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Hanmi Reports 2021 Fourth Quarter and Full Year Results

GlobeNewswire Inc.

Reports strong earnings, record loan production, and significant improvements in asset quality

LOS ANGELES, Jan. 25, 2022 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported financial results for the 2021 fourth quarter and full year.

Net income for the fourth quarter of 2021 was $33.3 million, or $1.09 per diluted share, compared with $26.6 million, or $0.86 per diluted share for the third quarter of 2021. Net income for the fourth quarter included a recovery of credit loss expense of $16.0 million reflecting a $9.1 million recovery from a loan charge-off in the previous year. In addition, income tax expense for the fourth quarter included a $2.7 million benefit from a decrease in the valuation allowance for deferred tax assets. Return on average assets and return on average equity for the fourth quarter of 2021 were 1.93% and 20.89%, respectively.

For the full year 2021, net income was $98.7 million, or $3.22 per diluted share, compared with $42.2 million, or $1.38 per diluted share, for the full year 2020. Net income for 2020 included a credit loss expense of $45.5 million arising from the uncertainties of the pandemic, while net income for 2021 included a recovery of credit loss expense of $24.4 million from improved economic conditions, a decline in pandemic uncertainties as well as the $9.1 million recovery of a previous loan charge-off. Return on average assets and return on average equity for the full year 2021 were 1.51% and 16.27%, respectively.

CEO Commentary
Bonnie Lee, President and Chief Executive Officer of Hanmi Financial Corporation, said, “We delivered very strong results for the fourth quarter, setting a new record high for loan production and achieving notable improvements in our asset quality. In 2021, as we moved farther away from pandemic-related uncertainties, we were able to recover a good portion of our 2020 loan loss provisions as well as a sizable cash recovery from a first quarter 2020 loan charge-off. Most importantly, we believe we demonstrated the earnings power and growth potential of our franchise. We delivered robust loan growth of 12.3%, excluding PPP loans, and a favorable mix of low-cost deposits, while effectively managing credit quality.”

“We generated continued momentum in our residential mortgage business, commercial and industrial loans and our Corporate Korea initiative, which is an important driver of commercial loan growth and noninterest-bearing demand deposits. During the year, we strengthened our relationships with current customers and significantly expanded our base of new customers across our diverse markets and business lines.

“As we celebrate our 40th year in business this year, we believe we are well positioned with a healthy loan pipeline, a robust deposit base and strong credit quality. We will remain focused on executing our strategic plan to drive disciplined growth and deliver attractive returns and long-term value for our shareholders.”

Fourth Quarter 2021 Highlights:

  • Fourth quarter net income increased 25.5% to $33.3 million, or $1.09 per diluted share, from $26.6 million, or $0.86 per diluted share, for the third quarter; full year 2021 net income was $98.7 million, or $3.22 per diluted share, up 133.9% from $42.2 million, or $1.38 per diluted share, for 2020.

  • Loans receivable increased 6.0% from September 30, 2021 to $5.15 billion at December 31 (6.4% excluding Paycheck Protection Program (“PPP”) loans) and 5.6% from year-end 2020 (12.3% excluding PPP loans); fourth quarter loan production reached a new record high of $625.1 million. Loan production for the full year 2021 was a record high of $1.81 billion (excluding $133.1 million of second draw PPP loans).

  • Deposits increased to $5.79 billion at December 31, 2021, up 1.0% from September 30, 2021 and 9.7% over year-end 2020 levels. The mix of noninterest-bearing deposits held steady at 44.5% of the portfolio.

  • A $16.0 million recovery of credit loss expense for the fourth quarter included a $9.1 million recovery from a first quarter 2020 loan charge-off; allowance for credit losses was 1.41% at December 31, 2021 compared with 1.58% at September 30, 2021 and 1.85% at December 31, 2020.

  • Nonperforming assets declined 35.9% from the third quarter to 0.20% of total assets from 0.32% at September 30, 2021, and 1.38% at December 31, 2020.

  • Net interest income was $49.5 million for the fourth quarter compared with $50.0 million for the third quarter, down 1.0% (up 2.0% when excluding PPP loan interest); $3.0 million of PPP loans remained at December 31, 2021.

  • Net interest margin was 2.96% for the fourth quarter, down from 3.07% for the third quarter (3.00% excluding PPP loan interest). PPP loan interest had no impact to fourth quarter net interest margin.

  • Fourth quarter noninterest income decreased 25.7% to $9.3 million from the previous quarter principally on lower levels of SBA gains.

  • Noninterest expense was $31.6 million, down 2.7% from the previous quarter; the efficiency ratio for the fourth quarter was 53.81% compared with 52.01% for the prior quarter.

  • Hanmi remained well capitalized from a regulatory perspective with a Total risk-based capital ratio of 17.38% and a Common equity Tier 1 capital ratio of 12.12% at December 31, 2021; tangible common equity to tangible assets ratio was 9.23% at the end of the fourth quarter.

For more information about Hanmi, please see the Q4 2021 Investor Update (and Supplemental Financial Information), which is available on the Bank’s website at www.hanmi.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov. Also, please refer to “Non-GAAP Financial Measures” herein for further details of the presentation of certain non-GAAP financial measures.

Quarterly Highlights
(Dollars in thousands, except per share data)

As of or for the Three Months Ended

Amount Change

December 31,

September 30,

June 30,

March 31,

December 31,

Q4-21

Q4-21

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Net income

$

33,331

$

26,565

$

22,122

$

16,659

$

14,326

$

6,766

$

19,005

Net income per diluted common share

$

1.09

$

0.86

$

0.72

$

0.54

$

0.47

$

0.23

$

0.62

Assets

$

6,858,587

$

6,776,533

$

6,578,856

$

6,438,401

$

6,201,888

$

82,054

$

656,699

Loans receivable

$

5,151,541

$

4,858,865

$

4,820,092

$

4,817,151

$

4,880,168

$

292,676

$

271,373

Deposits

$

5,786,269

$

5,729,536

$

5,629,830

$

5,509,823

$

5,275,008

$

56,733

$

511,261

Return on average assets

1.93

%

1.58

%

1.38

%

1.08

%

0.92

%

0.35

1.01

Return on average stockholders' equity

20.89

%

17.13

%

14.91

%

11.63

%

10.01

%

3.76

10.88

Net interest margin

2.96

%

3.07

%

3.19

%

3.09

%

3.13

%

-0.11

-0.17

Efficiency ratio (1)

53.81

%

52.01

%

52.66

%

52.92

%

55.53

%

1.80

-1.72

Tangible common equity to tangible assets (2)

9.23

%

8.98

%

9.01

%

8.87

%

9.13

%

0.25

0.10

Tangible common equity per common share (2)

$

20.79

$

19.96

$

19.27

$

18.59

$

18.41

$

0.83

$

2.38

(1) Noninterest expense divided by net interest income plus noninterest income.

(2) Refer to "Non-GAAP Financial Measures" for further details.


Results of Operations
Net interest income was $49.5 million for the fourth quarter of 2021 compared with $50.0 million for the third quarter of 2021. Fourth quarter interest and fees on loans receivable decreased 1.4%, or $0.7 million, from the preceding quarter primarily due to a 26 basis point decrease in average yields. Total interest expense for the fourth quarter decreased $0.3 million from the preceding quarter primarily due to a two basis point reduction in the average rate paid on interest-bearing deposits. Fourth quarter loan prepayment penalties were $0.3 million compared with $0.1 million for the third quarter. Net interest income of $195.1 million for the full year 2021 increased $14.2 million, or 7.8%, from $180.9 million for the full year 2020. The year-over-year increase in net interest income reflected a 68 basis point decrease in the average rate paid on interest-bearing deposits and a $669.5 million increase in the average balance of interest-earning assets, which were partially offset by a 53 basis point decrease in the average yield on interest-earning assets.

As of or For the Three Months Ended (in thousands)

Percentage Change

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Q4-21

Q4-21

Net Interest Income

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Interest and fees on loans receivable(1)

$

52,240

$

52,961

$

52,785

$

50,614

$

52,372

-1.4

%

-0.3

%

Interest on securities

1,821

1,865

1,404

1,140

1,684

-2.4

%

8.1

%

Dividends on FHLB stock

248

245

242

206

206

1.1

%

20.3

%

Interest on deposits in other banks

302

329

176

96

97

-8.2

%

211.5

%

Total interest and dividend income

$

54,611

$

55,400

$

54,607

$

52,056

$

54,359

-1.4

%

0.5

%

Interest on deposits

2,236

2,466

3,003

3,958

5,330

-9.3

%

-58.0

%

Interest on borrowings

364

409

447

478

528

-10.9

%

-31.0

%

Interest on subordinated debentures

2,515

2,545

1,585

1,619

1,623

-1.2

%

54.9

%

Total interest expense

5,115

5,420

5,035

6,055

7,481

-5.6

%

-31.6

%

Net interest income

$

49,496

$

49,980

$

49,572

$

46,001

$

46,878

-1.0

%

5.6

%

(1) Includes loans held for sale.

Net interest margin was 2.96% for the fourth quarter of 2021, down 11 basis points from the prior quarter. This was primarily due to a 14 basis point decline in the yield on earning assets offset by a four basis point decrease in the cost of interest-bearing liabilities. For the full year 2021, net interest margin was 3.08% compared with 3.19% for 2020.

The yield on average earning assets declined to 3.27% for the fourth quarter of 2021 from 3.41% for the third quarter of 2021, primarily due to lower yields on loans and, to a lesser extent, securities. Full year yields decreased 53 basis points to 3.42% from 3.95% for 2020.

The cost of interest-bearing liabilities was 0.57% for the fourth quarter of 2021 compared with 0.61% for the third quarter of 2021. The decrease was driven by a two basis point decline in the cost of interest-bearing deposits and a $0.5 million charge for the repurchase of $12.7 million of the Company’s 5.45% subordinated debentures in the third quarter. The cost of interest-bearing deposits in the fourth quarter was 0.28%. For the full year 2021, the cost of interest-bearing liabilities was 0.61% compared with 1.20% for the full year 2020, as the cost of interest-bearing deposits was 0.36% for 2021 compared with 1.04% for 2020.

For the Three Months Ended (in thousands)

Percentage Change

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Q4-21

Q4-21

Average Earning Assets and Interest-bearing Liabilities

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Loans receivable (1)

$

4,896,952

$

4,684,570

$

4,753,297

$

4,843,825

$

4,803,238

4.5

%

2.0

%

Securities (2)

914,148

878,866

812,805

774,022

743,636

4.0

%

22.9

%

FHLB stock

16,385

16,385

16,385

16,385

16,385

0.0

%

0.0

%

Interest-bearing deposits in other banks

802,901

872,783

659,934

395,602

392,949

-8.0

%

104.3

%

Average interest-earning assets

$

6,630,386

$

6,452,604

$

6,242,421

$

6,029,834

$

5,956,208

2.8

%

11.3

%

Demand: interest-bearing

$

122,602

$

115,233

$

112,252

$

102,980

$

101,758

6.4

%

20.5

%

Money market and savings

2,078,659

2,033,876

2,032,102

1,967,012

1,895,830

2.2

%

9.6

%

Time deposits

1,013,681

1,061,359

1,136,903

1,238,513

1,315,227

-4.5

%

-22.9

%

Average interest-bearing deposits

3,214,942

3,210,468

3,281,257

3,308,505

3,312,815

0.1

%

-3.0

%

Borrowings

137,500

143,750

150,091

150,000

150,000

-4.3

%

-8.3

%

Subordinated debentures

214,899

163,340

119,170

119,040

118,888

31.6

%

80.8

%

Average interest-bearing liabilities

$

3,567,341

$

3,517,558

$

3,550,518

$

3,577,545

$

3,581,703

1.4

%

-0.4

%

Average Noninterest Bearing Deposits

Demand deposits - noninterest bearing

$

2,561,297

$

2,444,759

$

2,223,172

$

1,991,204

$

1,935,564

4.8

%

32.3

%

(1) Includes loans held for sale.

(2) Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.

For the Three Months Ended

Amount Change

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Q4-21

Q4-21

Average Yields and Rates

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Loans receivable(1)

4.23

%

4.49

%

4.45

%

4.24

%

4.34

%

-0.26

-0.11

Securities (2)

0.83

%

0.87

%

0.69

%

0.59

%

0.91

%

-0.04

-0.08

FHLB stock

6.00

%

5.93

%

5.93

%

5.10

%

5.00

%

0.07

1.00

Interest-bearing deposits in other banks

0.15

%

0.15

%

0.11

%

0.10

%

0.10

%

0.00

0.05

Interest-earning assets

3.27

%

3.41

%

3.51

%

3.50

%

3.63

%

-0.14

-0.36

Interest-bearing deposits

0.28

%

0.30

%

0.37

%

0.49

%

0.64

%

-0.02

-0.36

Borrowings

1.05

%

1.13

%

1.19

%

1.29

%

1.40

%

-0.08

-0.35

Subordinated debentures

4.68

%

6.23

%

5.32

%

5.44

%

5.46

%

-1.55

-0.78

Interest-bearing liabilities

0.57

%

0.61

%

0.57

%

0.69

%

0.83

%

-0.04

-0.26

Net interest margin (taxable equivalent basis)

2.96

%

3.07

%

3.19

%

3.09

%

3.13

%

-0.11

-0.17

Cost of deposits

0.15

%

0.17

%

0.22

%

0.30

%

0.40

%

-0.02

-0.25

(1) Includes loans held for sale.

(2) Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.

For the fourth quarter of 2021, Hanmi recorded a $16.0 million recovery of credit loss expense comprised of a $13.4 million negative provision for loan losses, a $2.3 million negative provision for off-balance sheet items and a $0.3 million negative provision for the allowance for losses on accrued interest receivable for current or previously modified loans. The negative provision for loan losses reflected a $9.1 million cash recovery from a first quarter 2020 loan charge-off. In the third quarter of 2021, the Company recorded a $7.2 million recovery of credit loss expense. This was comprised of a $7.6 million negative provision for loan losses, a recovery of $0.4 million from an SBA impairment allowance, and a $0.4 million reduction in the allowance for losses on accrued interest receivable for current or previously modified loans, offset by a $1.2 million provision for off-balance sheet items. For the full year 2021, credit expense recoveries were $24.4 million compared to credit expense charges of $45.5 million for 2020.

Fourth quarter 2021 noninterest income decreased to $9.3 million from $12.5 million for the third quarter of 2021, primarily due to a $2.1 million decrease in gains on the sale of traditional SBA 7(a) loans. The volume of SBA loans sold in the fourth quarter decreased 23.5% to $36.6 million from $47.9 million in the third quarter, while trade premiums were 10.98% for the fourth quarter and 11.85% and for the third quarter. Noninterest income was $40.5 million for the full year 2021 compared with $43.1 million for 2020 with the decrease primarily due to a $16.2 million decrease in gains on sales of securities that was partially offset by increases of $9.0 million in gain on sales of SBA loans and $2.6 million in service charges.

For the Three Months Ended (in thousands)

Percentage Change

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Q4-21

Q4-21

Noninterest Income

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Service charges on deposit accounts

$

3,007

$

3,437

$

2,344

$

2,357

$

2,051

-12.5

%

46.6

%

Trade finance and other service charges and fees

1,160

1,188

1,259

1,034

1,113

-2.3

%

4.2

%

Servicing income

666

768

540

846

361

-13.3

%

84.5

%

Bank-owned life insurance income

252

251

252

256

271

0.4

%

-7.0

%

All other operating income

1,017

978

908

841

1,879

4.0

%

-45.9

%

Service charges, fees & other

6,102

6,622

5,303

5,334

5,675

-7.9

%

7.5

%

Gain on sale of SBA loans

3,791

5,842

3,508

4,125

1,769

-35.1

%

114.3

%

Net gain on sales of securities

(598

)

-

-

99

-

0.0

%

0.0

%

Gain (loss) on sale of bank premises

-

45

-

-

365

-100.0

%

-100.0

%

Legal settlement

-

-

75

250

1,000

0.0

%

-100.0

%

Total noninterest income

$

9,295

$

12,509

$

8,886

$

9,808

$

8,809

-25.7

%

5.5

%

Noninterest expense decreased 2.7% to $31.6 million for the fourth quarter of 2021 from $32.5 million for the third quarter of 2021 primarily due to a $1.1 million decline in other operating expenses largely from lower insurance premiums. The efficiency ratio increased to 53.81% in the fourth quarter from 52.01% in the prior quarter. Noninterest expense for the year ended December 31, 2021 was $124.5 million, up $5.4 million or 4.5%, from the prior year primarily from higher salaries and benefits stemming from increased compensation on higher loan production. The efficiency ratio for the full year 2021 was 52.84% (54.01% excluding securities gains and deferred PPP loan origination costs) compared to 53.15% (58.63% excluding securities gains and deferred PPP loan origination costs) for the prior year.

For the Three Months Ended (in thousands)

Percentage Change

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Q4-21

Q4-21

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Noninterest Expense

Salaries and employee benefits

$

18,644

$

18,795

$

18,302

$

16,820

$

17,344

-0.8

%

7.5

%

Occupancy and equipment

4,840

5,037

4,602

4,595

4,651

-3.9

%

4.1

%

Data processing

3,228

2,934

2,915

2,926

2,989

10.0

%

8.0

%

Professional fees

1,443

1,263

1,413

1,447

1,846

14.3

%

-21.8

%

Supplies and communication

795

741

733

757

759

7.3

%

4.7

%

Advertising and promotion

964

953

374

359

888

1.2

%

8.6

%

All other operating expenses

1,980

2,906

2,607

2,378

2,006

-31.9

%

-1.3

%

subtotal

31,894

32,629

30,946

29,282

30,483

-2.3

%

4.6

%

Other real estate owned expense (income)

-

23

(47

)

221

310

100.0

%

100.0

%

Repossessed personal property expense (income)

(258

)

(150

)

(116

)

32

(71

)

-71.9

%

-263.3

%

Impairment loss on bank premises

-

-

-

-

201

0.0

%

-100.0

%

Total noninterest expense

$

31,636

$

32,502

$

30,783

$

29,535

$

30,923

-2.7

%

2.3

%

Hanmi recorded a provision for income taxes of $9.8 million for the fourth quarter of 2021, representing an effective tax rate of 22.7% compared with $10.7 million, representing an effective tax rate of 28.6% for the third quarter of 2021. The decline in the effective tax rate primarily reflects a $2.7 million benefit from a reduction in the deferred tax asset valuation allowance against certain state net operating losses because the expiration dates were extended due to a change in state income tax regulations. For the full years ended December 31, 2021 and 2020, the provision for income taxes was $36.8 million and $17.3 million, representing effective tax rates of 27.2% and 29.1%, respectively. Again, the decline in the effective tax rate primarily reflects the reduction in the valuation allowance for deferred tax assets due to a change in certain state income tax regulations.

Financial Position
Total assets at December 31, 2021 increased 1.2% to $6.86 billion from $6.78 billion at September 30, 2021, primarily due to an increase in loans partially offset by a reduction in cash. From December 31, 2020, total assets increased 10.6% chiefly from an increase in loans, securities and cash and due from banks primarily funded by an increase in deposits and the issuance of subordinated debt.

Loans receivable, before the allowance for credit losses, were $5.15 billion at December 31, 2021, up 6.0% from $4.86 billion at September 30, 2021, and 5.6% from year-end 2020. Loans held for sale, representing the guaranteed portion of SBA 7(a) loans, were $13.3 million at the end of the fourth quarter of 2021, compared with $17.9 million at the end of the third quarter of 2021.

As of (in thousands)

Percentage Change

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Q4-21

Q4-21

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Loan Portfolio

Commercial real estate loans

$

3,701,864

$

3,528,506

$

3,452,014

$

3,372,288

$

3,353,818

4.9

%

10.4

%

Residential/consumer loans

400,548

354,860

348,730

328,228

345,831

12.9

%

15.8

%

Commercial and industrial loans

561,830

516,357

587,729

707,073

757,255

8.8

%

-25.8

%

Leases

487,299

459,142

431,619

409,562

423,264

6.1

%

15.1

%

Loans receivable

5,151,541

4,858,865

4,820,092

4,817,151

4,880,168

6.0

%

5.6

%

Loans held for sale

13,342

17,881

36,030

32,674

8,568

-25.4

%

55.7

%

Total

$

5,164,883

$

4,876,746

$

4,856,122

$

4,849,825

$

4,888,736

5.9

%

5.6

%

New loan production reached a record high of $625.1 million for the fourth quarter at an average rate of 3.91% and was partially offset by $152.1 million of loans paid-off during the quarter at an average rate of 4.02%. Commercial real estate loan production included $33.3 million of multifamily loans, and residential mortgage loan production more than doubled from the prior quarter reaching $84.7 million or 13.6% of total production. Payoffs included first-draw PPP loan forgiveness of $14.0 million and $120.1 million for the fourth and third quarters, respectively. The strong loan growth for the fourth quarter contributed to the $215.4 million decrease in cash and due from banks.

New Loan Production

(In thousands)

For the Three Months Ended (in thousands)

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

2021

2021

2021

2021

2020

New Loan Production

Commercial real estate loans

$

291,543

$

214,380

$

186,136

$

103,051

$

187,050

Commercial and industrial loans

116,365

114,263

99,429

42,255

71,412

SBA loans

47,397

46,264

42,560

155,908

27,516

Leases receivable

83,813

83,642

70,923

34,055

39,830

Residential/consumer loans

85,966

41,497

66,581

12,722

2,011

subtotal

625,084

500,046

465,629

347,991

327,819

Payoffs

(152,134

)

(291,686

)

(264,822

)

(166,730

)

(160,006

)

Amortization

(90,358

)

(63,435

)

(90,348

)

(94,852

)

(78,632

)

Loan sales

(41,274

)

(65,253

)

(35,760

)

(136,590

)

(21,580

)

Net line utilization

(48,203

)

(39,941

)

(70,287

)

(9,331

)

(18,815

)

Charge-offs & OREO

(439

)

(958

)

(1,471

)

(3,505

)

(2,755

)

Loans receivable-beginning balance

4,858,865

4,820,092

4,817,151

4,880,168

4,834,137

Loans receivable-ending balance

$

5,151,541

$

4,858,865

$

4,820,092

$

4,817,151

$

4,880,168

Deposits were $5.79 billion at the end of the fourth quarter of 2021, up 1.0% from $5.73 billion at the end of the preceding quarter and 9.7% from year-end 2020. Growth for the fourth quarter was primarily driven by a $66.4 million increase in money market and savings deposits and a $25.9 million increase in noninterest-bearing demand deposits; offset by a $42.4 million decrease in time deposits. For the year, noninterest-bearing demand deposits increased 35.6% while time deposits declined 23.1%. Noninterest-bearing demand deposits represented 44.5% of total deposits at December 31, 2021 compared with 36.0% at December 31, 2020. At December 31, 2021, the loan-to-deposit ratio was 89.0% compared with 92.5% at the end of the previous year.

As of (in thousands)

Percentage Change

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Q4-21

Q4-21

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Deposit Portfolio

Demand: noninterest-bearing

$

2,574,517

$

2,548,591

$

2,354,671

$

2,174,624

$

1,898,766

1.0

%

35.6

%

Demand: interest-bearing

125,183

118,334

113,892

111,362

100,617

5.8

%

24.4

%

Money market and savings

2,099,381

2,033,000

2,045,143

2,029,824

1,991,926

3.3

%

5.4

%

Time deposits

987,188

1,029,611

1,116,124

1,194,013

1,283,699

-4.1

%

-23.1

%

Total deposits

$

5,786,269

$

5,729,536

$

5,629,830

$

5,509,823

$

5,275,008

1.0

%

9.7

%

Stockholders’ equity at December 31, 2021 was $643.4 million, compared with $619.1 million at September 30, 2021. Tangible common stockholders’ equity was $632.0 million, or 9.23% of tangible assets, at December 31, 2021 compared with $607.6 million, or 8.98% of tangible assets at the end of the third quarter. Tangible book value per share increased to $20.79 at December 31, 2021 from $19.96 at the end of the prior quarter.

Hanmi continues to be well capitalized for regulatory purposes, with a preliminary Tier 1 risk-based capital ratio of 12.52% and a Total risk-based capital ratio of 17.38% at December 31, 2021, versus 12.18% and 17.18%, respectively, at the end of the third quarter of 2021.

As of

Amount Change

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Q4-21

Q4-21

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Regulatory Capital ratios (1)

Hanmi Financial

Total risk-based capital

17.38

%

17.18

%

15.53

%

15.54

%

15.21

%

0.20

2.17

Tier 1 risk-based capital

12.52

%

12.18

%

12.30

%

12.26

%

11.93

%

0.34

0.59

Common equity tier 1 capital

12.12

%

11.78

%

11.88

%

11.84

%

11.52

%

0.34

0.60

Tier 1 leverage capital ratio

9.66

%

9.50

%

9.57

%

9.61

%

9.49

%

0.16

0.17

Hanmi Bank

Total risk-based capital

15.43

%

15.17

%

15.25

%

15.26

%

14.86

%

0.26

0.57

Tier 1 risk-based capital

14.26

%

13.91

%

13.99

%

14.01

%

13.60

%

0.35

0.66

Common equity tier 1 capital

14.26

%

13.91

%

13.99

%

14.01

%

13.60

%

0.35

0.66

Tier 1 leverage capital ratio

10.96

%

10.86

%

10.89

%

10.99

%

10.83

%

0.10

0.13

(1) Preliminary ratios for December 31, 2021

Asset Quality
Loans and leases 30 to 89 days past due and still accruing were 0.11% of loans and leases at the end of the fourth quarter of 2021, compared with 0.12% at the end of the third quarter of 2021.

Special mention loans were $95.3 million at the end of the fourth quarter down from $130.6 million at September 30, 2021. The quarter-over-quarter change included reductions because of payoffs or sales of $15.6 million, $39.3 million of upgrades to pass and $8.7 million of downgrades to classified. Increases included upgrades from classified loans of $20.5 million and downgrades from pass loans and other additions of $7.8 million. The December 31, 2021 balance of special mention loans included $32.8 million of loans adversely affected by the COVID-19 pandemic.

Classified loans were $60.6 million at December 31, 2021 down from $82.4 million at the end of the third quarter. The quarter-over-quarter change reflected payoffs of $9.1 million, upgrades of $20.8 million and paydowns of $9.6 million. Additions to classified loans, representing downgrades from pass and special mention, totaled $17.7 million. At December 31, 2021, classified loans included $41.1 million of loans adversely affected by the COVID-19 pandemic.

Nonperforming loans were $13.4 million at December 31, 2021, or 0.26% of loans, down from $21.2 million at the end of the third quarter of 2021, or 0.44% of the portfolio. The quarter-over-quarter decrease reflected payoffs, paydowns, and charge-offs of $10.5 million and upgrades to accrual of $0.7 million. Additions to nonperforming loans totaled $3.4 million for the quarter. At December 31, 2021, nonperforming loans included $4.7 million of loans and leases adversely affected by the COVID-19 pandemic.

Nonperforming assets were $14.0 million at the end of the fourth quarter of 2021, or 0.20% of total assets, down from $21.9 million, or 0.32% of assets, at the end of the prior quarter.

Gross charge-offs for the fourth quarter of 2021 were $0.5 million compared with $0.9 million for the preceding quarter. Recoveries of previously charged-off loans for the fourth quarter of 2021 were $9.8 million compared with $1.8 million for the preceding quarter. As a result, there were net recoveries of $9.3 million for the fourth quarter of 2021, compared with net recoveries of $0.9 million for the preceding quarter. For the fourth quarter of 2021, net recoveries represented 0.76% of average loans on an annualized basis compared with net recoveries of 0.07% of average loans for the third quarter on an annualized basis.

The allowance for credit losses was $72.6 million as of December 31, 2021 generating an allowance for credit losses to loans of 1.41% compared with 1.58% at the end of the prior quarter. Both quantitative and qualitative loss factors declined in the fourth quarter reflecting improving economic conditions, asset quality metrics and the notable recovery from a previous loan charge-off. While macroeconomic assumptions continue to improve, the risk factors associated with the impact of the COVID-19 pandemic on the Bank’s loan portfolio continue to be considered in establishing the allowance for credit losses.

As of or for the Three Months Ended (in thousands)

Amount Change

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Q4-21

Q4-21

2021

2021

2021

2021

2020

vs. Q3-21

vs. Q4-20

Asset Quality Data and Ratios

Delinquent loans:

Loans, 30 to 89 days past due and still accruing

$

5,881

$

6,017

$

4,332

$

6,926

$

9,473

$

(136

)

$

(3,592

)

Delinquent loans to total loans

0.11

%

0.12

%

0.09

%

0.14

%

0.19

%

-0.01

-0.08

Criticized loans:

Special mention

$

95,295

$

130,564

$

121,826

$

96,057

$

76,978

$

(35,269

)

$

18,317

Classified

60,632

82,436

110,120

147,426

140,168

(21,804

)

(79,536

)

Total criticized loans

$

155,927

$

213,000

$

231,946

$

243,483

$

217,146

$

(57,073

)

$

(61,219

)

Nonperforming assets:

Nonaccrual loans

$

13,360

$

21,223

$

39,573

$

55,058

$

83,032

$

(7,863

)

$

(69,672

)

Loans 90 days or more past due and still accruing

-

13

12,446

-

-

(13

)

-

Nonperforming loans

13,360

21,236

52,019

55,058

83,032

(7,876...