119.5% |
| Other real estate owned, net | �24,781 | �1,714 | 1345.8% | �290 | 8445.2% |
| Customers' liability on acceptances | �2,428 | �3,186 | -23.8% | �1,535 | 58.2% |
| Servicing assets | �7,844 | �6,355 | 23.4% | �6,385 | 22.9% |
| FDIC loss sharing asset | �7,696 | �-- | -- | �--� | -- |
| Other intangible assets, net | �2,179 | �-- | -- | �1,212 | 79.8% |
| Investment in federal home loan bank stock, at cost | �17,579 | �16,385 | 7.3% | �14,060 | 25.0% |
| Investment in federal reserve bank stock, at cost | �12,273 | �11,514 | 6.6% | �13,200 | -7.0% |
| Income tax asset | �72,330 | �53,160 | 36.1% | �62,037 | 16.6% |
| Bank-owned life insurance | �30,372 | �30,147 | 0.7% | �29,468 | 3.1% |
| Prepaid expenses | �2,753 | �2,570 | 7.1% | �1,986 | 38.6% |
| Other assets | �45,542 | �15,049 | 202.6% | �7,981 | 470.6% |
| Total assets | �$�4,228,332 | �$�3,094,775 | 36.6% | �$�2,844,076 | 48.7% |
| � | � | � | � | � | � |
| Liabilities and Stockholders' Equity | � | � | � | � | � |
| Liabilities: | � | � | � | � | � |
| Deposits: | � | � | � | � | � |
| Noninterest-bearing | �$�1,029,343 | �$�910,320 | 13.1% | �$�778,345 | 32.2% |
| Interest-bearing | �2,568,811 | �1,634,529 | 57.2% | �1,651,362 | 55.6% |
| Total deposits | �3,598,154 | �2,544,849 | 41.4% | �2,429,707 | 48.1% |
| Accrued interest payable | �3,030 | �3,423 | -11.5% | �2,705 | 12.0% |
| Bank's liability on acceptances | �2,428 | �3,186 | -23.8% | �1,535 | 58.2% |
| Federal home loan bank advances | �110,000 | �97,000 | 13.4% | �2,645 | 4058.8% |
| Rescinded stock obligation | �15,720 | �-- | -- | �-- | -- |
| Subordinated debentures | �18,509 | �-- | -- | �-- | -- |
| Accrued expenses and other liabilities | �45,297 | �19,969 | 126.8% | �10,589 | 327.8% |
| Total liabilities | �3,793,138 | �2,668,427 | 41.6% | �2,447,181 | 55.0% |
| � | � | � | � | � | � |
| Stockholders' equity: | � | � | � | � | � |
| Common stock | �257 | �257 | 0.0% | �257 | 0.0% |
| Additional paid-in capital | �554,446 | �553,741 | 0.1% | �551,881 | 0.5% |
| Accumulated other comprehensive (loss) income | �(5,065) | �(2,150) | 135.6% | �(4,469) | 13.3% |
| Accumulated deficit | �(44,586) | �(55,642) | -19.9% | �(80,916) | -44.9% |
| Less treasury stock | �(69,858) | �(69,858) | 0.0% | �(69,858) | 0.0% |
| Total stockholders' equity | �435,194 | �426,348 | 2.1% | �396,895 | 9.6% |
| Total liabilities and stockholders' equity | �$�4,228,332 | �$�3,094,775 | 36.6% | �$�2,844,076 | 48.7% |
| � | � | � | � | � | � |
| (1) Results for September 30, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle. | |||||
| � | � | � | � | � | � |
| � | � | � | � | � | � |
| Hanmi Financial Corporation and Subsidiaries | |||||
| Consolidated Statements of Income (Unaudited) | |||||
| (In thousands, except share and per share data) | |||||
| � | � | � | � | � | � |
| � | �Three Months Ended� | ||||
| � | September 30, | June 30, | Percentage | September 30, | Percentage |
| � | 2014 | 2014 | Change | 2013 (1) | Change |
| Interest and Dividend Income: | � | � | � | � | � |
| Interest and fees on loans | �$�30,499 | �$�28,355 | 7.6% | �$�29,098 | 4.8% |
| Taxable interest on investment securities | �3,138 | �2,375 | 32.1% | �2,040 | 53.8% |
| Tax-exempt interest on investment securities | �20 | �20 | 0.0% | �69 | -71.0% |
| Interest on interest-bearing deposits in other banks | �29 | �18 | 61.1% | �28 | 3.6% |
| Dividends on federal reserve bank stock | �173 | �172 | 0.6% | �198 | -12.6% |
| Dividends on federal home loan bank stock | �290 | �236 | 22.9% | �194 | 49.5% |
| Total interest and dividend income | �34,149 | �31,176 | 9.5% | �31,627 | 8.0% |
| Interest Expense: | � | � | � | � | � |
| Interest on deposits | �3,278 | �3,153 | 4.0% | �3,117 | 5.2% |
| Interest on federal home loan bank advances | �37 | �30 | 23.3% | �36 | 2.8% |
| Interest on subordinated debentures | �73 | �-- | -- | �-- | -- |
| Interest on rescinded stock obligation | �87 | �-- | -- | �-- | -- |
| Total interest expense | �3,475 | �3,183 | 9.2% | �3,153 | 10.2% |
| Net interest income before provision for credit losses | �30,674 | �27,993 | 9.6% | �28,474 | 7.7% |
| Negative provision for credit losses | �-- | �(3,866) | -100.0% | �-- | -- |
| Net interest income after provision for credit losses | �30,674 | �31,859 | -3.7% | �28,474 | 7.7% |
| Noninterest Income: | � | � | � | � | � |
| Bargain purchase gain, net of deferred taxes | �6,593 | �-- | -- | �-- | -- |
| Service charges on deposit accounts | �2,883 | �2,568 | 12.3% | �2,730 | 5.6% |
| Trade finance & other service charges and fees | �1,153 | �1,166 | -1.1% | �1,078 | 7.0% |
| Bank-owned life insurance income | �225 | �224 | 0.4% | �230 | -2.2% |
| Gain on sales of SBA loans guaranteed portion | �1,221 | �498 | 145.2% | �994 | 22.8% |
| Net gain on sales of investment securities | �67 | �364 | -81.6% | �611 | -89.0% |
| Other operating income | �2,179 | �253 | 761.3% | �416 | 423.8% |
| Total noninterest income | �14,321 | �5,073 | 182.3% | �6,059 | 136.4% |
| Noninterest Expense: | � | � | � | � | � |
| Salaries and employee benefits | �12,847 | �10,280 | 25.0% | �9,101 | 41.2% |
| Occupancy and equipment | �3,098 | �2,469 | 25.5% | �2,561 | 21.0% |
| Merger and integration costs | �3,415 | �72 | 4643.1% | �-- | -- |
| Unconsummated acquisition costs | �-- | �-- | -- | �307 | -100.0% |
| Deposit insurance premiums and regulatory assessments | �513 | �399 | 28.6% | �308 | 66.6% |
| Data processing | �1,476 | �1,112 | 32.7% | �1,146 | 28.8% |
| Other real estate owned expense | �78 | �-- | -- | �(59) | -232.2% |
| Professional fees | �1,386 | �652 | 112.6% | �599 | 131.4% |
| Directors and officers liability insurance | �191 | �191 | 0.0% | �219 | -12.8% |
| Supplies and communications | �628 | �595 | 5.5% | �533 | 17.8% |
| Advertising and promotion | �809 | �753 | 7.4% | �1,039 | -22.1% |
| Loan-related expense | �58 | �61 | -4.9% | �91 | -36.3% |
| Amortization of other intangible assets | �33 | �-- | -- | �-- | -- |
| Other operating expenses | �2,231 | �1,973 | 13.1% | �1,791 | 24.6% |
| Total noninterest expense | �26,763 | �18,557 | 44.2% | �17,636 | 51.8% |
| Income from continuing operations before provision for income taxes | �18,232 | �18,375 | -0.8% | �16,897 | 7.9% |
| Provision for income taxes | �4,968 | �6,866 | -27.6% | �6,582 | -24.5% |
| Income from continuing operations, net of taxes | �$�13,264 | �$�11,509 | 15.2% | �$�10,315 | 28.6% |
| Discontinued operations | � | � | � | � | � |
| (Loss) income from operations of discontinued subsidiary (including gain on disposal of $51 in the second quarter of 2014) | �$�-- | �$�(1) | -100.0% | �$�112 | -100.0% |
| Income tax expense | �-- | �466 | -100.0% | �42 | -100.0% |
| (Loss) income from discontinued operations | �-- | �(467) | -100.0% | �70 | -100.0% |
| Net income | �$�13,264 | �$�11,042 | 20.1% | �$�10,385 | 27.7% |
| � | � | � | � | � | � |
| Basic earnings per share: | � | � | � | � | � |
| Income from continuing operations, net of taxes | �$�0.42 | �$�0.36 | � | �$�0.33 | � |
| Income from discontinued operations, net of taxes | �-- | �(0.01) | � | �-- | � |
| Basic earnings per share | �$�0.42 | �$�0.35 | � | �$�0.33 | � |
| Diluted earnings per share: | � | � | � | � | � |
| Income from continuing operations, net of taxes | �$�0.41 | �$�0.36 | � | �$�0.33 | � |
| Income from discontinued operations, net of taxes | �-- | �(0.01) | � | �-- | � |
| Diluted earnings per share | �$�0.41 | �$�0.35 | � | �$�0.33 | � |
| � | � | � | � | � | � |
| Weighted-average shares outstanding: | � | � | � | � | � |
| Basic | �31,708,581 | �31,681,033 | � | �31,621,049 | � |
| Diluted | �32,001,419 | �31,974,253 | � | �31,733,004 | � |
| Common shares outstanding | �31,894,429 | �31,860,956 | � | �31,754,115 | � |
| � | � | � | � | � | � |
| � | � | � | � |
| Hanmi Financial Corporation and Subsidiaries | |||
| Consolidated Statements of Income, Continued (Unaudited) | |||
| (In thousands, except share and per share data) | |||
| � | � | � | � |
| � | �Nine Months Ended� | ||
| � | September 30, | September 30, | Percentage |
| � | 2014 | 2013 (1) | Change |
| Interest and Dividend Income: | � | � | � |
| Interest and fees on loans | �$�87,044 | �$�83,736 | 4.0% |
| Taxable interest on investment securities | �8,050 | �6,256 | 28.7% |
| Tax-exempt interest on investment securities | �116 | �237 | -51.1% |
| Interest on federal funds sold | �-- | �6 | -100.0% |
| Interest on interest-bearing deposits in other banks | �67 | �140 | -52.1% |
| Dividends on federal reserve bank stock | �513 | �577 | -11.1% |
| Dividends on federal home loan bank stock | �762 | �449 | 69.7% |
| Total Interest and Dividend Income | �96,552 | �91,401 | 5.6% |
| Interest Expense: | � | � | � |
| Interest on deposits | �9,653 | �9,376 | 3.0% |
| Interest on federal home loan bank advances | �116 | �115 | 0.9% |
| Interest on subordinated debentures | �73 | �678 | -89.2% |
| Interest on rescinded stock obligation | �87 | �-- | -- |
| Total interest expense | �9,929 | �10,169 | -2.4% |
| Net interest income before provision for credit losses | �86,623 | �81,232 | 6.6% |
| Negative provision for credit losses | �(7,166) | �-- | -- |
| Net interest income after provision for credit losses | �93,789 | �81,232 | 15.5% |
| Noninterest Income: | � | � | � |
| Bargain purchase gain, net of deferred taxes | �6,593 | �-- | -- |
| Service charges on deposit accounts | �7,924 | �8,662 | -8.5% |
| Trade finance & other service charges and fees | �3,341 | �3,402 | -1.8% |
| Bank-owned life insurance income | �672 | �693 | -3.0% |
| Gain on sales of SBA loans guaranteed portion | �2,267 | �6,064 | -62.6% |
| Net loss on sales of other loans | �-- | �(557) | -100.0% |
| Net gain on sales of investment securities | �1,852 | �923 | 100.7% |
| Other operating income | �2,588 | �758 | 241.4% |
| Total noninterest income | �25,237 | �19,945 | 26.5% |
| Noninterest Expense: | � | � | -- |
| Salaries and employee benefits | �33,386 | �26,126 | 27.8% |
| Occupancy and equipment | �7,964 | �7,532 | 5.7% |
| Merger and integration costs | �3,572 | �-- | -- |
| Unconsummated acquisition costs | �-- | �1,331 | -100.0% |
| Deposit insurance premiums and regulatory assessments | �1,349 | �1,059 | 27.4% |
| Data processing | �3,746 | �3,436 | 9.0% |
| Other real estate owned expense | �84 | �(47) | -278.7% |
| Professional fees | �2,786 | �4,095 | -32.0% |
| Directors and officers liability insurance | �574 | �657 | -12.6% |
| Supplies and communications | �1,725 | �1,593 | 8.3% |
| Advertising and promotion | �2,142 | �2,419 | -11.5% |
| Loan-related expense | �203 | �328 | -38.1% |
| Amortization of other intangible assets | �33 | �-- | -- |
| Other operating expenses | �6,031 | �5,369 | 12.3% |
| Total noninterest expense | �63,595 | �53,898 | 18.0% |
| Income from continuing operations before provision for income taxes | �55,431 | �47,279 | 17.2% |
| Provision for income taxes | �19,667 | �17,510 | 12.3% |
| Income from continuing operations, net of taxes | �$�35,764 | �$�29,769 | 20.1% |
| Discontinued operations | � | � | � |
| Income from operations of discontinued subsidiary (including gain on disposal of $51 in the second quarter of 2014) | �$�37 | �$�242 | -84.7% |
| Income tax expense | �481 | �81 | 493.8% |
| (Loss) income from discontinued operations | �(444) | �161 | -375.8% |
| Net income | �$�35,320 | �$�29,930 | 18.0% |
| � | � | � | -- |
| Basic earnings per share: | � | � | � |
| Income from continuing operations, net of taxes | �$�1.13 | �$�0.94 | � |
| Income from discontinued operations, net of taxes | �(0.02) | �0.01 | � |
| Basic earnings per share | �$�1.11 | �$�0.95 | � |
| Diluted earnings per share: | � | � | � |
| Income from continuing operations, net of taxes | �$�1.12 | �$�0.94 | � |
| Income from discontinued operations, net of taxes | �(0.02) | �0.01 | � |
| Diluted earnings per share | �$�1.10 | �$�0.95 | � |
| � | � | � | � |
| Weighted-average shares outstanding: | � | � | � |
| Basic | �31,683,288 | �31,583,897 | � |
| Diluted | �31,967,876 | �31,652,795 | � |
| Common shares outstanding | �31,894,429 | �31,754,115 | � |
| � | � | � | � |
| (1) Results for September 30, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle. | |||
| � | � | � | � |
| � | � | � | � | � | � |
| Hanmi Financial Corporation and Subsidiaries | |||||
| Selected Financial Data (Unaudited) | |||||
| (In thousands) | |||||
| � | � | � | � | � | � |
| � | �As of or for the Three Months Ended� | �As of or for the Nine Months Ended� | |||
| � | September 30, | June 30, | September 30, | September 30, | September 30, |
| � | 2014 | 2014 | 2013 (4) | 2014 | 2013 (4) |
| Average balances: | � | � | � | � | � |
| Average gross loans, net of deferred loan costs (1) | �$�2,498,554 | �$�2,298,996 | �$�2,186,884 | �$�2,352,069 | �$�2,142,462 |
| Average investment securities | �749,566 | �526,474 | �414,019 | �603,771 | �446,322 |
| Average interest-earning assets | �3,315,959 | �2,854,031 | �2,644,844 | �2,999,013 | �2,665,087 |
| Average assets | �3,520,066 | �3,001,050 | �2,788,548 | �3,166,821 | �2,803,067 |
| Average deposits | �2,884,535 | �2,522,269 | �2,374,847 | �2,635,780 | �2,363,272 |
| Average borrowings | �118,436 | �39,146 | �5,587 | �71,709 | �34,308 |
| Average interest-bearing liabilities | �2,076,688 | �1,718,887 | �1,630,637 | �1,850,917 | �1,673,559 |
| Average stockholders' equity | �430,327 | �417,874 | �394,081 | �433,854 | �389,543 |
| Average tangible equity | �429,801 | �417,874 | �392,801 | �433,297 | �388,243 |
| � | � | � | � | � | � |
| Performance ratios: | � | � | � | � | � |
| Return on average assets (2) (5) | 1.49% | 1.54% | 1.47% | 1.51% | 1.42% |
| Pre-tax, pre-provision earnings on average assets (2) (5) | 2.05% | 1.94% | 2.40% | 2.04% | 2.26% |
| Return on average stockholders' equity (2) (5) | 12.23% | 11.05% | 10.38% | 11.02% | 10.22% |
| Return on average tangible equity (2) (5) | 12.24% | 11.05% | 10.42% | 11.04% | 10.25% |
| Efficiency ratio | 59.48% | 56.12% | 51.07% | 56.85% | 53.27% |
| Efficiency ratio (excluding merger and integration costs) | 51.89% | 55.90% | 50.18% | 53.66% | 51.96% |
| Net interest spread (2), (3) | 3.43% | 3.64% | 3.98% | 3.59% | 3.78% |
| Net interest margin (2), (3) | 3.67% | 3.94% | 4.28% | 3.86% | 4.08% |
| Average stockholders' equity to average assets | 12.22% | 13.92% | 14.13% | 13.70% | 13.90% |
| � | � | � | � | � | � |
| Allowance for loan losses: | � | � | � | � | � |
| Balance at beginning of period | �$�51,886 | �$�56,593 | �$�59,876 | �$�57,555 | �$�63,305 |
| Provision (negative provision) charged to operating expense | �48 | �(3,901) | �(10) | �(7,462) | �494 |
| Net (charge-offs) recoveries | �(755) | �(806) | �(2,227) | �1,086 | �(6,160) |
| Balance at end of period | �$�51,179 | �$�51,886 | �$�57,639 | �$�51,179 | �$�57,639 |
| � | � | � | � | � | � |
| Asset quality ratios: | � | � | � | � | � |
| Nonperforming assets to assets | 1.15% | 0.88% | 0.81% | 1.15% | 0.81% |
| Nonperforming loans to gross loans | 0.90% | 1.08% | 1.05% | 0.90% | 1.05% |
| Nonperforming assets to allowance for loan losses | 95.35% | 52.22% | 40.02% | 95.35% | 40.02% |
| Net loan charge-offs (recoveries) to average gross loans (2) | 0.12% | 0.14% | 0.41% | -0.06% | 0.38% |
| Allowance for loan losses to gross loans | 1.91% | 2.21% | 2.67% | 1.91% | 2.67% |
| Allowance for loan losses to nonperforming loans | 213.09% | 204.43% | 253.07% | 213.09% | 253.07% |
| � | � | � | � | � | � |
| Allowance for off-balance sheet items: | � | � | � | � | � |
| Balance at beginning of period | �$�1,592 | �$�1,557 | �$�1,320 | �$�1,248 | �$�1,824 |
| (Negative provision) provision charged to operating expense | �(48) | �35 | �10 | �296 | �(494) |
| Balance at end of period | �$�1,544 | �$�1,592 | �$�1,330 | �$�1,544 | �$�1,330 |
| � | � | � | � | � | � |
| Nonperforming assets: | � | � | � | � | � |
| Nonaccrual loans | �$�24,003 | �$�25,381 | �$�22,776 | � | � |
| Loans 90 days or more past due and still accruing | �15 | �-- | �-- | � | � |
| Nonperforming loans | �24,018 | �25,381 | �22,776 | � | � |
| Other real estate owned, net | �24,781 | �1,714 | �290 | � | � |
| Nonperforming assets | �48,799 | �27,095 | �23,066 | � | � |
| Nonperforming loans in loans held for sale | �-- | �-- | �-- | � | � |
| Nonperforming assets (including loans held for sale) | �$�48,799 | �$�27,095 | �$�23,066 | � | � |
| � | � | � | � | � | � |
| Delinquent loans (30 to 89 days past due and still accruing) | �$�7,506 | �$�5,290 | �$�6,756 | � | � |
| � | � | � | � | � | � |
| Delinquent loans to gross loans | 0.28% | 0.23% | 0.31% | � | � |
| � | � | � | � | � | � |
| (1)Included loans held for sale | |||||
| (2)�Annualized | |||||
| (3)Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate. | |||||
| (4)Results for September 30, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle. | |||||
| (5)Amount calculated based on net income from continuing operations. | |||||
| � | � | � | � | � | � |
| � | � | � | � |
| Hanmi Financial Corporation and Subsidiaries | |||
| Selected Financial Data, Continued (Unaudited) | |||
| (In thousands) | |||
| � | � | � | � |
| � | �As of or for the Three Months Ended� | ||
| � | September 30, | June 30, | September 30, |
| � | 2014 | 2014 | 2013 (4) |
| Loan portfolio: | � | � | � |
| Real estate loans | �$�2,302,424 | �$�1,981,522 | �$�1,838,700 |
| Residential loans | �108,730 | �108,561 | �82,519 |
| Commercial and industrial loans | �235,898 | �230,309 | �203,987 |
| Consumer loans | �28,907 | �28,843 | �34,065 |
| Gross loans | �2,675,959 | �2,349,235 | �2,159,271 |
| Deferred loan costs | �3,311 | �3,461 | �989 |
| Gross loans, net of deferred loan costs | �2,679,270 | �2,352,696 | �2,160,260 |
| Allowance for loan losses | �(51,179) | �(51,886) | �(57,639) |
| Loans receivable, net | �2,628,091 | �2,300,810 | �2,102,621 |
| Loans held for sale, at the lower of cost or fair value | �7,757 | �3,842 | �5,228 |
| Total loans receivable, net | �$�2,635,848 | �$�2,304,652 | �$�2,107,849 |
| � | � | � | � |
| Loan mix: | � | � | � |
| Real estate loans | 86.0% | 84.4% | 85.2% |
| Residential loans | 4.1% | 4.6% | 3.8% |
| Commercial and industrial loans | 8.8% | 9.8% | 9.4% |
| Consumer loans | 1.1% | 1.2% | 1.6% |
| Total loans | 100.0% | 100.0% | 100.0% |
| � | � | � | � |
| Deposit portfolio: | � | � | � |
| Demand-noninterest-bearing | �$�1,029,343 | �$�910,320 | �$�778,345 |
| Savings | �121,667 | �110,552 | �113,892 |
| Money market checking and NOW accounts | �796,849 | �557,887 | �539,130 |
| Time deposits of $100,000 or more | �919,085 | �487,041 | �493,532 |
| Other time deposits | �731,210 | �479,049 | �504,808 |
| Total deposits | �$�3,598,154 | �$�2,544,849 | �$�2,429,707 |
| � | � | � | � |
| Deposit mix: | � | � | � |
| Demand-noninterest-bearing | 28.6% | 35.8% | 32.0% |
| Savings | 3.5% | 4.4% | 4.7% |
| Money market checking and NOW accounts | 22.1% | 21.9% | 22.2% |
| Time deposits of $100,000 or more | 25.5% | 19.1% | 20.3% |
| Other time deposits | 20.3% | 18.8% | 20.8% |
| Total deposits | 100.0% | 100.0% | 100.0% |
| � | � | � | � |
| Capital ratios: | � | � | � |
| Hanmi Financial | � | � | � |
| Total risk-based capital ratio | 16.33% | 17.92% | 17.72% |
| Tier 1 risk-based capital ratio | 15.08% | 16.65% | 16.45% |
| Tier 1 leverage capital ratio | 12.80% | 14.09% | 13.68% |
| Hanmi Bank | � | � | � |
| Total risk-based capital ratio | 16.28% | 17.17% | 17.02% |
| Tier 1 risk-based capital ratio | 15.00% | 15.91% | 15.75% |
| Tier 1 leverage capital ratio | 12.81% | 13.49% | 13.10% |
| � | � | � | � |
| � | � | � | � | � | � | � | � | � | � |
| Hanmi Financial Corporation and Subsidiaries | |||||||||
| Average Balance, Average Yield Earned and Average Rate Paid (Unaudited) | |||||||||
| (In thousands) | |||||||||
| � | � | � | � | � | � | � | � | � | � |
| � | Three Months Ended | ||||||||
| � | September 30, 2014 | June 30, 2014 | September 30, 2013 (1) | ||||||
| � | � | Interest | Average | � | Interest | Average | � | Interest | Average |
| � | Average | Income / | Yield / | Average | Income / | Yield / | Average | Income / | Yield / |
| � | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate |
| Assets | � | � | � | � | � | � | � | � | � |
| Interest-earning assets: | � | � | � | � | � | � | � | � | � |
| Gross loans, net of deferred loan costs | �$ 2,498,554 | �$ 30,499 | 4.84% | �$ 2,298,996 | �$ 28,355 | 4.95% | �$ 2,186,884 | �$ 29,098 | 5.28% |
| Municipal securities-taxable | �16,713 | �164 | 3.93% | �19,151 | �191 | 3.99% | �43,259 | �442 | 4.09% |
| Municipal securities-tax exempt | �4,441 | �31 | 2.77% | �4,428 | �31 | 2.78% | �10,088 | �106 | 4.21% |
| Obligations of other U.S. government agencies | �144,177 | �491 | 1.36% | �85,160 | �401 | 1.88% | �94,350 | �455 | 1.93% |
| Other debt securities | �555,584 | �2,483 | 1.79% | �390,435 | �1,783 | 1.83% | �238,264 | �1,143 | 1.92% |
| Equity securities | �28,651 | �463 | 6.46% | �27,300 | �408 | 5.98% | �28,058 | �392 | 5.59% |
| Interest-bearing deposits in other banks | �67,839 | �29 | 0.17% | �28,561 | �18 | 0.25% | �43,941 | �28 | 0.25% |
| Total interest-earning assets | �3,315,959 | �34,160 | 4.09% | �2,854,031 | �31,187 | 4.38% | �2,644,844 | �31,664 | 4.75% |
| � | � | � | � | � | � | � | � | � | � |
| Noninterest-earning assets: | � | � | � | � | � | � | � | � | � |
| Cash and cash equivalents | �73,935 | � | � | �70,660 | � | � | �66,808 | � | � |
| Allowance for loan losses | �(58,390) | � | � | �(57,127) | � | � | �(58,991) | � | � |
| Other assets | �188,562 | � | � | �133,486 | � | � | �135,887 | � | � |
| Total noninterest-earning assets | �204,107 | � | � | �147,019 | � | � | �143,704 | � | � |
| � | � | � | � | � | � | � | � | � | � |
| Total assets | �$ 3,520,066 | � | � | �$ 3,001,050 | � | � | �$ 2,788,548 | � | � |
| � | � | � | � | � | � | � | � | � | � |
| Liabilities and Stockholders' Equity | � | � | � | � | � | � | � | � | � |
| Interest-bearing liabilities: | � | � | � | � | � | � | � | � | � |
| Deposits: | � | � | � | � | � | � | � | � | � |
| Savings | �$�112,690 | �$�348 | 1.23% | �$�115,667 | �$�372 | 1.29% | �$�115,058 | �$�454 | 1.57% |
| Money market checking and NOW accounts | �652,524 | �803 | 0.49% | �572,949 | �759 | 0.53% | �546,413 | �691 | 0.50% |
| Time deposits of $100,000 or more� | �641,545 | �1,388 | 0.86% | �509,105 | �872 | 0.69% | �522,664 | �942 | 0.72% |
| Other time deposits | �551,493 | �739 | 0.53% | �482,020 | �1,150 | 0.96% | �440,915 | �1,030 | 0.93% |
| FHLB advances | �105,667 | �37 | 0.14% | �39,146 | �30 | 0.31% | �5,587 | �36 | 2.56% |
| Other Borrowings | �1,247 | �-- | 0.00% | �-- | �-- | 0.00% | �-- | �-- | 0.00% |
| Rescinded stock obligation | �5,297 | �87 | 6.52% | �-- | �-- | 0.00% | �-- | �-- | 0.00% |
| Subordinated debentures | �6,225 | �73 | 4.65% | �-- | �-- | 0.00% | �-- | �-- | 0.00% |
| � | � | � | � | � | � | � | � | � | � |
| Total interest-bearing liabilities | �2,076,688 | �3,475 | 0.66% | �1,718,887 | �3,183 | 0.74% | �1,630,637 | �3,153 | 0.77% |
| � | � | � | � | � | � | � | � | � | � |
| Noninterest-bearing liabilities: | � | � | � | � | � | � | � | � | � |
| Demand deposits | �926,283 | � | � | �842,528 | � | � | �749,797 | � | � |
| Other liabilities | �86,768 | � | � | �21,761 | � | � | �14,033 | � | � |
| Total noninterest-bearing liabilities | �1,013,051 | � | � | �864,289 | � | � | �763,830 | � | � |
| � | � | � | � | � | � | � | � | � | � |
| Total liabilities | �3,089,739 | � | � | �2,583,176 | � | � | �2,394,467 | � | � |
| Stockholders' equity | �430,327 | � | � | �417,874 | � | � | �394,081 | � | � |
| � | � | � | � | � | � | � | � | � | � |
| Total liabilities and stockholders' equity | �$ 3,520,066 | � | � | �$ 3,001,050 | � | � | �$ 2,788,548 | � | � |
| � | � | � | � | � | � | � | � | � | � |
| Net interest income | � | �$ 30,685 | � | � | �$ 28,004 | � | � | �$ 28,511 | � |
| � | � | � | � | � | � | � | � | � | � |
| Cost of deposits | � | � | 0.45% | � | � | 0.50% | � | � | 0.52% |
| Net interest spread | � | � | 3.43% | � | � | 3.64% | � | � | 3.98% |
| Net interest margin | � | � | 3.67% | � | � | 3.94% | � | � | 4.28% |
| � | � | � | � | � | � | � | � | � | � |
| � | � | � | � | � | � | � |
| Hanmi Financial Corporation and Subsidiaries | ||||||
| Average Balance, Average Yield Earned and Average Rate Paid, Continued (Unaudited) | ||||||
| (In thousands) | ||||||
| � | � | � | � | � | � | � |
| � | Nine Months Ended | |||||
| � | September 30, 2014 | September 30, 2013 (1) | ||||
| � | � | 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 | �$ 2,352,069 | �$ 87,044 | 4.95% | �$ 2,142,462 | �$ 83,736 | 5.23% |
| Municipal securities-taxable | �22,308 | �684 | 4.09% | �45,141 | �1,350 | 3.99% |
| Municipal securities-tax exempt | �7,325 | �178 | 3.25% | �11,188 | �365 | 4.35% |
| Obligations of other U.S. government agencies | �107,058 | �1,297 | 1.62% | �92,262 | �1,309 | 1.89% |
| Other debt securities | �440,000 | �6,069 | 1.84% | �268,699 | �3,597 | 1.78% |
| Equity securities | �27,080 | �1,275 | 6.28% | �29,032 | �1,026 | 4.71% |
| Federal funds sold | �4 | �-- | 0.00% | �2,079 | �6 | 0.39% |
| Interest-bearing deposits in other banks | �43,169 | �67 | 0.21% | �74,224 | �140 | 0.25% |
| Total interest-earning assets | �2,999,013 | �96,614 | 4.31% | �2,665,087 | �91,529 | 4.59% |
| � | � | � | � | � | � | � |
| Noninterest-earning assets: | � | � | � | � | � | � |
| Cash and cash equivalents | �73,964 | � | � | �66,542 | � | � |
| Allowance for loan losses | �(58,031) | � | � | �(60,872) | � | � |
| Other assets | �151,875 | � | � | �132,310 | � | � |
| Total noninterest-earning assets | �167,808 | � | � | �137,980 | � | � |
| � | � | � | � | � | � | � |
| Total assets | �$ 3,166,821 | � | � | �$ 2,803,067 | � | � |
| � | � | � | � | � | � | � |
| Liabilities and Stockholders' Equity | � | � | � | � | � | � |
| Interest-bearing liabilities: | � | � | � | � | � | � |
| Deposits: | � | � | � | � | � | � |
| Savings | �$�114,908 | �$�1,124 | 1.31% | �$�114,978 | �$�1,377 | 1.60% |
| Money market checking and NOW accounts | �605,615 | �2,329 | 0.51% | �568,490 | �2,180 | 0.51% |
| Time deposits of $100,000 or more� | �550,309 | �3,147 | 0.76% | �560,999 | �3,174 | 0.76% |
| Other time deposits | �508,376 | �3,053 | 0.80% | �394,784 | �2,645 | 0.90% |
| FHLB advances | �67,405 | �116 | 0.23% | �5,898 | �115 | 2.61% |
| Other Borrowings | �421 | �-- | 0.00% | �-- | �-- | 0.00% |
| Rescinded stock obligation | �1,785 | �87 | 6.52% | �-- | �-- | 0.00% |
| Subordinated debentures | �2,098 | �73 | 4.65% | �28,410 | �678 | 3.19% |
| Total interest-bearing liabilities | �1,850,917 | �9,929 | 0.72% | �1,673,559 | �10,169 | 0.81% |
| � | � | � | � | � | � | � |
| Noninterest-bearing liabilities: | � | � | � | � | � | � |
| Demand deposits | �856,572 | � | � | �724,021 | � | � |
| Other liabilities | �25,478 | � | � | �15,944 | � | � |
| Total noninterest-bearing liabilities | �882,050 | � | � | �739,965 | � | � |
| � | � | � | � | � | � | � |
| Total liabilities | �2,732,967 | � | � | �2,413,524 | � | � |
| Stockholders' equity | �433,854 | � | � | �389,543 | � | � |
| � | � | � | � | � | � | � |
| Total liabilities and stockholders' equity | �$ 3,166,821 | � | � | �$ 2,803,067 | � | � |
| � | � | � | � | � | � | � |
| Net interest income | � | �$ 86,685 | � | � | �$ 81,360 | � |
| � | � | � | � | � | � | � |
| Cost of deposits | � | � | 0.49% | � | � | 0.53% |
| Net interest spread | � | � | 3.59% | � | � | 3.78% |
| Net interest margin | � | � | 3.86% | � | � | 4.08% |
| � | � | � | � | � | � | � |
| (1)�Results for September 30, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle. | ||||||
| � | � | � | � | � | � | � |
| � | � | � | � | � |
| Hanmi Financial Corporation and Subsidiaries | ||||
| Loans Receivable (Unaudited) | ||||
| (In thousands) | ||||
| � | � | � | � | � |
| � | September 30, 2014 | |||
| � | Legacy | Non-PCI | PCI | Total |
| Real estate loans: | � | � | � | � |
| Commercial property | � | � | � | � |
| Retail | �$�601,749 | �$�34,112 | �$�15,940 | �$�651,801 |
| Hotel/Motel | �361,102 | �91,303 | �14,206 | �466,611 |
| Gas station | �276,469 | �63,917 | �18,069 | �358,455 |
| Other | �789,249 | �16,447 | �15,715 | �821,411 |
| Construction | �3,595 | �551 | �-- | �4,146 |
| Residential property | �103,671 | �2,373 | �2,686 | �108,730 |
| Total real estate loans | �2,135,835 | �208,703 | �66,616 | �2,411,154 |
| Commercial and industrial loans: | � | � | � | � |
| Commercial term | �113,363 | �5,812 | �350 | �119,525 |
| Commercial lines of credit | �74,939 | �307 | �-- | �75,246 |
| International loans | �41,127 | �-- | �-- | �41,127 |
| Total commercial and industrial loans | �229,429 | �6,119 | �350 | �235,898 |
| Consumer loans | �27,777 | �1,072 | �58 | �28,907 |
| Total gross loans | �2,393,041 | �215,894 | �67,024 | �2,675,959 |
| Allowance for loans losses | �(51,179) | �-- | �-- | �(51,179) |
| Deferred loan costs | �3,311 | �-- | �-- | �3,311 |
| Loans receivable, net | �$�2,345,173 | �$�215,894 | �$�67,024 | �$�2,628,091 |
| � | � | � | � | � |
| � | � | � | � |
| Deposit Mix (Unaudited) | |||
| (In thousands) | |||
| � | � | � | � |
| � | September 30, 2014 | ||
| � | Legacy | Acquired | Total |
| Demand-noninterest-bearing | �$�886,287 | �$�143,056 | �$�1,029,343 |
| Savings | �104,739 | �16,928 | �121,667 |
| Money market checking and NOW accounts | �562,571 | �234,278 | �796,849 |
| Time deposits of $100,000 or more | �543,384 | �375,701 | �919,085 |
| Other time deposits | �416,490 | �314,720 | �731,210 |
| � | �$�2,513,471 | �$�1,084,684 | �$�3,598,154 |
| � | � | � | � |
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) | |||
| � | � | � | � |
| � | September 30, | June 30, | September 30, |
| Hanmi Financial Corporation | 2014 | 2014 | 2013(1) |
| Assets | �$�4,228,332 | �$�3,094,775 | �$�2,844,076 |
| Less other intangible assets | �(2,179) | �-- | �(1,212) |
| Tangible assets | �$�4,226,153 | �$�3,094,775 | �$�2,842,864 |
| � | � | � | � |
| Stockholders' equity | �$�435,194 | �$�426,348 | �$�396,895 |
| Less other intangible assets | �(2,179) | �-- | �(1,212) |
| Tangible stockholders' equity | �$�433,015 | �$�426,348 | �$�395,683 |
| � | � | � | � |
| Stockholders' equity to assets | 10.29% | 13.78% | 13.96% |
| Tangible common equity to tangible assets | 10.25% | 13.78% | 13.92% |
| � | � | � | � |
| Common shares outstanding | �31,894,429 | �31,860,956 | �31,754,115 |
| Tangible common equity per common share | �$�13.58 | �$�13.38 | �$�12.46 |
| � | � | � | � |
| (1) Results for September 30, 2013 have been adjusted to reflect the adoption of FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. See section of Change in Accounting Principle. | |||
| � | � | � | � |
Change in Accounting Principle
As of April 1, 2014, the Bank changed its method of accounting for investment in low-income housing tax credit, as required by FASB ASU 2014-01, Accounting for Investment in Qualified Affordable Housing Projects. Previously, the investment in low-income housing tax credit was accounted for under equity method.
Effective April 1, 2014, the Bank began recording amortization of the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizing the net investment performance in the income statement as a component of income tax expense (proportional amortization method). The Bank recorded this change in accounting principle in accordance with ASU 2014-01 which requires retrospective application of the new accounting principle to all practicable prior accounting periods as if the principle had always been used. The accounting principle was retrospectively applied from the period beginning on January 1, 1998, and to each period thereafter. Net income in the three and nine months ended September 30, 2013 increased by $135,000 and $51,000, respectively, due to this change in accounting principle.
CONTACT: Mark Yoon, CFA CPA CVA
EVP & Chief Financial Officer
213-427-5636
Christina Lee
FVP & Senior Strategy Officer
213-427-5631
Lasse Glassen
Investor Relations (Addo Communications)
310-829-5400