Hanmi Reports Third Quarter 2020 Results

Hanmi Bank
·25 min read

2020 Thir d Quarter Highlights:         

  • Net income of $16.3 million, or $0.53 per diluted share, up 78.1% from net income of $9.2 million, or $0.30 per share, for the prior quarter and up 32.1% from net income of $12.4 million, or $0.40 per share, from the same quarter a year ago.

  • Loans receivable were $4.83 billion, relatively unchanged compared with the end of the prior quarter, and included $256.6 million of new loan and lease production. Loans receivable were up 5.8% year-over-year.

  • Deposits of $5.19 billion compared with $5.21 billion from the end of the second quarter; Deposits up 10.7% from a year ago. Cost of interest-bearing deposits fell 24 basis points from the prior quarter.

    • Noninterest-bearing demand deposits of $1.96 billion, up 20.5% from the prior quarter on an annualized basis and up 41.3% year-over-year.

  • Credit loss expense, under the new accounting standard, was $0.04 million, compared with $24.6 million for the prior quarter resulting in an allowance for credit losses of 1.79% of loans at September 30, 2020 1.91% excluding Paycheck Protection Program (PPP) loans.

  • Nonperforming assets were 1.07% (1.00% after giving effect to a $3.6 million loan payoff in October) of total assets at quarter-end compared with 0.94% for the prior quarter; the change for the quarter reflects the addition of four loans for $7.9 million, a net increase of $1.4 million in nonperforming leases, and the return to accruing status of four loans for $2.3 million.

  • Net interest income was $45.6 million for the third quarter compared with $44.4 million for the prior quarter; third quarter prepayment penalties were $1.3 million compared with $0.1 million for the prior quarter.

  • Net interest margin for the third quarter was 3.13% (3.18% excluding PPP loans) compared with 3.15% (3.21% excluding PPP loans) for the prior quarter; prepayment penalties contributed approximately 9 basis points and 1 basis point, respectively, to net interest margin.

  • Noninterest income was $7.1 million for the third quarter compared with $20.9 million for the prior quarter; third quarter included $2.3 million of gains from sales of SBA loans while the second quarter included none and second quarter included $15.7 million of gains from sales of securities while the third quarter included none.

  • Noninterest expense was $29.9 million for the third quarter compared with $27.1 million for the prior quarter; the second quarter included the $3.1 million effect of deferred loan origination costs from PPP loan originations. The efficiency ratio for the third quarter was 56.73% compared with 41.51% (60.82% excluding securities gains and deferred PPP loan origination costs) for the prior quarter.

  • Hanmi remained well capitalized with a Total risk-based capital ratio of 15.45% and a Common equity Tier 1 capital ratio of 11.68% at September 30, 2020, and ended the third quarter with tangible common equity to tangible assets ratio of 9.05% (9.52% excluding PPP loans).

For more information about Hanmis response to the COVID-19 pandemic, including detail regarding participation in the PPP, loan deferrals, including a breakdown by loan type and industry, as well as detail concerning Hanmis loan exposure to higher impacted industries, please see the Q 3 2020 Investor Update (and Supplemental Financial Information) , a copy of which is available on the Banks 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 .

LOS ANGELES, Oct. 27, 2020 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or Hanmi) , the parent company of Hanmi Bank (the Bank), today reported net income for the 2020 third quarter of $16.3 million, or $0.53 per diluted share, compared with $9.2 million, or $0.30 per diluted share for the 2020 second quarter and $12.4 million, or $0.40 per diluted share for the 2019 third quarter.

Bonnie Lee, President and Chief Executive Officer, said, In light of the significant challenges and uncertainty we faced in the first half of 2020 arising from the COVID-19 pandemic, I am extremely pleased with the financial and operational improvements we achieved in the third quarter. In particular, efforts to protect our portfolio and help borrowers impacted by the pandemic through modifications, deferrals and other services have been extremely successful. We are very encouraged by the positive trend with the modified loan portfolio, declining to approximately 12% of the portfolio as of the end of the third quarter, and down from 29% at the end of the prior quarter. We also saw the benefit of lower deposit costs, moderated credit loss expense, a return to SBA loan sales and careful management of noninterest expense. Together, this greatly expanded our third quarter net income to $16.3 million, or $0.53 per diluted share.

Ms. Lee further added, While we will continue to proactively monitor the macroeconomic environment and the performance of our loan portfolio, we are concurrently taking steps to provide our customers with additional products and services, further diversify our sources of revenue and safely and soundly drive growth and profitability at the Bank. During the quarter we hired key executives to enhance our residential mortgage origination capabilities, as well as accelerate the digitization of our banking platform to provide a more convenient and seamless customer experience. We are confident these efforts will deepen our relationships with new and existing customers, allow us to scale more efficiently and provide exciting growth opportunities for Hanmi.

Ms. Lee concluded, As we look ahead to the fourth quarter and beyond, we remain committed to supporting our loyal customers, prioritizing the health and safety of our employees and communities and ultimately emerging from the pandemic well-positioned to drive profitable, sustainable growth and maximize value for our shareholders.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the Three Months Ended

 

Amount Change

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

Q3-20

 

Q3-20

 

2020

 

2020

 

2020

 

2019

 

2019

 

vs. Q2-20

 

vs. Q3-19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

16,344

 

 

$

9,175

 

 

$

2,350

 

 

$

3,084

 

 

$

12,376

 

 

$

7,169

 

 

$

3,968

 

Net income per diluted common share

$

0.53

 

 

$

0.30

 

 

$

0.08

 

 

$

0.10

 

 

$

0.40

 

 

$

0.23

 

 

$

0.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

$

6,106,782

 

 

$

6,218,163

 

 

$

5,617,690

 

 

$

5,538,184

 

 

$

5,527,982

 

 

$

(111,381

)

 

$

578,800

 

Loans receivable

$

4,834,137

 

 

$

4,825,642

 

 

$

4,543,636

 

 

$

4,610,148

 

 

$

4,569,837

 

 

$

8,495

 

 

$

264,300

 

Deposits

$

5,194,292

 

 

$

5,209,781

 

 

$

4,582,068

 

 

$

4,698,962

 

 

$

4,690,141

 

 

$

(15,489

)

 

$

504,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

1.08

%

 

 

0.63

%

 

 

0.17

%

 

 

0.22

%

 

 

0.90

%

 

 

0.45

 

 

 

0.18

 

Return on average stockholders' equity

 

11.74

%

 

 

6.73

%

 

 

1.69

%

 

 

2.15

%

 

 

8.67

%

 

 

5.01

 

 

 

3.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (1)

 

3.13

%

 

 

3.15

%

 

 

3.36

%

 

 

3.32

%

 

 

3.36

%

 

 

-0.02

 

 

 

-0.23

 

Efficiency ratio (2)

 

56.73

%

 

 

41.51

%

 

 

61.89

%

 

 

67.31

%

 

 

64.04

%

 

 

15.22

 

 

 

-7.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible common equity to tangible assets (3)

 

9.05

%

 

 

8.63

%

 

 

9.65

%

 

 

9.98

%

 

 

10.20

%

 

 

0.42

 

 

 

-1.15

 

Tangible common equity per common share (3)

$

17.95

 

 

$

17.47

 

 

$

17.67

 

 

$

17.90

 

 

$

18.05

 

 

$

0.48

 

 

$

(0.10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 $45.6 million for the third quarter of 2020 compared with $44.4 million for the second quarter of 2020, an increase of 2.6%. Interest and fees on loans increased 0.7%, or $0.4 million, from the preceding quarter primarily due to higher average balances, partially offset by a 7 basis point reduction in average yields. Interest on securities decreased 38.8%, or $1.2 million, from the preceding quarter primarily due to the sale of $479.9 million of securities during the previous quarter and the subsequent reinvestment into lower-yielding securities. Third quarter total interest expense decreased 18.2%, or $2.1 million from the preceding quarter driven by a 24 basis point reduction in the average rate paid on interest-bearing deposits. Third quarter loan prepayment penalties were $1.3 million compared with $0.1 million for the second quarter.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Percentage Change

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

Q3-20

 

Q3-20

Net Interest Income

2020

 

2020

 

2020

 

2019

 

2019

 

vs. Q2-20

 

vs. Q3-19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans receivable (1)

$

52,586

 

 

$

52,230

 

 

$

54,648

 

 

$

56,267

 

 

$

57,929

 

 

0.7

%

 

-9.2

%

Interest on securities

 

1,972

 

 

 

3,225

 

 

 

3,655

 

 

 

3,665

 

 

 

3,769

 

 

-38.8

%

 

-47.7

%

Dividends on FHLB stock

 

204

 

 

 

203

 

 

 

289

 

 

 

289

 

 

 

286

 

 

0.3

%

 

-28.8

%

Interest on deposits in other banks

 

84

 

 

 

78

 

 

 

333

 

 

 

478

 

 

 

193

 

 

7.3

%

 

-56.6

%

Total interest and dividend income

$

54,846

 

 

$

55,736

 

 

$

58,925

 

 

$

60,699

 

 

$

62,177

 

 

-1.6

%

 

-11.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

7,032

 

 

 

8,889

 

 

 

12,742

 

 

 

14,699

 

 

 

15,995

 

 

-20.9

%

 

-56.0

%

Interest on borrowings

 

582

 

 

 

760

 

 

 

496

 

 

 

325

 

 

 

367

 

 

-23.4

%

 

58.6

%

Interest on subordinated debentures

 

1,627

 

 

 

1,645

 

 

 

1,712

 

 

 

1,739

 

 

 

1,757

 

 

-1.1

%

 

-7.4

%

Total interest expense

 

9,241

 

 

 

11,294

 

 

 

14,950

 

 

 

16,763

 

 

 

18,119

 

 

-18.2

%

 

-49.0

%

Net interest income

$

45,605

 

 

$

44,442

 

 

$

43,975

 

 

$

43,936

 

 

$

44,058

 

 

2.6

%

 

3.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)       Includes loans held for sale.

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin was 3.13% for the third quarter of 2020 compared with 3.15% for the second quarter of 2020, principally reflecting an 18 basis point decline in the yield on earning assets offset by a 24 basis point decline in the cost of interest-bearing deposits. The average earning asset yield was 3.77% for the third quarter of 2020 compared with 3.95% for the second quarter of 2020. The 18 basis point decline was primarily due to the reduction in securities yields reflecting the prior quarter sale of securities and reinvestment into lower-yielding securities, and, to a lesser extent lower average yields on loans receivable. The cost of interest-bearing liabilities was 1.05% for the third quarter of 2020 compared with 1.23% for the second quarter of 2020. The 24 basis point decline in the cost of interest-bearing deposits drove the lower cost of interest-bearing liabilities.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended (in thousands)

 

Percentage Change

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

Q3-20

 

Q3-20

Average Earning Assets and Interest-bearing Liabilities

2020

 

2020

 

2020

 

2019

 

2019

 

vs. Q2-20

 

vs. Q3-19

Loans receivable (1)

$

4,734,511

 

 

$

4,680,048

 

 

$

4,518,395

 

 

$

4,487,998

 

 

$

4,519,770

 

 

1.2

%

 

4.8

%

Securities

 

696,285

 

 

 

589,932

 

 

 

623,711

 

 

 

624,861

 

 

 

630,450

 

 

18.0

%

 

10.4

%

FHLB stock

 

16,385

 

 

 

16,385

 

 

 

16,385

 

 

 

16,385

 

 

 

16,385

 

 

0.0

%

 

0.0

%

Interest-bearing deposits in other banks

 

340,486

 

 

 

386,956

 

 

 

104,513

 

 

 

114,462

 

 

 

35,140

 

 

-12.0

%

 

868.9

%

Average interest-earning assets

$

5,787,667

 

 

$

5,673,321

 

 

$

5,263,004

 

 

$

5,243,706

 

 

$

5,201,745

 

 

2.0

%

 

11.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand: interest-bearing

$

99,161

 

 

$

92,676

 

 

$

82,934

 

 

$

82,604

 

 

$

82,665

 

 

7.0

%

 

20.0

%

Money market and savings

 

1,771,615

 

 

 

1,677,081

 

 

 

1,687,013

 

 

 

1,640,162

 

 

 

1,555,639

 

 

5.6

%

 

13.9

%

Time deposits

 

1,357,167

 

 

 

1,458,351

 

 

 

1,522,745

 

 

 

1,605,276

 

 

 

1,692,419

 

 

-6.9

%

 

-19.8

%

Average interest-bearing deposits

 

3,227,943

 

 

 

3,228,108

 

 

 

3,292,692

 

 

 

3,328,042

 

 

 

3,330,723

 

 

-0.0

%

 

-3.1

%

Borrowings

 

163,364

 

 

 

342,437

 

 

 

130,659

 

 

 

75,500

 

 

 

74,239

 

 

-52.3

%

 

120.1

%

Subordinated debentures

 

118,733

 

 

 

118,583

 

 

 

118,444

 

 

 

118,297

 

 

 

118,145

 

 

0.1

%

 

0.5

%

Average interest-bearing liabilities

$

3,510,040

 

 

$

3,689,128

 

 

$

3,541,795

 

 

$

3,521,839

 

 

$

3,523,107

 

 

-4.9

%

 

-0.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)       Includes loans held for sale.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

Amount Change

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

Q3-20

 

Q3-20

Average Yields and Rates

2020

 

2020

 

2020

 

2019

 

2019

 

vs. Q2-20

 

vs. Q3-19

Loans receivable (1)

 

4.42

%

 

 

4.49

%

 

 

4.86

%

 

 

4.97

%

 

 

5.08

%

 

-0.07

 

 

-0.66

 

Securities (2)

 

1.13

%

 

 

2.19

%

 

 

2.34

%

 

 

2.35

%

 

 

2.39

%

 

-1.06

 

 

-1.26

 

FHLB stock

 

4.95

%

 

 

5.00

%

 

 

7.10

%

 

 

7.00

%

 

 

6.93

%

 

-0.05

 

 

-1.98

 

Interest-bearing deposits in other banks

 

0.10

%

 

 

0.08

%

 

 

1.28

%

 

 

1.66

%

 

 

2.18

%

 

0.02

 

 

-2.08

 

Interest-earning assets

 

3.77

%

 

 

3.95

%

 

 

4.50

%

 

 

4.59

%

 

 

4.74

%

 

-0.18

 

 

-0.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

0.87

%

 

 

1.11

%

 

 

1.56

%

 

 

1.75

%

 

 

1.91

%

 

-0.24

 

 

-1.04

 

Borrowings

 

1.42

%

 

 

0.89

%

 

 

1.53

%

 

 

1.71

%

 

 

1.96

%

 

0.53

 

 

-0.54

 

Subordinated debentures

 

5.48

%

 

 

5.55

%

 

 

5.78

%

 

 

5.88

%

 

 

5.92

%

 

-0.07

 

 

-0.44

 

Interest-bearing liabilities

 

1.05

%

 

 

1.23

%

 

 

1.70

%

 

 

1.89

%

 

 

2.04

%

 

-0.18

 

 

-0.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (taxable equivalent basis)

 

3.13

%

 

 

3.15

%

 

 

3.36

%

 

 

3.32

%

 

 

3.36

%

 

-0.02

 

 

-0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of deposits

 

0.55

%

 

 

0.74

%

 

 

1.11

%

 

 

1.25

%

 

 

1.37

%

 

-0.19

 

 

-0.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 third quarter of 2020, credit loss expense was $0.04 million, comprised of a $0.70 million provision for loan losses and a $0.66 million negative provision for off-balance sheet items. The provision for credit losses for the second quarter of 2020 was $21.1 million and the provision for loan losses was $1.6 million for the third quarter of 2019. The provision for off-balance sheet items was $3.5 million and $0.2 million for the second quarter of 2020 and third quarter of 2019, respectively.

Third quarter noninterest income decreased to $7.1 million from $20.9 million for the second quarter, primarily due to the $15.7 million in gains on sales of securities realized in the second quarter as a result of repositioning the securities portfolio to capture the high-level of unrealized gains arising from the very low rate environment. This decrease was partially offset by a $2.3 million increase in gain on sale of SBA loans on $29.3 million of loans sold for the third quarter of 2020. Hanmi did not sell any SBA loans during the second quarter due to disruptions in the secondary market resulting from the COVID-19 crisis.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended (in thousands)

 

Percentage Change

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

Q3-20

 

Q3-20

Noninterest Income

2020

 

2020

 

2020

 

2019

 

2019

 

vs. Q2-20

 

vs. Q3-19

Service charges on deposit accounts

$

2,002

 

 

$

2,032

 

 

$

2,400

 

 

$

2,589

 

 

$

2,518

 

 

-1.5

%

 

-20.5

%

Trade finance and other service charges and fees

 

972

 

 

 

961

 

 

 

986

 

 

 

1,267

 

 

 

1,191

 

 

1.1

%

 

-18.4

%

Servicing income

 

704

 

 

 

855

 

 

 

561

 

 

 

227

 

 

 

614

 

 

-17.7

%

 

14.7

%

Bank-owned life insurance income

 

289

 

 

 

276

 

 

 

277

 

 

 

281

 

 

 

279

 

 

4.6

%

 

3.4

%

All other operating income

 

806

 

 

 

1,095

 

 

 

845

 

 

 

846

 

 

 

491

 

 

-26.4

%

 

64.1

%

Service charges, fees & other

 

4,773

 

 

 

5,219

 

 

 

5,069

 

 

 

5,210

 

 

 

5,093

 

 

-8.6

%

 

-6.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of SBA loans

 

2,324

 

 

 

-

 

 

 

1,154

 

 

 

1,499

 

 

 

1,767

 

 

0.0

%

 

31.5

%

Net gain on sales of securities

 

-

 

 

 

15,712

 

 

 

-

 

 

 

-

 

 

 

-

 

 

-100.0

%

 

0.0

%

Gain on sale of bank premises

 

43

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

0.0

%

 

0.0

%

Total noninterest income

$

7,140

 

 

$

20,931

 

 

$

6,223

 

 

$

6,709

 

 

$

6,860

 

 

-65.9

%

 

4.1

%

During the third quarter of 2020, noninterest expense increased 10.3% to $29.9 million from $27.1 million for the second quarter primarily due to $3.1 million in deferred loan costs from PPP loans in the second quarter which drove a reduction in 2020 second quarter salaries and benefits expense. Primarily as a result of the decrease in revenues (noninterest income and net interest income), as well as higher noninterest expense, the efficiency ratio increased to 56.73% in the third quarter from 41.51% in the prior quarter. Excluding securities gains and deferred PPP loan origination costs the efficiency ratio for the third quarter was 56.73% compared with 60.82% for the prior quarter.

 

For the Three Months Ended (in thousands)

 

Percentage Change

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

Q3-20

 

Q3-20

 

2020

 

2020

 

2020

 

2019

 

2019

 

vs. Q2-20

 

vs. Q3-19

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

$

17,194

 

 

$

14,701

 

 

$

17,749

 

 

$

17,752

 

 

$

17,530

 

 

17.0

%

 

-1.9

%

Occupancy and equipment

 

4,650

 

 

 

4,508

 

 

 

4,475

 

 

 

4,547

 

 

 

4,528

 

 

3.1

%

 

2.7

%

Data processing

 

2,761

 

 

 

2,804

 

 

 

2,669

 

 

 

2,122

 

 

 

2,410

 

 

-1.5

%

 

14.6

%

Professional fees

 

1,794

 

 

 

1,545

 

 

 

1,915

 

 

 

2,601

 

 

 

2,826

 

 

16.1

%

 

-36.5

%

Supplies and communication

 

698

 

 

 

858

 

 

 

781

 

 

 

717

 

 

 

726

 

 

-18.7

%

 

-3.9

%

Advertising and promotion

 

594

 

 

 

456

 

 

 

734

 

 

 

1,165

 

 

 

927

 

 

30.2

%

 

-36.0

%

All other operating expenses

 

2,349

 

 

 

2,457

 

 

 

2,743

 

 

 

3,411

 

 

 

3,500

 

 

-4.4

%

 

-32.9

%

subtotal

 

30,040

 

 

 

27,329

 

 

 

31,066

 

 

 

32,315

 

 

 

32,447

 

 

9.9

%

 

-7.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other real estate owned expense (income)

 

(116

)

 

 

(191

)

 

 

2

 

 

 

40

 

 

 

160

 

 

39.4

%

 

-172.4

%

Impairment loss on bank premises

 

-

 

 

 

-

 

 

 

-

 

 

 

1,734

 

 

 

-

 

 

0.0

%

 

0.0

%

Total noninterest expense

$

29,924

 

 

$

27,138

 

 

$

31,068

 

 

$

34,089

 

 

$

32,607

 

 

10.3

%

 

-8.2

%

Hanmi recorded a provision for income taxes of $6.4 million for the third quarter of 2020, representing an effective tax rate of 28.3% compared with $4.5 million, representing an effective tax rate of 32.7%, for the second quarter of 2020. For the first nine months of 2020, the effective tax rate was 30.0%.

Financial Position
Total assets were $6.11 billion at September 30, 2020, a 1.8% decrease from $6.22 billion at June 30, 2020.

Loans receivable, before the allowance for credit losses, were $4.83 billion at September 30, 2020 and June 30, 2020. Loans held for sale, representing the guaranteed portion of SBA 7(a) loans were $12.8 million at the end of the third quarter, compared with $17.9 million at the end of the second quarter.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of (in thousands)

 

Percentage Change

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

Q3-20

 

Q3-20

 

2020

 

2020

 

2020

 

2019

 

2019

 

vs. Q2-20

 

vs. Q3-19

Loan Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate loans

$

3,264,447

 

 

$

3,266,242

 

 

$

3,187,189

 

 

$

3,226,478

 

 

$

3,209,752

 

 

-0.1

%

 

1.7

%

Residential/consumer loans

 

370,883

 

 

 

366,190

 

 

 

391,206

 

 

 

415,698

 

 

 

451,099

 

 

1.3

%

 

-17.8

%

Commercial and industrial loans

 

765,484

 

 

 

730,399

 

 

 

472,714

 

 

 

484,093

 

 

 

441,209

 

 

4.8

%

 

73.5

%

Leases

 

433,323

 

 

 

462,811

 

 

 

492,527

 

 

 

483,879

 

 

 

467,777

 

 

-6.4

%

 

-7.4

%

Loans receivable

 

4,834,137

 

 

 

4,825,642

 

 

 

4,543,636

 

 

 

4,610,148

 

 

 

4,569,837

 

 

0.2

%

 

5.8

%

Loans held for sale

 

12,834

 

 

 

17,942

 

 

 

-

 

 

 

6,020

 

 

 

6,598

 

 

-28.5

%

 

94.5

%

Total

$

4,846,971

 

 

$

4,843,584

 

 

$

4,543,636

 

 

$

4,616,168

 

 

$

4,576,435

 

 

0.1

%

 

5.9

%

For the third quarter of 2020, commercial real estate loans as a percentage of loans receivable decreased to 67.5% compared with 70.2% for the same period last year. Commercial and industrial loans, which included $302.9 million of SBA guaranteed PPP loans, reached 15.8% of the portfolio at the end of the 2020-third quarter, up from 9.7% a year ago.

Hanmi generated strong loan production volume through the third quarter. New loan production totaled $256.6 million at an average rate of 4.57%, while the average rate of loans paid off during the same period was 5.13%.

 

For the Three Months Ended (in thousands)

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

2020

 

2020

 

2020

 

2019

 

2019

New Loan Production

 

 

 

 

 

 

 

 

 

Commercial real estate loans

$

99,618

 

 

$

129,432

 

 

$

109,433

 

 

$

185,070

 

 

$

78,039

 

Commercial and industrial loans

 

78,594

 

 

 

61,114

 

 

 

18,237

 

 

 

95,349

 

 

 

51,093

 

SBA loans

 

31,335

 

 

 

328,274

 

 

 

23,422

 

 

 

33,649

 

 

 

34,114

 

Leases receivable

 

21,271

 

 

 

15,279

 

 

 

56,849

 

 

 

65,525

 

 

 

52,333

 

Residential/consumer loans

 

25,766

 

 

 

10

 

 

 

714

 

 

 

1,768

 

 

 

1,882

 

subtotal

 

256,584

 

 

 

534,109

 

 

 

208,655

 

 

 

381,361

 

 

 

217,461

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payoffs

 

(139,797

)

 

 

(67,537

)

 

 

(122,686

)

 

 

(205,012

)

 

 

(103,638

)

Amortization

 

(66,907

)

 

 

(90,678

)

 

 

(95,414

)

 

 

(77,580

)

 

 

(70,407

)

Loan sales

 

(36,068

)

 

 

-

 

 

 

(18,352

)

 

 

(26,087

)

 

 

(24,286

)

Net line utilization

 

(2,199

)

 

 

(92,230

)

 

 

(11,242

)

 

 

(31,333

)

 

 

(4,012

)

Charge-offs & OREO

 

(3,118

)

 

 

(1,658

)

 

 

(27,473

)

 

 

(1,038

)

 

 

(1,084

)

 

 

 

 

 

 

 

 

 

 

Loans receivable-beginning balance

 

4,825,642

 

 

 

4,543,636

 

 

 

4,610,148

 

 

 

4,569,837

 

 

 

4,555,803

 

Loans receivable-ending balance

$

4,834,137

 

 

$

4,825,642

 

 

$

4,543,636

 

 

$

4,610,148

 

 

$

4,569,837

 

Deposits totaled $5.19 billion at the end of the third quarter, compared with $5.21 billion at the end of the preceding quarter. Growth in noninterest-bearing demand deposits and interest-bearing demand deposits was more than offset by reductions in time deposits. At September 30, 2020 the loan-to-deposit ratio was 93.1% compared with 92.6% at the end of the previous quarter.

 

As of (in thousands)

 

Percentage Change

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

Q3-20

 

Q3-20

 

  2020  

 

  2020  

 

  2020  

 

  2019  

 

  2019  

 

vs. Q2-20

 

vs. Q3-19

Deposit Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand: noninterest-bearing

$

1,961,006

 

 

$

1,865,213

 

 

$

1,366,270

 

 

$

1,391,624

 

 

$

1,388,121

 

 

 

5.1

%

 

 

41.3

%

Demand: interest-bearing

 

100,155

 

 

 

96,941

 

 

 

87,313

 

 

 

84,323

 

 

 

84,155

 

 

 

3.3

%

 

 

19.0

%

Money market and savings

 

1,794,627

 

 

 

1,812,612

 

 

 

1,648,022

 

 

 

1,667,096

 

 

 

1,590,037

 

 

 

-1.0

%

 

 

12.9

%

Time deposits

 

1,338,504

 

 

 

1,435,015

 

 

 

1,480,463

 

 

 

1,555,919

 

 

 

1,627,828

 

 

 

-6.7

%

 

 

-17.8

%

Total deposits

$

5,194,292

 

 

$

5,209,781

 

 

$

4,582,068

 

 

$

4,698,962

 

 

$

4,690,141

 

 

 

-0.3

%

 

 

10.7

%

At September 30, 2020, the Bank had $150.0 million in borrowings from the FHLB with $1.4 billion of remaining unused availability. As of the end of the third quarter of 2020, the Bank had unused secured and unsecured facilities of $1.8 billion and $115.0 million, respectively.

At September 30, 2020, the Company had $16.1 million of cash on deposit with the Bank. Hanmi continues to believe it has ample liquidity to operate in the evolving, uncertain macroeconomic environment resulting from the pandemic, and is continuously evaluating potential liquidity requirements.

At September 30, 2020, stockholders equity was $563.2 million, compared with $547.4 million at June 30, 2020. Tangible common stockholders equity was $551.5 million, or 9.05% of tangible assets, at September 30, 2020 compared with $535.7 million, or 8.63% of tangible assets at the end of the second quarter. The ratio of tangible common equity to tangible assets excluding the $302.9 million of PPP loans was 9.52% at the end of the 2020-third quarter. Tangible book value per share increased to $17.95 at September 30, 2020 from $17.47 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 12.11% and a Total risk-based capital ratio of 15.45% at September 30, 2020, versus 11.55% and 14.85%, respectively, at the end of the second quarter.

 

As of

 

Amount Change

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

Q3-20

 

Q3-20

 

  2020  

 

  2020  

 

  2020  

 

  2019  

 

  2019  

 

vs. Q2-20

 

vs. Q3-19

Regulatory Capital ratios (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Hanmi Financial

 

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital

 

15.45

%

 

 

14.85

%

 

 

14.77

%

 

 

15.11

%

 

 

15.07

%

 

 

0.60

 

 

 

0.38

 

Tier 1 risk-based capital

 

12.11

%

 

 

11.55

%

 

 

11.52

%

 

 

11.78

%

 

 

11.91

%

 

 

0.56

 

 

 

0.2

 

Common equity tier 1 capital

 

11.68

%

 

 

11.12

%

 

 

11.09

%

 

 

11.36

%

 

 

11.49

%

 

 

0.56

 

 

 

0.19

 

Tier 1 leverage capital ratio

 

9.56

%

 

 

9.69

%

 

 

9.91

%

 

 

10.15

%

 

 

10.43

%

 

 

-0.13

 

 

 

-0.87

 

Hanmi Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital

 

15.06

%

 

 

14.41

%

 

 

14.29

%

 

 

14.64

%

 

 

14.65

%

 

 

0.65

 

 

 

0.41

 

Tier 1 risk-based capital

 

13.81

%

 

 

13.15

%

 

 

13.12

%

 

 

13.39

%

 

 

13.55

%

 

 

0.66

 

 

 

0.26

 

Common equity tier 1 capital

 

13.81

%

 

 

13.15

%

 

 

13.12

%

 

 

13.39

%

 

 

13.55

%

 

 

0.66

 

 

 

0.26

 

Tier 1 leverage capital ratio

 

10.91

%

 

 

11.04

%

 

 

11.35

%

 

 

11.56

%

 

 

11.86

%

 

 

-0.13

 

 

 

-0.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)       Preliminary ratios for September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality
Loans and leases 30 to 89 days past due and still accruing were 0.20% of loans and leases at the end of the third quarter of 2020, compared with 0.21% at the end of the second quarter.

Special mention loans were $57.1 million at the end of the third quarter compared with $21.1 million at June 30, 2020. The September 30, 2020 balance of special mention loans included $31.6 million of loans adversely affected by the pandemic.

Classified loans were $106.2 million at September 30, 2020 compared with $93.9 million at the end of the second quarter. The quarter-over-quarter change reflects additions or downgrades of $33.4 million and reductions or upgrades of $21.1 million. At September 30, 2020 classified loans included $21.7 million of loans adversely affected by the COVID-19 pandemic.

Nonperforming loans were $64.3 million at the end of the third quarter of 2020, or 1.33% (1.25% after giving effect to a $3.6 million loan payoff in October) of loans compared with $58.3 million at the end of the second quarter, or 1.21% of the portfolio.

Nonperforming assets were $65.4 million at the end of the third quarter of 2020, or 1.07% (1.00% after giving effect to a $3.6 million loan payoff in October) of total assets, compared with $58.4 million, or 0.94% of assets, at the end of the prior quarter.

Modified loans and leases declined 59% to $578.6 million at September 30, 2020 from $1.4 billion at June 30, 2020. Approximately 70%, or $402.7 million, of modified loans require interest-only payments. In addition, of the modified loan portfolio, 5.2% were special mention, 4.1% were classified and none were on nonaccrual status at September 30, 2020.

Gross charge-offs for the third quarter of 2020 were $2.2 million compared with $1.6 million for the preceding quarter. Recoveries of previously charged-off loans for the third quarter of 2020 were $1.7 million compared with $0.3 million for the preceding quarter. As a result, there were net charge-offs of $0.4 million for the third quarter of 2020, compared with net charge-offs of $1.3 million for the preceding quarter. For the third quarter of 2020, net charge-offs represented an annualized 0.03% of average loans compared with 0.11% of average loans for the second quarter.

The allowance for credit losses was $86.6 million as of September 30, 2020 generating an allowance for credit losses to loans of 1.79% (1.91% excluding the PPP loans) compared with 1.79% (1.91% excluding the PPP loans) at the end of the prior quarter. Although largely unchanged from the second quarter, the allowance reflects the change in macroeconomic assumptions including a lower projected average unemployment rate for the subsequent four quarters and a higher projected annual GDP growth rate. Hanmi recognizes the inherent uncertainties in the estimate of the allowance for credit losses and the effects the COVID-19 pandemic may have on our borrowers. Hanmi expects the estimate of the allowance for credit losses will change in future periods because of changes in economic conditions, economic forecasts, and other factors.

 

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

 

Amount Change

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

 

Q3-20

 

Q3-20

 

2020

 

2020

 

2020

 

2019

 

2019

 

vs. Q2-20

 

vs. Q3-19

Asset Quality Data and Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delinquent loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, 30 to 89 days past due and still accruing

$

9,428

 

 

$

9,984

 

 

$

10,001

 

 

$

10,251

 

 

$

8,085

 

 

$

(556

)

 

$

1,343

 

Delinquent loans to total loans

 

0.20

%

 

 

0.21

%

 

 

0.22

%

 

 

0.22

%

 

 

0.18

%

 

 

-0.01

 

 

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Criticized loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Special mention

$

57,105

 

 

$

21,134

 

 

$

20,945

 

 

$

26,632

 

 

$

27,400

 

 

$

35,971

 

 

$

29,705

 

Classified

 

106,211

 

 

 

93,922

 

 

 

88,225

 

 

 

94,025

 

 

 

80,734

 

 

 

12,289

 

 

 

25,477

 

Total criticized loans

$

163,316

 

 

$

115,056

 

 

$

109,170

 

 

$

120,657

 

 

$

108,134

 

 

$

48,260

 

 

$

55,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonperforming assets :

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans

$

64,333

 

 

$

58,264

 

 

$

46,383

 

 

$

63,761

 

 

$

64,194

 

 

$

6,069

 

 

$

139

 

Loans 90 days or more past due and still accruing

 

-

 

 

 

-

 

 

 

5,843

 

 

 

-

 

 

 

544

 

 

 

-

 

 

 

(544

)

Nonperforming loans

 

64,333

 

 

 

58,264

 

 

 

52,226

 

 

 

63,761

 

 

 

64,738

 

 

 

6,069

 

 ...

(405)Other real estate owned, net 1,052 148 63 63 330 904 722 Nonperforming assets$65,385 $58,412 $52,289 $63,824 $65,068 $6,973 $317 Nonperforming loans to total loans 1.33% 1.21% 1.15% 1.38% 1.43% Nonperforming assets to assets 1.07% 0.94% 0.93% 1.15% 1.18% Allowance for credit losses: Balance at beginning of period$86,330 $66,500 $61,408 $50,712 $49,386 Impact of CECL adoption - - 17,433 - - Provision for loan losses 696 21,131 14,916 10,751 1,602 Net loan (charge-offs) recoveries (406) (1,301) (27,257) (55) (276) Balance at end of period$86,620 $86,330 $66,500 $61,408 $-$50,712 Net loan charge-offs to average loans (1) 0.03% 0.11% 2.41% 0.00% 0.02% Allowance for credit losses to loans 1.79% 1.79% 1.46% 1.33% 1.11% Allowance for credit losses related to off-balance sheet items: Balance at beginning of period$6,347 $2,885 $2,397 $1,542 $1,333 Impact of CECL adoption - - (335) - - Provision for loss on off-balance sheet items (658) 3,462 823 855 209 Balance at end of period$5,689 $6,347 $2,885 $2,397 $1,542 Commitments to extend credit$444,782 $486,852 $375,233 $371,287 $346,182 (1) Annualized

Corporate Developments
On July 29, 2020 Hanmi’s Board of Directors declared a cash dividend on its common stock for the 2020 third quarter of $0.08 per share. The dividend was paid on August 31, 2020 to stockholders of record as of the close of business on August 10, 2020.

Conference Call
Management will host a conference call today, October 27, 2020 at 2:00 p.m. PT (5:00 p.m. ET) to discuss these results. This call will also be broadcast live via the internet. Investment professionals and all current and prospective stockholders are invited to access the live call by dialing 1-877-407-9039 before 2:00 p.m. PT, using access code HANMI. To listen to the call online, either live or archived, visit the Investor Relations page of Hanmi’s website at www.hanmi.com.

About Hanmi Financial Corporation
Headquartered in Los Angeles, California, Hanmi Financial Corporation owns Hanmi Bank, which serves multi-ethnic communities through its network of 35 full-service branches and 9 loan production offices in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Washington and Georgia. Hanmi Bank specializes in real estate, commercial, SBA and trade finance lending to small and middle market businesses. Additional information is available at www.hanmi.com.

Forward-Looking Statements
This press release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. 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. 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 our forward-looking statements to be reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Forward-looking 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 statements. These factors include the following:

  • a 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;

  • our ability to remediate any material weakness in our internal controls over financial reporting;

  • 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;

  • a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;

  • the failure to maintain current technologies;

  • our inability to successfully implement future information technology enhancements;

  • difficult business and economic conditions that can adversely affect our industry and business, including competition and lack of soundness of other financial institutions, fraudulent activity and negative publicity;

  • risks associated with Small Business Administration loans;

  • failure to attract or retain key employees;

  • our ability to access cost-effective funding;

  • fluctuations in real estate values;

  • changes in accounting policies and practices;

  • the imposition of tariffs or other domestic or international governmental policies impacting the value of the products of our borrowers;

  • changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums;

  • the ability of Hanmi Bank to make distributions to Hanmi Financial Corporation, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial tests;

  • our ability to identify a suitable strategic partner or to consummate a strategic transaction;

  • the adequacy of our allowance for credit losses;

  • our credit quality and the effect of credit quality on our provision for loan losses and allowance for credit 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;

  • changes in securities markets; and

  • risks as it relates to cyber security against our information technology and those of our third-party providers and vendors.

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and whether the gradual reopening of businesses will result in a meaningful increase in economic activity. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

  • demand for our products and services may decline;

  • if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase;

  • collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

  • our allowance for credit losses may have to be increased if borrowers experience financial difficulties;

  • a worsening of business and economic conditions or in the financial markets could result in an impairment of certain intangible assets, such as goodwill or our servicing assets;

  • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

  • as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities;

  • a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;

  • litigation, regulatory enforcement risk and reputation risk regarding our participation in the Paycheck Protection Program and the risk that the Small Business Administration may not fund some or all PPP loan guaranties;

  • our cyber security risks are increased as the result of an increase in the number of employees working remotely;

  • FDIC premiums may increase if the agency experiences additional resolution costs; and

  • the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors.

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, 2019, 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.

Investor Contacts:
Romolo (Ron) Santarosa
Senior Executive Vice President & Chief Financial Officer
213-427-5636

Lasse Glassen
Investor Relations / Addo Investor Relations
310-829-5400


Hanmi Financial Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(In thousands)

September 30,

June 30,

Percentage

September 30,

Percentage

2020

2020

Change

2019

Change

Assets

Cash and due from banks

$

359,755

$

546,048

-34.1

%

$

150,678

138.8

%

Securities available for sale, at fair value

723,601

655,971

10.3

%

621,815

16.4

%

Loans held for sale, at the lower of cost or fair value

12,834

17,942

-28.5

%

6,598

94.5

%

Loans receivable, net of allowance for credit losses

4,747,517

4,739,312

0.2

%

4,519,125

5.1

%

Accrued interest receivable

21,417

21,372

0.2

%

11,723

82.7

%

Premises and equipment, net

27,956

26,412

5.8

%

27,271

2.5

%

Customers' liability on acceptances

208

-

-

33

529.5

%

Servicing assets

6,348

6,187

2.6

%

7,436

-14.6

%

Goodwill and other intangible assets, net

11,677

11,742

-0.6

%

11,950

-2.3

%

Federal Home Loan Bank ("FHLB") stock, at cost

16,385

16,385

0.0

%

16,385

0.0

%

Bank-owned life insurance

53,623

53,334

0.5

%

52,500

2.1

%

Prepaid expenses and other assets

125,461

123,458

1.6

%

102,468

22.4

%

Total assets

$

6,106,782

$

6,218,163

-1.8

%

$

5,527,982

10.5

%

Liabilities and Stockholders' Equity

Liabilities:

Deposits:

Noninterest-bearing

$

1,961,006

$

1,865,213

5.1

%

$

1,388,121

41.3

%

Interest-bearing

3,233,286

3,344,568

-3.3

%

3,302,020

-2.1

%

Total deposits

5,194,292

5,209,781

-0.3

%

4,690,141

10.7

%

Accrued interest payable

5,427

8,655

-37.3

%

10,076

-46.1

%

Bank's liability on acceptances

208

-

-

33

529.5

%

Borrowings

150,000

251,808

-40.4

%

75,000

100.0

%

Subordinated debentures

118,821

118,670

0.1

%

118,232

0.5

%

Accrued expenses and other liabilities

74,831

81,813

-8.5

%

59,973

24.8

%

Total liabilities

5,543,579

5,670,727

-2.2

%

4,953,455

11.9

%

Stockholders' equity:

Common stock

33

33

0.0

%

33

0.0

%

Additional paid-in capital

577,727

577,211

0.1

%

574,957

0.5

%

Accumulated other comprehensive income

1,721

335

413.8

%

3,708

-53.6

%

Retained earnings

102,751

88,859

15.6

%

104,927

-2.1

%

Less treasury stock

(119,029

)

(119,002

)

0.0

%

(109,098

)

-9.1

%

Total stockholders' equity

563,203

547,436

2.9

%

574,527

-2.0

%

Total liabilities and stockholders' equity

$

6,106,782

$

6,218,163

-1.8

%

$

5,527,982

10.5

%

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

2020

2020

Change

2019

Change

Interest and dividend income:

Interest and fees on loans receivable

$

52,586

$

52,230

0.7

%

$

57,929

-9.2

%

Interest on securities

1,972

3,225

-38.8

%

3,769

-47.7

%

Dividends on FHLB stock

204

203

0.3

%

286

-28.8

%

Interest on deposits in other banks

84

78

7.3

%

193

-56.6

%

Total interest and dividend income

54,846

55,736

-1.6

%

62,177

-11.8

%

Interest expense:

Interest on deposits

7,032

8,889

-20.9

%

15,995

-56.0

%

Interest on borrowings

582

760

-23.4

%

367

58.6

%

Interest on subordinated debentures

1,627

1,645

-1.1

%

1,757

-7.4

%

Total interest expense

9,241

11,294

-18.2

%

18,119

-49.0

%

Net interest income before credit loss expense

45,605

44,442

2.6

%

44,058

3.5

%

Credit loss expense

38

24,594

-99.8

%

1,602

-97.6

%

Net interest income after credit loss expense

45,567

19,848

129.6

%

42,456

7.3

%

Noninterest income:

Service charges on deposit accounts

2,002

2,032

-1.5

%

2,518

-20.5

%

Trade finance and other service charges and fees

972

961

1.1

%

1,191

-18.4

%

Gain on sale of Small Business Administration ("SBA") loans

2,324

-

-

1,767

31.5

%

Net gain on sales of securities

-

15,712

-100.0

%

-

-

Other operating income

1,842

2,226

-17.2

%

1,384

33.1

%

Total noninterest income

7,140

20,931

-65.9

%

6,860

4.1

%

Noninterest expense:

Salaries and employee benefits

17,194

14,701

17.0

%

17,530

-1.9

%

Occupancy and equipment

4,650

4,508

3.1

%

4,528

2.7

%

Data processing

2,761

2,804

-1.5

%

2,410

14.6

%

Professional fees

1,794

1,545

16.1

%

2,826

-36.5

%

Supplies and communications

698

858

-18.7

%

726

-3.9

%

Advertising and promotion

594

456

30.2

%

927

-36.0

%

Other operating expenses

2,233

2,266

-1.5

%

3,660

-39.0

%

Total noninterest expense

29,924

27,138

10.3

%

32,607

-8.2

%

Income before tax

22,783

13,641

67.0

%

16,709

36.4

%

Income tax expense

6,439

4,466

44.2

%

4,333

48.6

%

Net income

$

16,344

$

9,175

78.1

%

$

12,376

32.1

%

Basic earnings per share:

$

0.53

$

0.30

$

0.40

Diluted earnings per share:

$

0.53

$

0.30

$

0.40

Weighted-average shares outstanding:

Basic

30,464,263

30,426,967

30,830,445

Diluted

30,464,263

30,426,967

30,859,119

Common shares outstanding

30,719,591

30,657,629

31,173,881

Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In thousands, except share and per share data)

Nine Months Ended

September 30,

September 30,

Percentage

2020

2019

Change

Interest and dividend income:

Interest and fees on loans receivable

$

159,464

$

173,135

-7.9

%

Interest on securities

8,852

10,996

-19.5

%

Dividends on FHLB stock

696

858

-18.8

%

Interest on deposits in other banks

495

1,085

-54.4

%

Total interest and dividend income

169,507

186,074

-8.9

%

Interest expense:

Interest on deposits

28,663

48,406

-40.8

%

Interest on borrowings

1,838

439

318.8

%

Interest on subordinated debentures

4,984

5,293

-5.8

%

Total interest expense

35,485

54,138

-34.5

%

Net interest income before credit loss expense

134,022

131,936

1.6

%

Credit loss expense

40,371

19,418

107.9

%

Net interest income after credit loss expense

93,651

112,518

-16.8

%

Noninterest income:

Service charges on deposit accounts

6,434

7,362

-12.6

%

Trade finance and other service charges and fees

2,920

3,519

-17.0

%

Gain on sale of Small Business Administration ("SBA") loans

3,478

3,752

-7.3

%

Net gain on sales of securities

15,712

1,295

1113.3

%

Other operating income

5,751

4,915

17.0

%

Total noninterest income

34,295

20,843

64.5

%

Noninterest expense:

Salaries and employee benefits

49,645

50,149

-1.0

%

Occupancy and equipment

13,633

12,517

8.9

%

Data processing

8,233

6,633

24.1

%

Professional fees

5,255

6,459

-18.6

%

Supplies and communications

2,337

2,220

5.3

%

Advertising and promotion

1,783

2,632

-32.2

%

Other operating expenses

7,245

11,207

-35.4

%

Total noninterest expense

88,131

91,817

-4.0

%

Income before tax

39,815

41,544

-4.2

%

Income tax expense

11,945

11,840

0.9

%

Net income

$

27,870

$

29,704

-6.2

%

Basic earnings per share:

$

0.91

$

0.96

Diluted earnings per share:

$

0.91

$

0.96

Weighted-average shares outstanding:

Basic

30,276,462

30,736,456

Diluted

30,276,462

30,769,160

Common shares outstanding

30,719,591

31,173,881

Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(In thousands, except ratios)

Three Months Ended

September 30, 2020

June 30, 2020

September 30, 2019

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:

Loans receivable (1)

$

4,734,511

$

52,586

4.42

%

$

4,680,048

$

52,230

4.49

%

$

4,519,770

$

57,929

5.08

%

Securities (2)

696,285

1,972

1.13

%

589,932

3,225

2.19

%

630,450

3,769

2.39

%

FHLB stock

16,385

204

4.95

%

16,385

203

5.00

%

16,385

286

6.93

%

Interest-bearing deposits in other banks

340,486

84

0.10

%

386,956

78

0.08

%

35,140

193

2.18

%

Total interest-earning assets

5,787,667

54,846

3.77

%

5,673,321

55,736

3.95

%

5,201,745

62,177

4.74

%

Noninterest-earning assets:

Cash and due from banks

64,814

69,667

99,492

Allowance for credit losses

(86,615

)

(66,926

)

(49,762

)

Other assets

245,589

219,383

210,142

Total assets

$

6,011,455

$

5,895,445

$

5,461,617

Liabilities and Stockholders' Equity

Interest-bearing liabilities:

Deposits:

Demand: interest-bearing

$

99,161

$

17

0.07

%

$

92,676

$

18

0.08

%

$

82,665

$

31

0.15

%

Money market and savings

1,771,615

2,192

0.49

%

1,677,081

2,309

0.55

%

1,555,639

6,180

1.58

%

Time deposits

1,357,167

4,823

1.41

%

1,458,351

6,562

1.81

%

1,692,419

9,784

2.29

%

Total interest-bearing deposits

3,227,943

7,032

0.87

%

3,228,108

8,889

1.11

%

3,330,723

15,995

1.91

%

Borrowings

163,364

582

1.42

%

342,437

760

0.89

%

74,239

367

1.96

%

Subordinated debentures

118,733

1,627

5.48

%

118,583

1,645

5.55

%

118,145

1,757

5.92

%

Total interest-bearing liabilities

3,510,040

9,241

1.05

%

3,689,128

11,294

1.23

%

3,523,107

18,119

2.04

%

Noninterest-bearing liabilities and equity:

Demand deposits: noninterest-bearing

1,859,832

1,589,668

1,300,704

Other liabilities

87,811

68,311

71,631

Stockholders' equity

553,772

548,338

566,175

Total liabilities and stockholders' equity

$

6,011,455

$

5,895,445

$

5,461,617

Net interest income (tax equivalent basis)

$

45,605

$

44,442

$

44,058

Cost of deposits

0.55

%

0.74

%

1.37

%

Net interest spread (taxable equivalent basis)

2.72

%

2.72

%

2.70

%

Net interest margin (taxable equivalent basis)

3.13

%

3.15

%

3.36

%

(1) Includes average loans held for sale

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

Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(In thousands, except ratios)

Nine Months Ended

September 30, 2020

September 30, 2019

Interest

Average

Interest

Average

Average

Income /

Yield /

Average

Income /

Yield /

Balance

Expense

Rate

Balance

Expense

Rate

Assets

Interest-earning assets:

Loans receivable (1)

$

4,644,647

$

159,464

4.59

%

$

4,514,707

$

173,135

5.13

%

Securities (2)

636,860

8,852

1.85

%

616,503

11,141

2.41

%

FHLB stock

16,385

696

5.68

%

16,385

858

7.00

%

Interest-bearing deposits in other banks

277,698

495

0.24

%

60,240

1,085

2.41

%

Total interest-earning assets

5,575,590

169,507

4.06

%

5,207,835

186,219

4.78

%

Noninterest-earning assets:

Cash and due from banks

77,263

103,098

Allowance for credit losses

(71,587

)

(38,885

)

Other assets

223,675

193,944

Total assets