U.S. Markets open in 5 hrs 51 mins

Hanmi Reports Fourth Quarter 2019 Results

2019 Fourth Quarter and Full Year Highlights:   

  • Fourth quarter net income of $3.1 million, or $0.10 per diluted share, down from $12.4 million, or $0.40 per diluted share from the prior quarter; Full year 2019 net income of $32.8 million, or $1.06 per diluted share, compared with $57.9 million, or $1.79 per diluted share in 2018.
    • Net income for the quarter included a $6.9 million specific provision for loan and lease losses related to a previously identified $39.7 million troubled loan relationship; at year-end the specific allowance stood at $22.6 million.
  • Loans and leases receivable of $4.61 billion, up 3.6% in the fourth quarter on an annualized basis and up 0.2% year-over-year.
  • New loan and lease production of $381.4 million, the highest quarterly loan and lease production since 2015.
  • Deposits of $4.70 billion, up 0.8% in the fourth quarter on an annualized basis and down 1.0% year-over-year.
  • Nonperforming assets at 1.15% of total assets compared with 1.18% from the prior quarter; net charge-offs of 0.02% for the year and an allowance to loans and leases of 1.33% at year-end.
  • Fourth quarter net interest income was $43.9 million, down 0.3% from the prior quarter; for the full year, net interest income was $175.9 million compared with $181.0 million last year.
  • Fourth quarter net interest margin was 3.32%, down 4 basis points from the prior quarter; net interest margin for the full year was 3.37% compared with 3.57% last year.
  • Fourth quarter noninterest income was $6.7 million, down 2.2% from the prior quarter; for the full year, noninterest income was $27.6 million compared with $24.5 million last year.
  • Fourth quarter noninterest expense of $34.1 million, inclusive of a $1.7 million impairment charge on bank premises to be sold, up $1.4 million, or 4.5% from the prior quarter; noninterest expense for the full year was $125.9 million compared with $117.6 million last year.
  • Repurchased approximately 1.2%, or 375,000 shares, of Hanmi common stock under the previously announced share repurchase program; tangible common equity ratio remains strong at 9.98%.

LOS ANGELES, Jan. 28, 2020 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported net income for the 2019 fourth quarter of $3.1 million, or $0.10 per diluted share, compared with $12.4 million, or $0.40 per diluted share for the 2019 third quarter and $11.4 million, or $0.37 per diluted share for the 2018 fourth quarter. 2019 fourth quarter net income included a $6.9 million specific provision for loan and lease losses related to the previously identified $39.7 million troubled loan relationship.

For the 2019 year, net income was $32.8 million, or $1.06 per diluted share, compared with $57.9 million, or $1.79 per diluted share, for 2018.

Bonnie Lee, President and Chief Executive Officer, said, “Hanmi’s performance in the fourth quarter was highlighted by excellent growth in loan and lease production along with an improving mix of deposits. Total loan and lease production volume of $381.4 million increased more than 75% from the prior quarter and nearly 55% from the fourth quarter last year. Despite the strong loan and lease production, payoffs more than doubled from the prior quarter, which resulted in loan and lease growth in the fourth quarter of 3.6% on an annualized basis. In addition, we benefitted during the year from an 8.3% increase in noninterest-bearing demand deposits along with a 13.6% reduction in time deposits that helped mitigate competitive pressure on loan yields.”

Ms. Lee continued, “Net income for the quarter included a $6.9 million specific provision related to the previously identified $39.7 million troubled loan relationship. We continue to work with the borrower on an orderly resolution to the relationship and the borrower has continued payments, reducing the relationship to $39.7 million from $40.7 million at midyear. With the loans comprising this relationship maturing on December 31, 2019, we received current appraisals on the personal property securing the relationship and have provided for a specific allowance at the lower range of the appraised values. Notwithstanding this particular relationship, Hanmi’s overall credit quality metrics remain strong.”

Ms. Lee concluded, “As we look ahead to 2020, given our strong deposit franchise and loan and lease pipeline I believe Hanmi is well-positioned to deliver profitable growth throughout the year.”

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,     Q4-19     Q4-19  
  2019     2019     2019     2019     2018     vs. Q3-19     vs. Q4-18  
                                         
Net income $ 3,084     $ 12,376     $ 2,656     $ 14,672     $ 11,385     $ (9,292 )   $ (8,301 )
Net income per diluted common share $ 0.10     $ 0.40     $ 0.09     $ 0.48     $ 0.37     $ (0.30 )   $ (0.27 )
                                         
Assets $ 5,538,184     $ 5,527,982     $ 5,511,752     $ 5,571,068     $ 5,502,219     $ 10,202     $ 35,965  
Loans and leases receivable $ 4,610,148     $ 4,569,837     $ 4,555,802     $ 4,575,620     $ 4,600,540     $ 40,311     $ 9,608  
Deposits $ 4,698,962     $ 4,690,141     $ 4,762,068     $ 4,820,175     $ 4,747,235     $ 8,821     $ (48,273 )
                                         
Return on average assets 0.22 %   0.90 %   0.19 %   1.09 %   0.83 %   -0.68     -0.61  
Return on average stockholders' equity 2.15 %   8.67 %   1.87 %   10.62 %   7.92 %   -6.52     -5.77  
                                         
Net interest margin (1) 3.32 %   3.36 %   3.30 %   3.52 %   3.51 %   -0.04     -0.19  
Efficiency ratio (2) 67.31 %   64.04 %   59.44 %   56.83 %   56.40 %   3.27     10.91  
                                         
Tangible common equity to tangible assets (3) 9.98 %   10.20 %   10.04 %   9.93 %   9.84 %   -0.22     0.14  
Tangible common equity per common share (3) $ 17.90     $ 18.05     $ 17.83     $ 17.89     $ 17.47     $ (0.15 )   $ 0.43  
                                         
(1)  Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.
(2)  Noninterest expense divided by net interest income plus noninterest income.
(3)  Refer to "Non-GAAP Financial Measures" for further details.


Results of Operations

Net interest income was $43.9 million for the fourth quarter of 2019 compared with $44.1 million for the third quarter of 2019. Fourth quarter interest and fees on loans and leases decreased 2.9%, or $1.7 million, from the preceding quarter primarily due to an 11 basis point reduction in average yields, which was a function of the decline in the overnight rate by 25 basis points. This was partially offset by a decrease in total interest expense of 7.5%, or $1.4 million, from the preceding quarter due primarily to lower rates paid on interest-bearing deposits. Fourth quarter loan prepayment penalties were $0.7 million compared with $0.3 million for the third quarter.

Net interest income of $175.9 million for the full year in 2019 decreased 2.8% compared with $181.0 million for the full year in 2018. The year-over-year decline in net interest income reflects an 11 basis point increase in average yield on higher average interest-earnings assets that was more than offset by a 48 basis point increase in average rate paid on average interest-bearing deposits.

                               
   As of or For the Three Months Ended (in thousands)    Percentage Change
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,   Q4-19     Q4-19  
Net Interest Income 2019   2019   2019   2019   2018   vs. Q3-19     vs. Q4-18  
                               
Interest and fees on loans and leases(1) $   56,267   $   57,929   $   56,872   $   58,334   $   57,947   -2.9 %   -2.9 %
Interest on securities 3,665   3,769   3,770   3,456   3,278   -2.8 %   11.8 %
Dividends on FHLB stock 289   286   283   289   555   1.0 %   -47.9 %
Interest on deposits in other banks 478   193   557   335   179   147.7 %   167.0 %
Total interest and dividend income $   60,699   $   62,177   $   61,482   $   62,414   $   61,959   -2.4 %   -2.0 %
                               
Interest on deposits 14,699   15,995   16,728   15,683   14,139   -8.1 %   4.0 %
Interest on borrowings 325   367   -   71   420   -11.4 %   -22.6 %
Interest on subordinated debentures 1,739   1,757   1,764   1,772   1,754   -1.0 %   -0.9 %
Total interest expense 16,763   18,119   18,492   17,526   16,313   -7.5 %   2.8 %
Net interest income $   43,936   $   44,058   $   42,990   $   44,888   $   45,646   -0.3 %   -3.7 %
                               
(1)  Includes loans held for sale.
     


Net interest margin was 3.32% for the fourth quarter of 2019 compared with 3.36% for the third quarter of 2019, principally reflecting a 15 basis point decline in the yield on earning assets offset by a 16 basis point decline in the cost of interest-bearing deposits. For the full year, net interest margin was 3.37% for 2019 compared with 3.57% for 2018.

The average earning asset yield was 4.59% for the fourth quarter of 2019 compared with 4.74% for the third quarter of 2019. The 15 basis point decline reflects in part the 25 basis point decline in the overnight rate. Full year yields increased 11 basis points year-over-year to 4.73%.

The cost of interest-bearing liabilities was 1.89% for the fourth quarter of 2019 compared with 2.04% for the third quarter of 2019. The lower cost of interest-bearing liabilities was driven by a reduction in the general level of interest rates. For 2019, the cost of interest-bearing liabilities was 1.99% compared with 1.55% for the full year 2018, reflecting a decreasing interest rate environment in the second half of 2019. 

     
   For the Three Months Ended (in thousands)    Percentage Change
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,   Q4-19     Q4-19  
Average Earning Assets and Interest-bearing Liabilities 2019   2019   2019   2019   2018   vs. Q3-19     vs. Q4-18  
Loans and leases receivable (1) $   4,487,998   $   4,519,770   $   4,491,377   $   4,533,120   $   4,544,722   -0.7 %   -1.2 %
Securities 624,861   630,450   629,062   589,547   581,550   -0.9 %   7.4 %
FHLB stock 16,385   16,385   16,385   16,385   16,385   0.0 %   0.0 %
Interest-bearing deposits in other banks 114,462   35,140   92,753   53,022   34,301   225.7 %   233.7 %
Average interest-earning assets $   5,243,706   $   5,201,745   $   5,229,577   $   5,192,074   $   5,176,958   0.8 %   1.3 %
                               
Demand: interest-bearing $   82,604   $   82,665   $   83,932   $   85,291   $   89,971   -0.1 %   -8.2 %
Money market and savings 1,640,162   1,555,639   1,541,976   1,526,710   1,510,428   5.4 %   8.6 %
Time deposits 1,605,276   1,692,419   1,863,685   1,852,562   1,751,429   -5.1 %   -8.3 %
Average interest-bearing deposits 3,328,042   3,330,723   3,489,593   3,464,563   3,351,828   -0.1 %   -0.7 %
Borrowings 75,500   74,239   59   10,611   65,217   1.7 %   15.8 %
Subordinated debentures 118,297   118,145   118,007   117,863   117,728   0.1 %   0.5 %
Average interest-bearing liabilities $   3,521,839   $   3,523,107   $   3,607,659   $   3,593,037   $   3,534,773   0.0 %   -0.4 %
                               
(1)  Includes loans held for sale.    


  For the Three Months Ended 
  Amount Change
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,   Q4-19   Q4-19
Average Yields and Rates 2019   2019   2019   2019   2018   vs. Q3-19   vs. Q4-18
Loans and leases receivable(1) 4.97 %   5.08 %   5.08 %   5.22 %   5.06 %   -0.11   -0.09
Securities (2) 2.35 %   2.39 %   2.40 %   2.44 %   2.37 %   -0.04   -0.02
FHLB stock 7.00 %   6.93 %   6.93 %   7.15 %   13.44 %   0.07   -6.44
Interest-bearing deposits in other banks 1.66 %   2.18 %   2.41 %   2.56 %   2.07 %   -0.52   -0.41
Interest-earning assets 4.59 %   4.74 %   4.72 %   4.89 %   4.76 %   -0.15   -0.17
                                     
Interest-bearing deposits 1.75 %   1.91 %   1.92 %   1.84 %   1.67 %   -0.16   0.08
Borrowings 1.71 %   1.96 %   0.00 %   2.71 %   2.56 %   -0.25   -0.85
Subordinated debentures 5.88 %   5.92 %   5.96 %   6.01 %   5.94 %   -0.04   -0.06
Interest-bearing liabilities 1.89 %   2.04 %   2.06 %   1.98 %   1.83 %   -0.15   0.06
                                     
Net interest margin (taxable equivalent basis) 3.32 %   3.36 %   3.30 %   3.52 %   3.51 %   -0.04   -0.19
                                     
Cost of deposits 1.25 %   1.37 %   1.41 %   1.35 %   1.20 %   -0.12   0.05
                                     
 
(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 2019, the loan and lease loss provision was $10.8 million compared with $1.6 million for the preceding quarter, and $3.0 million for the fourth quarter of 2018. The 2019 fourth quarter provision included a $6.9 million specific provision for a previously identified troubled loan relationship. The loan and lease loss provision for the full year 2019 was $30.2 million compared with $4.0 million for 2018. 2019 included a $22.6 million specific provision for the previously identified troubled loan relationship.

Fourth quarter noninterest income decreased 2.2% to $6.7 million from $6.9 million for the third quarter, primarily due to a $0.3 million decrease in gain on sale of SBA loans. Gains on sales of SBA loans were $1.5 million for the fourth quarter 2019, down from $1.8 million for the preceding quarter reflecting lower trade premiums of 7.60% compared with 9.15%. The volume of SBA loans sold for the 2019 fourth quarter and third quarter were $24.9 million and $24.3 million, respectively. Servicing income reflected a higher level of amortization arising from elevated pay-offs, and other income included $0.5 million from the accretion of purchase discount related to matured leases.

Noninterest income was $27.6 million for the full year 2019 compared with $24.5 million for 2018 primarily due to higher gain on sale of SBA loans and securities and a $1.2 million gain on sale of bank premises. 

     
   For the Three Months Ended (in thousands)    Percentage Change
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,   Q4-19     Q4-19  
Noninterest Income 2019   2019   2019   2019   2018   vs. Q3-19     vs. Q4-18  
Service charges on deposit accounts $ 2,589   $ 2,518   $ 2,486   $ 2,358   $ 2,648   2.8 %   -2.2 %
Trade finance and other service charges and fees 1,267   1,191   1,204   1,124   1,167   6.4 %   8.6 %
Servicing income 227   614   600   357   630   -63.0 %   -64.0 %
Bank-owned life insurance income 281   279   281   280   288   0.7 %   -2.4 %
All other operating income 846   491   293   484   584   72.3 %   44.9 %
Service charges, fees & other 5,210   5,093   4,864   4,603   5,317   2.3 %   -2.0 %
                               
Gain on sale of SBA loans 1,499   1,767   1,060   926   983   -15.2 %   52.5 %
Net gain (loss) on sales of securities -   -   570   725   -   0.0 %   0.0 %
Gain on sale of bank premises -   -   1,235   -   -   0.0 %   0.0 %
Total noninterest income $ 6,709   $ 6,860   $ 7,729   $ 6,254   $ 6,300   -2.2 %   6.5 %
                               

During the fourth quarter, noninterest expense increased 4.5% to $34.1 million from $32.6 million in the third quarter principally due to a $1.7 million impairment loss on former bank premises to be sold and a $0.6 million increase in the provision for off balance sheet items arising from an increase in commitments to extend credit and an increase in related estimated loss factors.

Noninterest expense for the year ended December 31, 2019 were $125.9 million, reflecting an increase of $8.3 million from the year ended December 31, 2018 stemming mostly from the $1.7 million impairment loss, higher professional fees principally related to the reporting delay and CECL implementation, and increased investments in technology. The efficiency ratio for full year 2019 was 61.89% compared to 57.20% for the prior year. 

   For the Three Months Ended (in thousands)      Percentage Change  
  Dec 31,   Sep 30,   Jun 30,   Mar 31,     Dec 31,     Q4-19     Q4-19  
  2019   2019   2019   2019     2018     vs. Q3-19     vs. Q4-18  
Noninterest Expense                                  
Salaries and employee benefits $   17,752   $   17,530   $   16,881   $   15,738     $   15,845     1.3 %   12.0 %
Occupancy and equipment 4,547   4,528   3,468   4,521     4,105     0.4 %   10.8 %
Data processing 2,122   2,410   2,140   2,083     1,894     -12.0 %   12.0 %
Professional fees 2,601   2,826   1,983   1,649     1,969     -8.0 %   32.1 %
Supplies and communication 717   726   649   844     797     -1.2% %   -10.0 %
Advertising and promotion 1,165   927   945   760     1,316     25.7 %   -11.5 %
All other operating expenses 2,556   3,291   3,687   3,728     3,669     -22.3 %   -30.3 %
subtotal 31,460   32,238   29,753   29,323     29,595     -2.4 %   6.3 %
                                   
Provision (income) for off-balance sheet items 855   209   233   (339 )   82     309.1 %   942.7 %
Other real estate owned expense (income) 40   160   158   81     (378 )   -75.0 %   110.6 %
Impairment loss on bank premises 1,734   -   -   -     -     0.0 %   0.0 %
Total noninterest expense $   34,089   $   32,607   $   30,144   $   29,065     $   29,299     4.5 %   16.3 %
                                   

For the full years ended December 31, 2019 and 2018, the provision for income taxes was $14.6 million and $26.1 million, respectively, representing effective tax rates of 30.8% and 31.1%, respectively.

Financial Position
Total assets were $5.54 billion at December 31, 2019, a 0.2% increase from $5.53 billion at September 30, 2019.

Loans and leases receivable, before the allowance for loan and lease losses, were $4.61 billion at December 31, 2019, up 0.9% from $4.57 billion at the end of the prior quarter. Loans held for sale, representing the guaranteed portion of SBA loans, were $6.0 million at December 31, 2019 compared with $6.6 million at the end of the third quarter.

Loans and leases receivable, before the allowance for loan and lease losses at year-end 2019, were up 0.1% from $4.60 billion at December 31, 2018.

     
   As of (in thousands)    Percentage Change  
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,   Q4-19     Q4-19  
  2019   2019   2019   2019   2018   vs. Q3-19     vs. Q4-18  
Loan and Lease Portfolio                              
Commercial real estate loans $   3,226,478   $   3,209,752   $   3,213,135   $   3,230,526   $   3,257,792   0.5 %   -1.0 %
Residential real estate loans 402,028   436,576   458,327   483,830   500,563   -7.9 %   -19.7 %
Commercial and industrial loans 484,093   441,209   409,502   422,502   429,903   9.7 %   12.6 %
Lease receivables 483,879   467,777   460,519   425,530   398,858   3.4 %   21.3 %
Consumer loans 13,670   14,523   14,319   13,232   13,424   -5.9 %   1.8 %
Loans and leases receivable 4,610,148   4,569,837   4,555,802   4,575,620   4,600,540   0.9 %   0.2 %
Loans held for sale 6,020   6,598   6,029   7,140   9,390   -8.8 %   -35.9 %
Total loans and leases $   4,616,168   $   4,576,435   $   4,561,831   $   4,582,760   $   4,609,930   0.9 %   0.1 %
                               

For the fourth quarter of 2019, commercial real estate loans as a percentage of loans and leases receivable decreased to 70.0% compared with 70.8% for the same period last year. Commercial and industrial loans and leases receivable each reached 10.5% of the portfolio; a year ago, they were 9.3% and 8.7% respectively.

New loan and lease production for the 2019 fourth quarter was $381.4 million at an average rate of 5.08%, while the average rate of loans paid off during the same period was 5.01%.

  For the Three Months Ended (in thousands)
  Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,  
  2019     2019     2019     2019     2018  
New Loan & Lease Production                            
Commercial real estate loans $   185,070     $   78,039     $   105,527     $   46,531     $   87,523  
Commercial and industrial loans 95,349     51,093     48,451     33,643     68,113  
SBA loans 33,649     34,114     19,970     29,976     30,758  
Lease receivable 65,525     52,333     77,983     69,577     59,023  
Consumer loans 1,768     1,882     450     122     831  
subtotal 381,361     217,461     252,381     179,849     246,248  
                             
                             
Payoffs (205,012 )   (103,638 )   (124,200 )   (133,246 )   (94,288 )
Amortization (77,580 )   (70,407 )   (77,417 )   (74,538 )   (90,603 )
Loan sales (26,087 )   (24,286 )   (16,650 )   (15,459 )   (18,210 )
Net line utilization (31,333 )   (4,012 )   (52,404 )   19,581     (21,715 )
Charge-offs & OREO (1,038 )   (1,084 )   (1,527 )   (1,107 )   (3,775 )
                             
Loans and leases-beginning balance $   4,569,837     $   4,555,803     $   4,575,620     $   4,600,540     $   4,582,883  
Loans and leases-ending balance $   4,610,148     $   4,569,837     $   4,555,803     $   4,575,620     $   4,600,540  
                             

Deposits increased by 0.2% to $4.70 billion at the end of the fourth quarter from $4.69 billion at the end of the preceding quarter. The average loan-to-deposit ratio at December 31, 2019 was 96.1% compared with 97.6% in the third quarter.

Deposits decreased by 1.0% from $4.75 billion at the end of the fourth quarter last year, driven primarily by a decrease of 13.6% in time deposits, partially offset by an increase of 8.3% in noninterest-bearing demand deposits. Time deposits accounted for 33.1% of the deposit portfolio.

     
   As of (in thousands)    Percentage Change  
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,   Q4-19     Q4-19  
  2019   2019   2019   2019   2018   vs. Q3-19     vs. Q4-18  
Deposit Portfolio                              
Demand: noninterest-bearing $   1,391,624   $   1,388,121   $   1,312,577   $   1,316,114   $   1,284,530   0.3 %   8.3 %
Demand: interest-bearing 84,323   84,155   80,248   85,946   87,582   0.2 %   -3.7 %
Money market and savings 1,667,096   1,590,037   1,528,000   1,543,299   1,573,622   4.8 %   5.9 %
Time deposits 1,555,919   1,627,828   1,841,243   1,874,816   1,801,501   -4.4 %   -13.6 %
Total deposits $   4,698,962   $   4,690,141   $   4,762,068   $   4,820,175   $   4,747,235   0.2 %   -1.0 %
                               

At December 31, 2019, stockholders’ equity was $563.3 million, compared with $574.5 million at September 30, 2019. Tangible common stockholders’ equity was $551.4 million, or 9.98% of tangible assets, compared with $562.6 million, or 10.20% of tangible assets at the end of the third quarter. Tangible book value per share decreased to $17.90 from $18.05 in the prior quarter. During the 2019 fourth quarter, Hanmi repurchased 375,000 shares at a weighted average price of $19.63.

Hanmi continues to be well capitalized for regulatory purposes, with a preliminary Tier 1 risk-based capital ratio of 11.77% and a Total risk-based capital ratio of 14.99% at December 31, 2019, versus 11.91% and 15.07%, respectively, for the third quarter.

   As of    Amount Change
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,   Q4-19   Q4-19
  2019   2019   2019   2019   2018   vs. Q3-19   vs. Q4-18
Regulatory Capital ratios (1)                          
Hanmi Financial                          
Total risk-based capital 14.99%   15.07%   14.99%   14.17%   14.54%   -0.08   0.45
Tier 1 risk-based capital 11.77%   11.91%   11.83%   11.94%   11.74%   -0.14   0.03
Common equity tier 1 capital 11.35%   11.49%   11.41%   11.52%   11.32%   -0.14   0.03
Tier 1 leverage capital ratio 10.13%   10.43%   10.20%   10.39%   10.18%   -0.30   -0.05
Hanmi Bank                          
Total risk-based capital 14.56%   14.65%   14.62%   14.37%   14.19%   -0.09   0.37
Tier 1 risk-based capital 13.43%   13.55%   13.54%   13.64%   13.47%   -0.12   -0.04
Common equity tier 1 capital 13.43%   13.55%   13.54%   13.64%   13.47%   -0.12   -0.04
Tier 1 leverage capital ratio 11.69%   11.86%   11.67%   11.88%   11.67%   -0.17   0.02
                           
(1)  Preliminary ratios for December 31, 2019                          
                           


Asset Quality

Loans and leases 30 to 89 days past due and still accruing were 0.22% of loans and leases at the end of the fourth quarter of 2019, compared with 0.18% at the end of the third quarter.

Classified loans were $94.0 million at December 31, 2019 compared with $80.7 million at the end of the third quarter, while special mention loans were $26.6 million at the end of the fourth quarter compared with $27.4 million at September 30, 2019. The increase in classified loans reflects the addition of a $10.7 million branded hotel construction loan due to project delays; project completion is estimated to be late summer or early fall of 2020.

Nonperforming loans and leases were $63.8 million at the end of the fourth quarter of 2019, or 1.38% of loans and leases compared with $64.7 million for the third quarter, or 1.42% of the portfolio.

Nonperforming assets were $63.8 million at the end of the fourth quarter of 2019, or 1.15% of assets, compared with $65.1 million, or 1.18% of assets, at the end of the prior quarter.

The troubled loan relationship identified in the 2019 second quarter, included in both the classified and nonaccrual categories above, was $39.7 million at December 31, 2019, compared with $40.0 million at September 30, 2019, and $40.7 million at June 30, 2019. The decline reflects payments applied to the loans outstanding; there have been no charge-offs. The specific allowance for this troubled loan relationship increased to $22.6 million at year-end from $15.7 million at September 30, 2019.

Gross charge-offs for the fourth quarter of 2019 were $1.0 million compared with $0.9 million for the preceding quarter. Recoveries of previously charged-off loans for the fourth quarter of 2019 were $1.0 million compared with $0.6 million for the preceding quarter. As a result, there were net charge offs of $55,000 for the fourth quarter of 2019, compared with net charge offs of $276,000 for the preceding quarter. For the fourth quarter of 2019, net charge offs represented 0.00% of average loans and leases compared to net charge offs of 0.02% for the preceding quarter.

The allowance for loan and lease losses was $61.4 million as of December 31, 2019, generating an allowance for loan and lease losses to loans and leases of 1.33% compared with 1.11% in the prior quarter.

...
   As of or for the Three Months Ended (in thousands) 
  Amount Change
 
  Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,     Q4-19     Q4-19  
  2019     2019     2019     2019     2018     vs. Q3-19     vs. Q4-18  
Asset Quality Data and Ratios                                        
                                         
Delinquent loans and leases:                                        
Loans and leases, 30 to 89 days past due and still accruing $   10,251     $   8,085     $   11,210     $   9,242     $   10,674     $   2,166     $   (423 )
Delinquent loans and leases to loans and leases 0.22 %   0.18 %   0.25 %   0.20 %   0.23 %   0.04     -0.01  
                                         
Criticized loans and leases:                                        
Special mention $   26,632     $   27,400     $   23,820     $   9,257     $   29,183     $   (768 )   $ (2,551 )
Classified 94,025     80,734     75,686     53,087     29,542     13,291     64,483  
Total criticized loans & leases $   120,657     $   108,134     $   99,506     $   62,344     $   58,725     $ 12,523     $ 61,932  
                                         
Nonperforming assets:                                        
Nonaccrual loans and leases $   63,761     $   64,194     $   63,031     $   40,041     $   15,525     $   (433 )   $ 48,236  
Loans and leases 90 days or more past due and still accruing -     544     -     -     4     (544 )   (4 )
Nonperforming loans and leases 63,761     64,738     63,031     40,041     15,529     (977 )   48,232  
Other real estate owned, net 63     330     507     622     663     (267 )   (600 )
Nonperforming assets $   63,824     $   65,068     $   63,538     $   40,663     $   16,192     $ (1,244 )   $ 47,632  
                                         
Nonperforming loans and leases to loans and leases 1.38 %   1.43 %   1.38 %   0.88 %   0.34 %            
Nonperforming assets to assets 1.15 %   1.18 %   1.15 %   0.73 %   0.29 %            
                                         
Allowance for loan and lease losses:                                        
Balance at beginning of period $   50,712     $   49,386     $   32,896     $   31,974     $   31,676              
Loan and lease loss provision 10,752     1,602     16,699     1,117     3,041              
Less: Net loan and lease charge-offs 55     276     209     195     2,743              
Balance at end of period $   61,409     $   50,712     $   49,386     $   32,896     $   31,974              
                                         
Net loan and lease charge-offs to average loans and leases (1) 0.00 %   0.02 %   0.02 %   0.02 %   0.24 %            
Allowance for loan and lease losses to loans and leases 1.33 %   1.11 %   1.08 %   0.72 %   0.70 %            
                                         
Allowance for off-balance sheet items: