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Section 1: 8-K (FORM 8-K)

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): October 23, 2018  

HANMI FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in Charter)

Delaware000-3042195-4788120
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

 

3660 Wilshire Boulevard, Penthouse Suite A, Los Angeles, California 90010
(Address of Principal Executive Offices) (Zip Code)

(213) 382-2200
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 [   ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 [   ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 [   ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 [   ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 
 

Item 2.02. Results of Operations and Financial Condition.

This information set forth under “Item 2.02. Results of Operations and Financial Condition,” including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

On October 23, 2018, Hanmi Financial Corporation (“Hanmi Financial”) issued a press release announcing its financial results for the quarter ended September 30, 2018. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(d)           Exhibits

99.1        Press release issued by Hanmi Financial dated October 23, 2018.  

Forward-Looking Statements

This press release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All statements other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, litigation, plans and objectives of management for future operations, developments regarding our capital plans, strategic alternatives for a possible business combination, merger or sale transaction, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of potential future supervisory action against us or Hanmi Bank; general economic and business conditions internationally, nationally and in those areas in which we operate; volatility and deterioration in the credit and equity markets; changes in consumer spending, borrowing and savings habits; availability of capital from private and government sources; demographic changes; competition for loans and deposits and failure to attract or retain loans and deposits; fluctuations in interest rates and a decline in the level of our interest rate spread; risks of natural disasters related to our real estate portfolio; risks associated with Small Business Administration loans; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability of Hanmi Bank to make distributions to Hanmi Financial Corporation, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial tests; ability to identify a suitable strategic partner or to consummate a strategic transaction; adequacy of our allowance for loan and lease losses; credit quality and the effect of credit quality on our provision for loan and lease losses and allowance for loan and lease losses; changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements; our ability to control expenses; and changes in securities markets. In addition, we set forth certain risks in our reports filed with the U.S. Securities and Exchange Commission, including, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017, 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.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 HANMI FINANCIAL CORPORATION
   
  
Date: October 23, 2018By: /s/ C. G. Kum        
  C. G. Kum
  Chief Executive Officer
  


EXHIBIT INDEX

 

Exhibit
No.
     Description
   
99.1 Press release, dated October 23, 2018.*


*        Deemed “furnished” and not “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

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Section 2: EX-99.1 (PRESS RELEASE)

EdgarFiling

EXHIBIT 99.1

Hanmi Reports Solid Growth in Earnings for Third Quarter 2018

2018 Third Quarter Highlights:      

LOS ANGELES, Oct. 23, 2018 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported net income for the 2018 third quarter of $16.1 million, or $0.50 per diluted share, compared with $15.5 million, or $0.48 per diluted share for the 2018 second quarter and $14.9 million, or $0.46 per diluted share for the 2017 third quarter.

C. G. Kum, Chief Executive Officer, said, “Hanmi delivered a solid performance with net income up 3% from the prior quarter and up almost 8% year-over-year. Careful expense management along with loan growth drove the improvement in the bottom line. During the quarter, we also repurchased 429,558 shares of Hanmi’s common stock, or 1.3% of outstanding shares, under our recently announced stock repurchase program that authorized the buy-back of up to 5% of our shares outstanding. We expect, as market conditions permit, to complete the buy-back of the remaining shares under the authorized stock repurchase program by year end.”

Mr. Kum concluded, “Over the past four years, Hanmi has successfully generated double-digit annual growth in high-quality loans. However, given the current competition for deposits and increasingly challenging environment to originate loans that are well-priced and meet our underwriting standards, we made a strategic decision during the quarter to slow loan growth for the second half of 2018 and to moderate our loan growth expectation for 2019 to a range of 5% to 7%. In addition, a review of the company’s cost structure is being undertaken with the goal of reducing non-interest expenses by at least $5 million, or approximately $0.12 per share, in 2019. A key part of this activity will include a review of our technology platform and processes to improve operating efficiencies. We expect the improved cost structure and operating efficiencies will better position the company to pursue opportunistic growth in the future.”

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, Q3-18 Q3-18
 2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
              
Net income$  16,081  $  15,548  $  14,855  $  11,500  $  14,923  $  533 $  1,158
Net income per diluted common share$  0.50  $  0.48  $  0.46  $  0.36  $  0.46  $  0.02 $  0.04
              
Assets$  5,487,042  $  5,415,202  $  5,305,641  $  5,210,485  $  5,111,396  $  71,840 $  375,646
Loans and leases receivable$  4,582,883  $  4,542,126  $  4,413,557  $  4,304,458  $  4,195,355  $  40,757 $  387,528
Deposits$  4,614,422  $  4,426,535  $  4,378,101  $  4,348,654  $  4,299,010  $  187,887 $  315,412
              
Return on average assets 1.17%  1.17%  1.16%  0.88%  1.18%  0.00  -0.01
Return on average stockholders' equity 10.91%  10.81%  10.65%  8.12%  10.73%  0.10  0.18
              
Net interest margin (1) 3.48%  3.60%  3.70%  3.79%  3.79%  -0.12  -0.31
Efficiency ratio (2) 56.28%  57.80%  58.36%  54.16%  53.33%  -1.52  2.95
              
Tangible common equity to tangible assets (3) 10.15%  10.35%  10.43%  10.58%  10.72%  -0.21  -0.57
Tangible common equity per common share (3)$  17.31  $  17.20  $  16.98  $  16.96  $  16.86  $  0.11 $  0.45
              
              
(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 $45.3 million for the third quarter of 2018 compared with $45.1 million for the second quarter of 2018. Interest and fees on loans and leases increased 4.9%, or $2.7 million, from the preceding quarter due to a 3.1% increase in average loans and leases receivable and a three basis point increase in the average yield; however, interest expense on deposits increased 23.5% or $2.2 million, from the preceding quarter due to a 3.2% increase in average interest-bearing deposits and a 23 basis point increase in rates paid. Loan prepayment fees were immaterial during the last two quarters.

              
  As of or For the Three Months Ended (in thousands)  Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-18 Q3-18
Net Interest Income2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
              
Interest and fees on loans and leases(1)$  56,361 $  53,708 $  51,574 $  52,176 $  50,265 4.9% 12.1%
Interest on securities   3,238    3,198    3,105    3,194    3,188 1.3% 1.6%
Dividends on FHLB stock   286    283    289    289    286 1.1% 0.0%
Interest on deposits in other banks   151    133    114    125    123 13.5% 22.8%
Total interest and dividend income$  60,036 $  57,322 $  55,082 $  55,784 $  53,862 4.7% 11.5%
              
Interest on deposits   11,694    9,465    7,785    7,402    7,071 23.5% 65.4%
Interest on borrowings   1,264    1,015    679    363    198 24.5% 538.4%
Interest on subordinated debentures   1,749    1,728    1,694    1,676    1,667 1.2% 4.9%
Total interest expense   14,707    12,208    10,158    9,441    8,936 20.5% 64.6%
Net interest income$  45,329 $  45,114 $  44,924 $  46,343 $  44,926 0.5% 0.9%
              
(1)  Includes loans held for sale.             
              

Net interest margin on a tax equivalent basis was 3.48% for the third quarter of 2018 compared with 3.60% for the second quarter of 2018 down 12 basis points primarily from the increase in the cost of interest-bearing deposits. The average earning asset yield (tax equivalent) was 4.60% for the third quarter of 2018 compared with 4.57% for the second quarter of 2018. The three basis point increase was primarily due to the increase in average yield for loans and leases receivable. The cost of interest-bearing liabilities was 1.66% for the third quarter of 2018 compared with 1.44% for the second quarter of 2018. The 22 basis point increase was primarily due to an 8.6% increase in average time deposits and a 28 basis point increase in the average rate paid on time deposits. 

  For the Three Months Ended (in thousands)  Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-18 Q3-18
Average Earning Assets and Interest-bearing Liabilities2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
Loans and leases receivable (1)$  4,551,284  $  4,414,217  $  4,310,964  $  4,227,259  $  4,092,131  3.1% 11.2%
Securities   589,939     591,493     588,738     611,181     611,538  -0.3% -3.5%
FHLB stock   16,385     16,385     16,385     16,385     16,385  0.0% 0.0%
Interest-bearing deposits in other banks   30,368     28,831     32,401     36,386     38,981  5.3% -22.1%
Average interest-earning assets$  5,187,976  $  5,050,926  $  4,948,488  $  4,891,211  $  4,759,035  2.7% 9.0%
              
Demand: interest-bearing$  92,090  $  92,552  $  91,378  $  90,646  $  90,720  -0.5% 1.5%
Money market and savings   1,377,739     1,412,118     1,478,795     1,513,408     1,526,951  -2.4% -9.8%
Time deposits   1,687,827     1,553,692     1,440,382     1,408,227     1,384,724  8.6% 21.9%
Average interest-bearing deposits   3,157,656     3,058,362     3,010,555     3,012,281     3,002,395  3.2% 5.2%
Borrowings   240,054     214,066     179,000     119,946     67,935  12.1% 253.4%
Subordinated debentures   117,584     117,456     117,323     117,198     117,065  0.1% 0.4%
Average interest-bearing liabilities$  3,515,294  $  3,389,884  $  3,306,878  $  3,249,425  $  3,187,395  3.7% 10.3%
              
(1)  Includes loans held for sale.             
              
  For the Three Months Ended  Amount Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-18 Q3-18
Average Yields and Rates 2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
Loans and leases receivable(1) 4.91%  4.88%  4.85%  4.90%  4.87% 0.03  0.04 
Securities (2) 2.31%  2.29%  2.24%  2.37%  2.41% 0.02  -0.10 
FHLB stock 6.93%  6.93%  7.15%  7.00%  6.93% 0.00  0.00 
Interest-bearing deposits in other banks 1.97%  1.85%  1.43%  1.36%  1.25% 0.12  0.72 
Interest-earning assets 4.60%  4.57%  4.53%  4.56%  4.53% 0.03  0.07 
              
Interest-bearing deposits 1.47%  1.24%  1.05%  0.97%  0.93% 0.23  0.54 
Borrowings 2.09%  1.90%  1.54%  1.20%  1.16% 0.19  0.93 
Subordinated debentures 5.92%  5.87%  5.77%  5.70%  5.68% 0.05  0.24 
Interest-bearing liabilities 1.66%  1.44%  1.25%  1.15%  1.11% 0.22  0.55 
              
Net interest margin (taxable equivalent basis) 3.48%  3.60%  3.70%  3.79%  3.79% -0.12  -0.31 
              
Cost of deposits 1.04%  0.87%  0.73%  0.68%  0.66% 0.17  0.38 
              
(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 2018, the loan and lease loss provision was $0.2 million compared with $0.1 million for the preceding quarter reflecting the continued strong asset quality of the portfolio of loans and leases.

Third quarter noninterest income increased 4.5% to $6.2 million from $5.9 million for the second quarter, primarily due to a $0.3 million increase in servicing income, $0.2 million increase in service charges on deposit accounts and an increase of $0.2 million in other operating income. This was partially offset by a $0.3 million decrease in gain on sale of SBA loans. Gains on sales of SBA loans were $1.1 million for the third quarter 2018, down from $1.4 million for the preceding quarter reflecting lower trade premiums. The volume of SBA loans sold for the 2018 third quarter and second quarter were $19.8 and $19.1 million, respectively.  

  For the Three Months Ended (in thousands)  Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-18 Q3-18
Noninterest Income2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
Service charges on deposit accounts$  2,513 $  2,328 $  2,511  $  2,729 $  2,678 7.9% -6.2%
Trade finance and other service charges and fees   1,128    1,149    1,173     1,047    1,133 -1.8% -0.4%
Servicing income   673    421    662     564    644 59.9% 4.5%
Bank-owned life insurance income   285    256    277     285    286 11.3% -0.3%
Other operating income   462    305    285     636    283 51.5% 63.3%
Service charges, fees & other   5,061    4,459    4,908     5,261    5,024 13.5% 0.7%
              
Gain on sale of SBA loans   1,114    1,408    1,448     2,056    2,546 -20.9% -56.2%
Disposition gain on PCI loans   21    11    133     91    979 90.9% -97.9%
Net gain (loss) on sales of securities   19    67    (428)    275    267 -71.6% -92.9%
Total noninterest income$  6,215 $  5,945 $  6,061  $  7,683 $  8,816 4.5% -29.5%
     

Noninterest expense has remained within a relatively tight range over the past year. During the third quarter, noninterest expense decreased 1.7% to $29.0 million from $29.5 million in the second quarter primarily due to a $0.7 million decrease in other real estate owned, a $0.4 million decrease in occupancy and equipment and a $0.2 million decrease in advertising and promotion. This was partially offset by increases of $0.4 million in professional fees and $0.2 million in data processing. During the third quarter, certain expenses were recovered on a former OREO property. The increase in data processing was due to higher levels of activity and professional fees increased due to the timing of co-sourced internal audits and credit reviews. Merger and integration costs related to the transaction to acquire SWNB Bancorp, Inc. (“SWNB”), which was terminated in September 2018, were $0.5 million and $0.4 million, in the third and second quarter, respectively. As a result of the decrease in noninterest expense, as well as the increase in revenues (noninterest income and net interest income), the efficiency ratio improved to 56.28% in the third quarter from 57.80% in the prior quarter.

  For the Three Months Ended (in thousands)  Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-18 Q3-18
 2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
Noninterest Expense             
Salaries and employee benefits$  17,436  $  17,453 $  18,702 $  17,270  $  16,947  -0.1% 2.9%
Occupancy and equipment   3,685     4,082    4,072    3,997     3,883  -9.7% -5.1%
Data processing   1,745     1,554    1,678    1,812     1,779  12.3% -1.9%
Professional fees   1,626     1,214    1,369    1,552     1,210  33.9% 34.4%
Supplies and communication   805     693    708    778     755  16.2% 6.6%
Advertising and promotion   814     1,034    876    988     1,147  -21.3% -29.0%
Merger and integration costs   466     380    -     -      -   22.6% 0.0%
Other operating expenses   2,872     2,854    2,273    2,961     2,955  0.6% -2.8%
subtotal   29,449     29,264    29,678    29,358     28,676  0.6% 2.7%
              
Other real estate owned expense (income)   (441)    246    79    (100)    (16) -279.3% 2656.3%
Total noninterest expense$  29,008  $  29,510 $  29,757 $  29,258  $  28,660  -1.7% 1.2%
     

Hanmi recorded a provision for income taxes of $6.3 million for the third quarter of 2018, representing an effective tax rate of 28.0%, compared with $5.9 million, representing an effective tax rate of 27.5%, for the second quarter. Hanmi’s effective tax rate for the third quarter of 2017 was 39.9% with a provision of $9.9 million. The year-over-year decrease was a result of the lower Federal corporate tax rate beginning in 2018.

Financial Position
Total assets were $5.49 billion at September 30, 2018, a 1.3% increase from $5.42 billion at June 30, 2018. The increase in total assets was primarily due to an increase in loans and leases receivable.

Loans and leases receivable, before the allowance for loan and lease losses, were $4.58 billion at September 30, 2018, up 0.9% from $4.54 billion at the end of the prior quarter. Loans held for sale, representing the guaranteed portion of SBA loans, were $4.5 million at September 30, 2018 compared with $5.3 million at the end of the second quarter.

Loans and leases receivable, before the allowance for loan and lease losses, increased 9.2% from $4.20 billion for the third quarter last year, primarily due to strong loan and lease production over the last twelve months.

  As of (in thousands)  Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-18 Q3-18
 2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
Loan and Lease Portfolio             
Commercial real estate loans$  3,275,382 $  3,241,348 $  3,122,745 $  3,069,063 $  3,108,931 1.0% 5.4%
Residential real estate loans   516,968    539,861    545,053    521,852    430,627 -4.2% 20.1%
Commercial and industrial loans   396,383    396,522    409,380    399,197    364,456 0.0% 8.8%
Lease receivable   379,455    350,578    321,480    297,286    272,271 8.2% 39.4%
Consumer loans   14,695    13,817    14,899    17,060    19,070 6.4% -22.9%
Loans and leases receivable 4,582,883  4,542,126  4,413,557  4,304,458  4,195,355 0.9% 9.2%
Loans held for sale   4,455    5,349    6,008    6,394    6,469 -16.7% -31.1%
Total loans and leases$  4,587,338 $  4,547,475 $  4,419,565 $  4,310,852 $  4,201,824 0.9% 9.2%
     

New loan and lease production for the 2018 third quarter was $238.0 million while payoffs, amortization and net line utilization was $177.8 million compared with $220.5 million and $151.4 million, respectively, for the third quarter last year. Third quarter 2018 new loan and lease production was comprised of $112.7 million of commercial real estate loans, $32.7 million of commercial and industrial loans, $25.4 million of SBA loans, $64.3 million of commercial leases and $2.9 million of consumer loans. Loan purchases for the 2018 third quarter were $2.2 million, compared with $88.2 million in third quarter last year. For the third quarter of 2018, commercial real estate loans as a percentage of loans and leases receivable decreased to 71.5% compared with 74.1% for the same period last year.

Bonnie Lee, President and Chief Operating Officer, said, “Total new loan and lease production of $238 million in the third quarter increased 8% year-over-year and was in-line with our new strategy to moderate loan and lease growth to single digits in the near-term given the current banking environment. During the quarter, we significantly reduced loan purchases, particularly purchases of residential consumer loans where spreads continue to compress. However, I was pleased with the strong contributions from our Commercial Equipment Leasing division, which comprised approximately 27% of new origination volume in the quarter and benefit our total portfolio with strong risk-adjusted yields.”

Deposits increased 4.2% to $4.61 billion at the end of the third quarter from $4.43 billion at the end of the preceding quarter. Time deposits and money market and savings deposits led this growth with increases of 8.9% and 7.1%, respectively. The loan to deposit ratio at September 30, 2018 decreased to 99.3% from 102.6% in the second quarter.

Deposits increased 7.3% from $4.30 billion in the third quarter last year, as total time deposits and noninterest-bearing demand deposits increased 25.4% and 1.6%, respectively, from a year ago.

  As of (in thousands)  Percentage Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-18 Q3-18
 2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
Deposit Portfolio             
Demand: noninterest-bearing$  1,313,777 $  1,350,383 $  1,352,162 $  1,312,274 $  1,293,538 -2.7% 1.6%
Demand: interest-bearing   90,586    105,825    93,591    92,948    90,734 -14.4% -0.2%
Money market and savings   1,478,631    1,381,038    1,469,010    1,527,100    1,534,457 7.1% -3.6%
Time deposits   1,731,428    1,589,289    1,463,338    1,416,332    1,380,281 8.9% 25.4%
Total deposits$  4,614,422 $  4,426,535 $  4,378,101 $  4,348,654 $  4,299,010 4.2% 7.3%
     

At September 30, 2018, stockholders’ equity was $567.7 million, compared with $571.7 million at June 30, 2018. Tangible common stockholders’ equity was $555.5 million, or 10.15% of tangible assets, compared with $559.3 million, or 10.35% of tangible assets at the end of the second quarter. Tangible book value per share increased to $17.31 from $17.20 in the prior quarter.

Hanmi continues to be well capitalized, with a preliminary Tier 1 risk-based capital ratio of 12.14% and a Total risk-based capital ratio of 14.93% at September 30, 2018, versus 12.35% and 15.17%, respectively, for the second quarter.

  As of  Amount Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-18 Q3-18
 2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
Regulatory Capital ratios (1)             
Hanmi Financial             
Total risk-based capital14.93% 15.17% 15.43% 15.50% 15.58% -0.24 -0.65
Tier 1 risk-based capital12.14% 12.35% 12.52% 12.55% 12.56% -0.21 -0.42
Common equity tier 1 capital11.73% 11.93% 12.09% 12.19% 12.20% -0.20 -0.47
Tier 1 leverage capital ratio10.50% 10.83% 10.88% 10.79% 10.92% -0.33 -0.42
Hanmi Bank             
Total risk-based capital14.68% 14.86% 15.13% 15.20% 15.32% -0.18 -0.64
Tier 1 risk-based capital13.97% 14.15% 14.39% 14.47% 14.55% -0.18 -0.58
Common equity tier 1 capital13.97% 14.15% 14.39% 14.47% 14.55% -0.18 -0.58
Tier 1 leverage capital ratio12.08% 12.42% 12.51% 12.44% 12.66% -0.33 -0.58
              
(1)  Preliminary ratios for September 30, 2018          
           

Hanmi declared a cash dividend of $0.24 per common share on its common stock in the third quarter.  The dividend was paid on August 30, 2018, to stockholders of record as of the close of business on August 9, 2018.

Asset Quality
Nonperforming loans and leases were $18.3 million at the end of the third quarter of 2018, or 0.40% of loans and leases receivable, compared with $15.8 million at the end the prior quarter, or 0.35%. Loans and leases 30 to 89 days past due and still accruing were 0.15% of loans and leases receivable at the end of the third quarter of 2018, compared with 0.20% at the end of the second quarter.

Nonperforming assets were $19.2 million at the end of the third quarter of 2018, or 0.35% of assets, compared with 0.30% of assets at the end of the prior quarter.

Gross charge-offs for the third quarter of 2018 were $1.2 million compared with $0.7 million for the preceding quarter. Recoveries of previously charged-off loans for the third quarter of 2018 were $0.9 million compared with $0.6 million for the preceding quarter. As a result, there were net charge offs of $342,000 for the third quarter of 2018, compared with net charge offs of $59,000 for the preceding quarter.  For the third quarter of 2018, net charge offs were 0.03% of average loans and leases compared to net charge offs of 0.01% for the preceding quarter.   

The allowance for loan and lease losses was $31.7 million as of September 30, 2018, generating an allowance of loan and lease losses to loans and leases of 0.69% compared with 0.70% in the prior quarter.

  As of or for the Three Months Ended (in thousands)  Amount Change
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-18 Q3-18
 2018 2018 2018 2017 2017 vs. Q2-18 vs. Q3-17
Asset Quality             
Nonperforming assets:             
Nonaccrual loans and leases$  18,283  $  15,804  $  15,345  $  15,805  $  14,558  $  2,479  $  3,725 
Loans and leases 90 days or more past due and still accruing   -     -     17     -     -     -      -  
Nonperforming loans and leases   18,283     15,804     15,362     15,805     14,558     2,479     3,725 
Other real estate, net   877     280     1,660     1,946     1,946     597     (1,069)
Nonperforming assets$  19,160  $  16,084  $  17,022  $  17,751  $  16,504  $  3,076  $  2,656 
              
Delinquent loan and leases:             
Loans and leases, 30 to 89 days past due and still accruing$  6,901  $  9,089  $  7,270  $  8,666  $  5,682  $  (2,188) $  1,219 
Delinquent loans and leases to loans and leases 0.15%  0.20%  0.16%  0.20%  0.14%  -5.0%  1.5%
              
Allowance for loan and lease losses:            
Balance at beginning of period$  31,818  $  31,777  $  31,043  $  32,492  $  33,758     
Loan and lease loss provision   200     100     649     220     269     
Net loan charge-offs (recoveries)   342     59     (85)    1,669     1,535     
Balance at end of period$  31,676  $  31,818  $  31,777  $  31,043  $  32,492     
              
Asset quality ratios:             
Nonperforming loans and leases to loans and leases 0.40%  0.35%  0.35%  0.37%  0.35%    
Nonperforming assets to assets 0.35%  0.30%  0.32%  0.34%  0.32%    
Net loan and lease charge-offs (recoveries) to average loans and leases (1) 0.03%  0.01%  -0.01%  0.16%  0.15%    
Allowance for loan and lease losses to loans and leases 0.69%  0.70%  0.72%  0.72%  0.77%    
Allowance for loan and lease losses to nonperforming loans and leases 173.25%  201.33%  206.85%  196.41%  223.19%    
              
Allowance for off-balance sheet items:            
Balance at beginning of period$  1,357  $  1,323  $  1,296  $  915  $  1,135     
Provision (income) for off-balance sheet items   -      34     27     381     (220)    
Balance at end of period$  1,357  $  1,357  $  1,323  $  1,296  $  915     
              
(1)  Annualized             
              

Corporate Developments
During the third quarter, Hanmi announced that its Board of Directors authorized a stock repurchase program of up to 5%, or 1.6 million shares, of its outstanding common stock. As of September 30, 2018, Hanmi repurchased 429,558 shares at an average price of $25.89 for an aggregate cost of $11.1 million.

In addition, during the third quarter, Hanmi announced that it had terminated its previously announced agreement to acquire SWNB. Subsequent to the end of the quarter, Hanmi announced that it filed a complaint in the United States District Court for the Southern District of Texas against SWNB and its directors, alleging breach of contract under the Agreement and Plan of Merger. The lawsuit seeks damages for losses incurred as well as the termination fee payable under the Merger Agreement as a result of SWNB’s and the directors’ breach of the agreements.

Conference Call                            
Management will host a conference call today, October 23, 2018 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 40 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. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All statements other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, litigation, plans and objectives of management for future operations, developments regarding our capital plans, strategic alternatives for a possible business combination, merger or sale transaction, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of potential future supervisory action against us or Hanmi Bank; general economic and business conditions internationally, nationally and in those areas in which we operate; volatility and deterioration in the credit and equity markets; changes in consumer spending, borrowing and savings habits; availability of capital from private and government sources; demographic changes; competition for loans and deposits and failure to attract or retain loans and deposits; fluctuations in interest rates and a decline in the level of our interest rate spread; risks of natural disasters related to our real estate portfolio; risks associated with Small Business Administration loans; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability of Hanmi Bank to make distributions to Hanmi Financial Corporation, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial tests; ability to identify a suitable strategic partner or to consummate a strategic transaction; adequacy of our allowance for loan and lease losses; credit quality and the effect of credit quality on our provision for loan and lease losses and allowance for loan and lease losses; changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements; our ability to control expenses; and changes in securities markets. In addition, we set forth certain risks in our reports filed with the U.S. Securities and Exchange Commission, including, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017, 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

Richard Pimentel
Senior Vice President & Corporate Finance Officer
213-427-3191

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
 2018 2018 Change 2017 Change
Assets         
Cash and due from banks$  159,617  $  136,474  17.0% $  138,139  15.5%
Securities available for sale, at fair value   572,236     565,529  1.2%    598,440  -4.4%
Loans held for sale, at the lower of cost or fair value   4,455     5,349  -16.7%    6,469  -31.1%
Loans and leases receivable, net of allowance for loan and lease losses   4,551,207     4,510,308  0.9%    4,162,863  9.3%
Accrued interest receivable   13,646     12,940  5.5%    12,098  12.8%
Premises and equipment, net   28,552     26,324  8.5%    26,648  7.1%
Customers' liability on acceptances   1,265     971  30.3%    647  95.5%
Servicing assets   8,878     9,255  -4.1%    10,428  -14.9%
Goodwill and other intangible assets, net   12,273     12,363  -0.7%    12,628  -2.8%
Federal Home Loan Bank ("FHLB") stock, at cost   16,385     16,385  0.0%    16,385  0.0%
Bank-owned life insurance   51,372     51,087  0.6%    50,268  2.2%
Prepaid expenses and other assets   67,156     68,217  -1.6%    76,383  -12.1%
Total assets$  5,487,042   $  5,415,202   1.3% $  5,111,396   7.3%
          
Liabilities and Stockholders' Equity         
Liabilities:         
Deposits:         
     Noninterest-bearing$  1,313,777  $  1,350,383  -2.7% $  1,293,538  1.6%
     Interest-bearing   3,300,645     3,076,152  7.3%    3,005,472  9.8%
         Total deposits   4,614,422     4,426,535  4.2%    4,299,010  7.3%
Accrued interest payable   8,153     5,775  41.2%    4,071  100.3%
Bank's liability on acceptances   1,265     971  30.3%    657  92.5%
Borrowings   160,000     270,000  -40.7%    110,000  45.5%
Subordinated debentures   117,670     117,532  0.1%    117,140  0.5%
Accrued expenses and other liabilities   17,784     22,682  -21.6%    21,271  -16.4%
Total liabilities   4,919,294      4,843,495   1.6%    4,552,149   8.1%
          
Stockholders' equity:         
Common stock   33     33  0.0%    33  0.0%
Additional paid-in capital   568,861     568,011  0.1%    564,787  0.7%
Accumulated other comprehensive (loss) income   (11,295)    (9,324) 21.1%    290  -3994.8%
Retained earnings   93,768     85,465  9.7%    65,858  42.4%
Less treasury stock   (83,619)    (72,478) 15.4%    (71,721) 16.6%
Total stockholders' equity   567,748      571,707   -0.7%    559,247   1.5%
Total liabilities and stockholders' equity$  5,487,042   $  5,415,202   1.3% $  5,111,396   7.3%


 

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
 2018 2018 Change 2017 Change
Interest and dividend income:         
Interest and fees on loans and leases$  56,361  $  53,708 4.9% $  50,265  12.1%
Interest on securities   3,238     3,198 1.3%    3,188  1.6%
Dividends on FHLB stock   286     283 1.1%    286  0.0%
Interest on deposits in other banks   151     133 13.5%    123  22.8%
     Total interest and dividend income   60,036     57,322 4.7%    53,862  11.5%
Interest expense:         
Interest on deposits   11,694     9,465 23.5%    7,071  65.4%
Interest on borrowings   1,264     1,015 24.5%    198  538.4%
Interest on subordinated debentures   1,749     1,728 1.2%    1,667  4.9%
     Total interest expense   14,707     12,208 20.5%    8,936  64.6%
Net interest income before provision for loan and lease losses   45,329     45,114 0.5%    44,926  0.9%
Loan and lease loss provision   200     100 100.0%    269  -25.7%
Net interest income after provision for loan and lease losses   45,129     45,014 0.3%    44,657  1.1%
Noninterest income:         
Service charges on deposit accounts   2,513     2,328 7.9%    2,678  -6.2%
Trade finance and other service charges and fees   1,128     1,149 -1.8%    1,133  -0.4%
Gain on sale of Small Business Administration ("SBA") loans   1,114     1,408 -20.9%    2,546  -56.2%
Servicing income   673     421 59.9%    644  4.5%
Bank-owned life insurance income   285     256 11.3%    286  -0.3%
Disposition gains on Purchased Credit Impaired ("PCI") loans   21     11 90.9%    979  -97.9%
Net gain (loss) on sales of securities   19     67 -71.6%    267  -92.9%
Other operating income   462     305 51.5%    283  63.3%
     Total noninterest income   6,215     5,945 4.5%    8,816  -29.5%
Noninterest expense:         
Salaries and employee benefits   17,436     17,453 -0.1%    16,947  2.9%
Occupancy and equipment   3,685     4,082 -9.7%    3,883  -5.1%
Data processing   1,745     1,554 12.3%    1,779  -1.9%
Professional fees   1,626     1,214 33.9%    1,210  34.4%
Supplies and communications   805     693 16.2%    755  6.6%
Advertising and promotion   814     1,034 -21.3%    1,147  -29.0%
Other real estate owned expense   (441)    246 -279.3%    (16) 2656.3%
Merger and integration costs   466