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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): April 23, 2019  

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 April 23, 2019, Hanmi Financial Corporation (“Hanmi Financial”) issued a press release announcing its financial results for the quarter ended March 31, 2019. 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 April 23, 2019.

Forward-Looking Statements

This press release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All statements other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital plans, strategic alternatives for a possible business combination, merger or sale transaction, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of potential future supervisory action against us or Hanmi Bank; general economic and business conditions internationally, nationally and in those areas in which we operate; volatility and deterioration in the credit and equity markets; changes in consumer spending, borrowing and savings habits; availability of capital from private and government sources; demographic changes; competition for loans and deposits and failure to attract or retain loans and deposits; fluctuations in interest rates and a decline in the level of our interest rate spread; risks of natural disasters related to our real estate portfolio; risks associated with Small Business Administration loans; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability of Hanmi Bank to make distributions to Hanmi Financial 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, 2018, 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: April 23, 2019By: /s/ C. G. Kum        
  C. G. Kum
  Chief Executive Officer
  


EXHIBIT INDEX

Exhibit No. Description
   
99.1 Press release, dated April 23, 2019.*

* 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 First Quarter 2019 Results

2019 First Quarter Highlights:

LOS ANGELES, April 23, 2019 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported net income for the 2019 first quarter of $14.7 million, or $0.48 per diluted share, compared with $11.4 million, or $0.37 per diluted share for the 2018 fourth quarter and $14.9 million, or $0.46 per diluted share for the 2018 first quarter.

C. G. Kum, Chief Executive Officer, said, “Hanmi’s first quarter financial performance highlights the continued execution of our strategy to grow loans in a prudent manner, protect net interest margin and to improve the Bank’s cost structure. During the first quarter, which is typically the seasonally slowest quarter for loan production, new origination volume nearly offset normal loan run-off while net interest margin remained stable. Based on our current loan and lease pipeline, we remain confident in our ability to grow loans in the range of 5% to 7% for the full year. Deposit gathering activities in the quarter were also successful as total deposits expanded 6% on an annualized basis due to growth in time and noninterest-bearing demand deposits. In addition, we made progress in executing our previously announced branch consolidation initiative with the closure of four branches in the first quarter.”

Mr. Kum concluded, “I am very pleased with the Board’s decision to appoint Bonnie Lee as CEO upon my retirement next month. While serving as our Chief Operating Officer for the past six years, she has developed deep relationships with Hanmi’s customers and employees, while establishing herself as a respected leader in our industry. Given her institutional knowledge of the Bank, excellent track record of success and strong leadership abilities, I am confident this will be a smooth transition as Bonnie assumes her new role as CEO.”

Quarterly Highlights
(In thousands, except per share data)

  As of  or for the Three Months Ended  Amount Change
 March 31, December 31, September 30, June 30, March 31, Q1-19 Q1-19
 2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
              
Net income$14,672  $11,385  $16,081  $15,548  $14,855  $3,287  $(183)
Net income per diluted common share$0.48  $0.37  $0.50  $0.48  $0.46  $0.11  $0.02 
              
Assets$5,571,068  $5,502,219  $5,487,042  $5,415,202  $5,305,641  $68,849  $265,427 
Loans and leases receivable$4,575,620  $4,600,540  $4,582,883  $4,542,126  $4,413,557  $(24,920) $162,063 
Deposits$4,820,175  $4,747,235  $4,614,422  $4,426,535  $4,378,101  $72,940  $442,074 
              
Return on average assets 1.09%  0.83%  1.17%  1.17%  1.16%  0.26   -0.07 
Return on average stockholders' equity 10.62%  7.92%  10.91%  10.81%  10.65%  2.70   -0.03 
              
Net interest margin (1) 3.52%  3.51%  3.48%  3.60%  3.70%  0.01   -0.18 
Efficiency ratio (2) 56.83%  56.40%  56.28%  57.80%  58.36%  0.43   -1.53 
              
Tangible common equity to tangible assets (3) 9.93%  9.84%  10.15%  10.35%  10.43%  0.09   -0.50 
Tangible common equity per common share (3)$17.89  $17.47  $17.31  $17.20  $16.98  $0.42  $0.91 
                            

(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
First quarter 2019 net interest income decreased 1.7% to $44.9 million from $45.6 million in the 2018 fourth quarter principally due to two fewer days quarter-over-quarter. Interest and fees on loans and leases for the first quarter increased 0.7%, or $0.4 million, from the preceding quarter due to an increase in the average yield and an increase in loan prepayment fees. In addition, borrowing costs decreased $0.3 million in the first quarter as deposits increased and borrowings declined. However, this was partially offset by an increase in interest expense on deposits of 10.9%, or $1.5 million, from the preceding quarter due to a 3.4% increase in average interest-bearing deposits.

  As of or For the Three Months Ended (in thousands)  Percentage Change
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Q1-19 Q1-19
Net Interest Income2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
              
Interest and fees on loans and leases(1)$58,334 $57,947 $56,361 $53,708 $51,574 0.7% 13.1%
Interest on securities 3,456  3,278  3,238  3,198  3,105 5.4% 11.3%
Dividends on FHLB stock 289  555  286  283  289 -47.9% 0.0%
Interest on deposits in other banks 335  179  151  133  114 87.2% 193.9%
Total interest and dividend income$62,414 $61,959 $60,036 $57,322 $55,082 0.7% 13.3%
              
Interest on deposits 15,683  14,139  11,694  9,465  7,785 10.9% 101.5%
Interest on borrowings 71  420  1,264  1,015  679 -83.1% -89.5%
Interest on subordinated debentures 1,772  1,754  1,749  1,728  1,694 1.0% 4.6%
Total interest expense 17,526  16,313  14,707  12,208  10,158 7.4% 72.5%
Net interest income$44,888 $45,646 $45,329 $45,114 $44,924 -1.7% -0.1%
                     

(1)       Includes loans held for sale.

Net interest margin on a tax equivalent basis was 3.52% for the first quarter of 2019 compared with 3.51% for the fourth quarter of 2018, as higher average yields on loans and leases receivable primarily due to market interest rates and competition were offset by higher costs of deposits. Net interest margin adjusted for loan prepayment penalties and the special FHLB dividend was 3.46% for the first quarter and prior quarter.

The average earning asset yield (tax equivalent) was 4.89% for the first quarter of 2019 compared with 4.76% for the fourth quarter of 2018. The 13 basis point increase was due to the increase in average yields for loans and leases receivable.

The cost of interest-bearing liabilities was 1.98% for the first quarter of 2019 compared with 1.83% for the fourth quarter of 2018. The 15 basis point increase was primarily due to a 17 basis point increase in the average rate paid on interest-bearing deposits and a 3.4% increase in interest-bearing deposits.

  For the Three Months Ended (in thousands)  Percentage Change
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Q1-19 Q1-19
Average Earning Assets and Interest-bearing Liabilities2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
Loans and leases receivable (1)$  4,533,120 $  4,544,722 $  4,551,284 $  4,414,217 $  4,310,964 -0.3% 5.2%
Securities   589,547    581,550    589,939    591,493    588,738 1.4% 0.1%
FHLB stock   16,385    16,385    16,385    16,385    16,385 0.0% 0.0%
Interest-bearing deposits in other banks   53,022    34,301    30,368    28,831    32,401 54.6% 63.6%
Average interest-earning assets$  5,192,074 $  5,176,958 $  5,187,976 $  5,050,926 $  4,948,488 0.3% 4.9%
              
Demand: interest-bearing$  85,291 $  89,971 $  92,090 $  92,552 $  91,378 -5.2% -6.7%
Money market and savings   1,526,710    1,510,428    1,377,739    1,412,118    1,478,795 1.1% 3.2%
Time deposits   1,852,562    1,751,429    1,687,827    1,553,692    1,440,382 5.8% 28.6%
Average interest-bearing deposits   3,464,563    3,351,828    3,157,656    3,058,362    3,010,555 3.4% 15.1%
Borrowings   10,611    65,217    240,054    214,066    179,000 -83.7% -94.1%
Subordinated debentures   117,863    117,728    117,584    117,456    117,323 0.1% 0.5%
Average interest-bearing liabilities$  3,593,037 $  3,534,773 $  3,515,294 $  3,389,884 $  3,306,878 1.6% 8.7%
                     

(1)       Includes loans held for sale.

  For the Three Months Ended  Amount Change
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Q1-19 Q1-19
Average Yields and Rates2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
Loans and leases receivable(1)5.22% 5.06% 4.91% 4.88% 4.85% 0.16 0.37
Securities (2)2.44% 2.37% 2.31% 2.29% 2.24% 0.07 0.20
FHLB stock7.15% 13.44% 6.93% 6.93% 7.15% -6.29 0.00
Interest-bearing deposits in other banks2.56% 2.07% 1.97% 1.85% 1.43% 0.49 1.13
Interest-earning assets4.89% 4.76% 4.60% 4.57% 4.53% 0.13 0.36
              
Interest-bearing deposits1.84% 1.67% 1.47% 1.24% 1.05% 0.17 0.79
Borrowings2.71% 2.56% 2.09% 1.90% 1.54% 0.15 1.17
Subordinated debentures6.01% 5.94% 5.92% 5.87% 5.77% 0.07 0.24
Interest-bearing liabilities1.98% 1.83% 1.66% 1.44% 1.25% 0.15 0.73
              
Net interest margin (taxable equivalent basis)3.52% 3.51% 3.48% 3.60% 3.70% 0.01 -0.18
              
Cost of deposits1.35% 1.20% 1.04% 0.87% 0.73% 0.15 0.62
              

(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 first quarter of 2019, the loan and lease loss provision was $1.1 million compared with $3.0 million for the preceding quarter. Net charge-offs declined to $0.2 million for the first quarter of 2019 from $2.7 million from the fourth quarter of 2018. The allowance to loans and leases rose to 0.72% at the end of the first quarter from 0.70% at year-end.

First quarter noninterest income decreased 0.7% to $6.3 million from the fourth quarter, primarily due to a $0.3 million decrease in service charges on deposit accounts and a $0.3 million decrease in servicing income. The decline in servicing income reflects a higher level of prepayments in the serviced assets. This was partially offset by a $0.7 million increase in gain on sales of securities. This increase was due to the sale of $69.2 million of tax-exempt municipal bonds in the first quarter, with the resulting proceeds invested in U.S. Treasury bills and U.S. Government agency mortgage-backed securities. Gains on sales of SBA loans were $0.9 million for the first quarter, down from $1.0 million for the preceding quarter reflecting higher trade premiums offset by lower volume. The volume of SBA loans sold for the first quarter 2019 and fourth quarter 2018 were $15.5 million and $17.9 million, respectively.

  For the Three Months Ended (in thousands)  Percentage Change
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Q1-19 Q1-19
Noninterest Income2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
Service charges on deposit accounts$  2,358 $  2,648 $  2,513 $  2,328 $  2,511  -11.0% -6.1%
Trade finance and other service charges and fees   1,124    1,167    1,128    1,149    1,173  -3.7% -4.2%
Servicing income   357    630    673    421    662  -43.3% -46.1%
Bank-owned life insurance income   280    288    285    256    277  -2.8% 1.1%
Other operating income   484    584    483    316    418  -17.1% 15.8%
Service charges, fees & other   4,603    5,317    5,082    4,470    5,041  -13.4% -8.7%
              
Gain on sale of SBA loans   926    983    1,114    1,408    1,448  -5.8% -36.0%
Net gain (loss) on sales of securities   725    -     19    67    (428) 0.0% -269.4%
Total noninterest income$  6,254 $  6,300 $  6,215 $  5,945 $  6,061  -0.7% 3.2%
                      

Noninterest expense for the first quarter decreased 0.8% to $29.1 million from $29.3 million for the prior quarter primarily due to a $0.4 million decrease in other operating expenses and a $0.6 million decrease in advertising and promotion, partially offset by a $0.5 million increase in other real estate owned expense and a $0.4 million increase in occupancy and equipment of which approximately $0.3 million was related to one-time expenses associated with the consolidation of four branches during the quarter. Despite the decrease in noninterest expense, as a result of the decrease in revenues (noninterest income and net interest income), the efficiency ratio increased slightly to 56.8% in the first quarter from 56.4% in the prior quarter.

  For the Three Months Ended (in thousands)  Percentage Change
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Q1-19 Q1-19
 2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
Noninterest Expense             
Salaries and employee benefits$  15,738 $  15,845  $  17,436  $  17,453 $  18,702 -0.7% -15.8%
Occupancy and equipment   4,521    4,105     3,685     4,082    4,072 10.1% 11.0%
Data processing   2,083    1,894     1,745     1,554    1,678 10.0% 24.1%
Professional fees   1,649    1,969     1,626     1,214    1,369 -16.3% 20.5%
Supplies and communication   844    797     805     693    708 5.9% 19.2%
Advertising and promotion   760    1,316     814     1,034    876 -42.2% -13.2%
Merger and integration costs   -     -      466     380    -  0.0% 0.0%
Other operating expenses   3,389    3,751     2,872     2,854    2,273 -9.7% 49.1%
subtotal   28,984    29,677     29,449     29,264    29,678 -2.3% -2.3%
              
Other real estate owned expense (income)   81    (378)    (441)    246    79 -121.4% 2.5%
Total noninterest expense$  29,065 $  29,299  $  29,008  $  29,510 $  29,757 -0.8% -2.3%
                       

Hanmi recorded a provision for income taxes of $6.3 million for the first quarter of 2019, representing an effective tax rate of 30.0% compared with $8.2 million, representing an effective tax rate of 41.9% for the fourth quarter of 2018.  First quarter income tax expense included a $0.4 million charge related to the settlement of the California 2008 and 2009 tax year audits with the Franchise Tax Board. Fourth quarter income tax expense included a net charge of $2.7 million, reflecting charges for a state deferred tax valuation allowance and the finalization of the re-measurement of deferred tax assets due to the change in the Federal corporate tax rate, offset by a benefit due to a lapse of the statute of limitations for certain unrecognized tax benefits.

Financial Position
Total assets were $5.57 billion at March 31, 2019, a 1.3% increase from $5.50 billion at December 31, 2018 from an increase in securities available for sale at fair value and the adoption of ASC 842, the new accounting standard for leases. On January 1, 2019, Hanmi adopted ASC 842 – Lease Accounting (ASU 2016-02) and recorded a Right-of-Use Asset (ROUA) on Leases and a Lease Liability of $40.9 million, respectively.  As of March 31, 2019, the ROUA on Leases was $39.3 million and the Lease Liability was $39.5 million. These amounts were included in ‘Prepaid expenses and other assets’ and ‘Accrual expenses and other liabilities,’ respectively.

Loans and leases receivable, before the allowance for loan and lease losses, were $4.58 billion at March 31, 2019, down 0.5% from $4.60 billion at December 31, 2018. The decrease in loans and leases from the prior quarter reflects the seasonality of loan production as well as Hanmi’s strategic decision to moderate loan growth, protect net interest margin and reduce expenses given the increasingly challenging banking environment. Loans held for sale, representing the guaranteed portion of SBA loans, were $7.1 million at March 31, 2019 compared with $9.4 million at the end of 2018.

Loans and leases receivable, before the allowance for loan and lease losses, increased 3.7% from $4.41 billion at March 31, 2018, primarily due to production.

  As of (in thousands)  Percentage Change
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Q1-19 Q1-19
 2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
Loan and Lease Portfolio             
Commercial real estate loans$  3,230,526 $  3,257,792 $  3,275,382 $  3,241,348 $  3,122,745 -0.8% 3.5%
Residential real estate loans   483,830    500,563    516,968    539,861    545,053 -3.3% -11.2%
Commercial and industrial loans   422,502    429,903    396,383    396,522    409,380 -1.7% 3.2%
Lease receivable   425,530    398,858    379,455    350,578    321,480 6.7% 32.4%
Consumer loans   13,232    13,424    14,695    13,817    14,899 -1.4% -11.2%
Loans and leases receivable 4,575,620  4,600,540  4,582,883  4,542,126  4,413,557 -0.5% 3.7%
Loans held for sale   7,140    9,390    4,455    5,349    6,008 -24.0% 18.8%
Total loans and leases$  4,582,760 $  4,609,930 $  4,587,338 $  4,547,475 $  4,419,565 -0.6% 3.7%
                     

For the first quarter of 2019, commercial real estate loans as a percentage of loans and leases receivable decreased to 70.6% compared with 70.8% for the same period last year.

Bonnie Lee, President and Chief Operating Officer, said, “While loan production is seasonally slowest in the first quarter, our performance is also indicative of being extremely selective in originating new credits with respect to pricing and underwriting.  Given the highly competitive environment, I am quite pleased with our stable net interest margin and continued strong credit quality. Overall, our production outlook remains positive and we continue to expect to generate 5% to 7% growth in attractively priced, high quality loans and leases for the full year.”

Commenting on her recent promotion, Ms. Lee concluded, “I am honored to serve on Hanmi’s Board of Directors and very grateful to the Board’s confidence in my abilities. C. G. Kum has been an excellent colleague, friend and mentor since I joined Hanmi in 2013. I look forward to serving as the Bank’s next CEO upon his retirement next month, and I wish him all the best in his well-deserved retirement.”

 For the Three Months Ended (in thousands)
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
 2019 2018 2018 2018 2018
New Loan & Lease Production         
Commercial real estate loans$  46,531  $  87,523  $  112,748  $  198,314  $  136,633 
Commercial and industrial loans   33,643     68,113     32,714     19,226     27,426 
SBA loans   29,976     30,758     25,388     29,649     25,081 
Lease receivable   69,577     59,023     64,284     60,308     54,952 
Consumer loans   122     831     2,873     1,327     1,189 
subtotal   179,849     246,248     238,007     308,824     245,281 
          
Loan purchases   -     -     2,160     25,901     38,905 
Payoffs, amortization & net line utilization   (188,203)    (206,606)    (177,799)    (186,234)    (154,268)
Loan sales   (15,459)    (18,210)    (19,751)    (19,185)    (19,187)
Charge-offs   (1,107)    (3,775)    (1,245)    (657)    (1,632)
Other real estate owned   -     -     (615)    (80)    - 
          
Loans and leases-beginning balance$  4,600,540  $  4,582,883  $  4,542,126  $  4,413,557  $  4,304,458 
Loans and leases-ending balance$  4,575,620  $  4,600,540  $  4,582,883  $  4,542,126  $  4,413,557 
                    

Deposits increased to $4.82 billion at the end of the 2019 first quarter from $4.75 billion at the end of the preceding quarter. Time deposits and noninterest-bearing demand deposits led this growth with increases of 4.1% and 2.5%, respectively. The loan-to-deposit ratio at March 31, 2019 decreased to 94.9% from 96.9% in the fourth quarter.

Deposits increased 10.1% from $4.38 billion in the first quarter last year, as time deposits and money market and savings deposits increased 28.1% and 5.1%, respectively, from a year ago.

  As of (in thousands)  Percentage Change
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Q1-19 Q1-19
 2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
Deposit Portfolio             
Demand: noninterest-bearing$  1,316,114 $  1,284,530 $  1,313,777 $  1,350,383 $  1,352,162 2.5% -2.7%
Demand: interest-bearing   85,946    87,582    90,586    105,825    93,591 -1.9% -8.2%
Money market and savings   1,543,299    1,573,622    1,478,631    1,381,038    1,469,010 -1.9% 5.1%
Time deposits   1,874,816    1,801,501    1,731,428    1,589,289    1,463,338 4.1% 28.1%
Total deposits$  4,820,175 $  4,747,235 $  4,614,422 $  4,426,535 $  4,378,101 1.5% 10.1%
                     

At March 31, 2019, stockholders’ equity was $564.3 million, compared with $552.6 million at December 31, 2018. Tangible common stockholders’ equity was $552.2 million, or 9.93% of tangible assets, compared with $540.4 million, or 9.84% of tangible assets at December 31, 2018. Tangible book value per share was $17.89, compared to $17.47 in the fourth quarter.

Hanmi continues to be well capitalized, with a preliminary Tier 1 risk-based capital ratio of 11.84% and a total risk-based capital ratio of 14.63% at March 31, 2019, versus 11.74% and 14.54%, respectively, at year-end 2018.

  As of  Amount Change
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Q1-19 Q1-19
 2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
Regulatory Capital ratios (1)             
Hanmi Financial             
Total risk-based capital14.63% 14.54% 15.01% 15.17% 15.43% 0.09 -0.80
Tier 1 risk-based capital11.84% 11.74% 12.21% 12.35% 12.52% 0.10 -0.68
Common equity tier 1 capital11.43% 11.32% 11.79% 11.93% 12.09% 0.11 -0.66
Tier 1 leverage capital ratio10.39% 10.18% 10.53% 10.83% 10.88% 0.21 -0.49
Hanmi Bank             
Total risk-based capital14.25% 14.19% 14.76% 14.86% 15.13% 0.06 -0.88
Tier 1 risk-based capital13.53% 13.47% 14.05% 14.15% 14.39% 0.06 -0.86
Common equity tier 1 capital13.53% 13.47% 14.05% 14.15% 14.39% 0.06 -0.86
Tier 1 leverage capital ratio11.88% 11.67% 12.11% 12.42% 12.51% 0.21 -0.63
                   

(1)       Preliminary ratios for March 31, 2019

Hanmi declared a cash dividend of $0.24 per common share on its common stock in the 2019 first quarter. The dividend was paid on February 28, 2019, to stockholders of record as of the close of business on January 30, 2019.

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 first quarter of 2019, compared with 0.23% at the end of the fourth quarter.

Nonperforming loans and leases were $40.0 million at the end of the first quarter of 2019, or 0.88% of loans and leases compared with $15.5 million at the end of 2018, or 0.34% of the portfolio. The increase in nonaccrual loans and leases reflects the addition of a $25.0 million commercial loan relationship, primarily secured by business assets and to a lesser extent commercial real estate, which recently experienced an interruption to their business.  Hanmi has established a specific allowance of $3.0 million at March 31, 2019 for this relationship, is working closely with the borrower and expects to achieve a resolution as soon as possible. 

Nonperforming assets were $40.7 million at the end of the first quarter of 2019, or 0.73% of assets, compared to $16.2 million, or 0.29% of assets, at the end of the prior quarter.

Gross charge-offs for the first quarter of 2019 were $1.1 million compared with $3.8 million for the preceding quarter. Recoveries of previously charged-off loans and leases for the first quarter of 2019 were $0.9 million compared with $1.0 million for the preceding quarter. As a result, there were net charge-offs of $0.2 million for the first quarter of 2019, compared to net charge-offs of $2.7 million for the preceding quarter. For the first quarter of 2019, net charge-offs were 0.02% of average loans and leases compared with net charge-offs of 0.24% for the preceding quarter.  

The allowance for loan and lease losses was $32.9 million as of March 31, 2019, generating an allowance for loan and lease losses to loans and leases of 0.72% compared with 0.70% in the prior quarter.

  As of or for the Three Months Ended (in thousands)  Amount Change
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Q1-19 Q1-19
 2019 2018 2018 2018 2018 vs. Q4-18 vs. Q1-18
Asset Quality             
Nonperforming assets:             
Nonaccrual loans and leases$  40,041  $  15,525  $  18,283  $  15,804  $  15,345  $  24,516  $  24,696 
Loans and leases 90 days or more past due and still accruing   -     4     -     -     17     (4)    (17)
Nonperforming loans and leases   40,041     15,529     18,283     15,804     15,362     24,512     24,679 
Other real estate, net   622     663     877     280     1,660     (41)    (1,038)
Nonperforming assets$  40,663  $  16,192  $  19,160  $  16,084  $  17,022  $  24,471  $  23,641 
              
Delinquent loan and leases:             
Loans and leases, 30 to 89 days past due and still accruing$  9,242  $  10,674  $  6,901  $  9,089  $  7,270  $  (1,432) $  1,972 
Delinquent loans and leases to loans and leases 0.20%  0.23%  0.15%  0.20%  0.16%  -0.03   0.04 
              
Allowance for loan and lease losses:             
Balance at beginning of period$  31,974  $  31,676  $  31,818  $  31,777  $  31,043     
Loan and lease loss provision   1,117     3,041     200     100     649     
Net loan and lease charge-offs (recoveries)   195     2,743     342     59     (85)    
Balance at end of period$  32,896  $  31,974  $  31,676  $  31,818  $  31,777     
              
Asset quality ratios:             
Nonperforming loans and leases to loans and leases 0.88%  0.34%  0.40%  0.35%  0.35%    
Nonperforming assets to assets 0.73%  0.29%  0.35%  0.30%  0.32%    
Net loan and lease charge-offs (recoveries) to average loans and leases (1) 0.02%  0.24%  0.03%  0.01%  -0.01%    
Allowance for loan and lease losses to loans and leases 0.72%  0.70%  0.69%  0.70%  0.72%    
Allowance for loan and lease losses to nonperforming loans and leases 82.16%  205.90%  173.25%  201.33%  206.85%    
              
Allowance for off-balance sheet items:             
Balance at beginning of period$  1,439  $  1,357  $  1,357  $  1,323  $  1,296     
Provision (income) for off-balance sheet items   (338)    82     -      34     27     
Balance at end of period$  1,101  $  1,439  $  1,357  $  1,357  $  1,323     
              

(1)       Annualized

Conference Call
Management will host a conference call today, April 23, 2019 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. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All statements other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital plans, strategic alternatives for a possible business combination, merger or sale transaction, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of potential future supervisory action against us or Hanmi Bank; general economic and business conditions internationally, nationally and in those areas in which we operate; volatility and deterioration in the credit and equity markets; changes in consumer spending, borrowing and savings habits; availability of capital from private and government sources; demographic changes; competition for loans and deposits and failure to attract or retain loans and deposits; fluctuations in interest rates and a decline in the level of our interest rate spread; risks of natural disasters related to our real estate portfolio; risks associated with Small Business Administration loans; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability of Hanmi Bank to make distributions to Hanmi Financial 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, 2018, 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)

 March 31, December 31, Percentage March 31, Percentage
 2019 2018 Change 2018 Change
Assets         
Cash and due from banks$  169,830  $  155,376  9.3% $  151,611  12.0%
Securities available for sale, at fair value   621,470     574,908  8.1%    570,351  9.0%
Loans held for sale, at the lower of cost or fair value   7,140     9,390  -24.0%    6,008  18.8%
Loans and leases receivable, net of allowance for loan and lease losses   4,542,724     4,568,566  -0.6%    4,381,780  3.7%
Accrued interest receivable   13,397     13,331  0.5%    12,751  5.1%
Premises and equipment, net   28,426     27,752  2.4%    26,465  7.4%
Customers' liability on acceptances   750     173  333.5%    870  -13.8%
Servicing assets   7,978     8,520  -6.4%    9,867  -19.1%
Goodwill and other intangible assets, net   12,105     12,182  -0.6%    12,454  -2.8%
Federal Home Loan Bank ("FHLB") stock, at cost   16,385     16,385  0.0%    16,385  0.0%
Bank-owned life insurance   51,941     51,661  0.5%    50,831  2.2%
Prepaid expenses and other assets   98,922     63,975  54.6%    66,268  49.3%
Total assets$  5,571,068   $  5,502,219   1.3% $  5,305,641   5.0%
          
Liabilities and Stockholders' Equity         
Liabilities:         
Deposits:         
Noninterest-bearing$  1,316,114  $  1,284,530  2.5% $  1,352,162  -2.7%
Interest-bearing   3,504,061     3,462,705  1.2%    3,025,939  15.8%
Total deposits   4,820,175     4,747,235  1.5%    4,378,101  10.1%
Accrued interest payable   14,437     11,379  26.9%    5,931  143.4%
Bank's liability on acceptances   750     173  333.5%    870  -13.8%
Borrowings   -     55,000  -100.0%    220,000  -100.0%
Subordinated debentures   117,947     117,808  0.1%    117,400  0.5%
Accrued expenses and other liabilities   53,467     18,056  196.1%    19,061  180.5%
Total liabilities   5,006,776      4,949,651   1.2%    4,741,363   5.6%
          
Stockholders' equity:         
Common stock   33     33  0.0%    33  0.0%
Additional paid-in capital   570,432     569,712  0.1%    567,081  0.6%
Accumulated other comprehensive (loss) income   (1,882)    (6,079) -69.0%    (8,207) -77.1%
Retained earnings   104,771     97,539  7.4%    77,691  34.9%
Less treasury stock   (109,062)    (108,637) 0.4%    (72,320) 50.8%
Total stockholders' equity   564,292      552,568   2.1%    564,278   0.0%
Total liabilities and stockholders' equity$  5,571,068   $  5,502,219   1.3% $  5,305,641   5.0%
                  

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

  Three Months Ended
 March 31, December 31, Percentage March 31, Percentage
 2019 2018 Change 2018 Change
Interest and dividend income:         
Interest and fees on loans and leases$  58,334 $  57,947  0.7% $  51,574  13.1%
Interest on securities   3,456    3,278  5.4%    3,105  11.3%
Dividends on FHLB stock   289    555  -47.9%    289  0.0%
Interest on deposits in other banks   335    179  87.2%    114  193.9%
Total interest and dividend income   62,414    61,959  0.7%    55,082  13.3%
Interest expense:         
Interest on deposits   15,683    14,139  10.9%    7,785  101.5%
Interest on borrowings   71    420  -83.1%    679  -89.5%
Interest on subordinated debentures   1,772    1,754  1.0%    1,694  4.6%
Total interest expense   17,526    16,313  7.4%    10,158  72.5%
Net interest income before provision for loan and lease losses   44,888    45,646  -1.7%    44,924  -0.1%
Loan and lease loss provision   1,117    3,041  -63.3%    649  72.1%
Net interest income after provision for loan and lease losses   43,771    42,605  2.7%    44,275  -1.1%
Noninterest income:         
Service charges on deposit accounts   2,358    2,648  -11.0%    2,511  -6.1%
Trade finance and other service charges and fees   1,124    1,167  -3.7%    1,173  -4.2%
Gain on sale of Small Business Administration ("SBA") loans   926    983  -5.8%    1,448  -36.0%
Servicing income   357    630  -43.3%    662  -46.1%
Bank-owned life insurance income   280    288  -2.8%    277  1.1%
Net gain (loss) on sales of securities   725    -  -     (428) -269.4%
Other operating income   484    584  -17.1%    418  15.8%
Total noninterest income   6,254    6,300  -0.7%    6,061  3.2%
Noninterest expense:         
Salaries and employee benefits   15,738    15,845  -0.7%    18,702  -15.8%
Occupancy and equipment   4,521    4,105  10.1%    4,072  11.0%
Data processing   2,083    1,894  10.0%    1,678  24.1%
Professional fees   1,649    1,969  -16.3%    1,369  20.5%
Supplies and communications   844    797  5.9%    708  19.2%
Advertising and promotion   760    1,316  -42.2%    876  -13.2%
Other real estate owned expense   81    (378) -121.4%    79  2.5%
Other operating expenses   3,389    3,751  -9.7%    2,273  49.1%
Total noninterest expense   29,065    29,299  -0.8%    29,757  -2.3%
Income before provision for income taxes   20,960    19,607  6.9%    20,579  1.9%
Provision for income taxes   6,288    8,222  -23.5%    5,724  9.9%
Net income$  14,672  $  11,385   28.9% $  14,855   -1.2%
           
Basic earnings per share:$  0.48 $  0.37    $  0.46   
Diluted earnings per share:$  0.48 $  0.37    $  0.46   
          
Weighted-average shares outstanding:         
Basic   30,667,378    30,681,980       32,145,214   
Diluted   30,720,772    30,757,398       32,301,095   
Common shares outstanding   30,860,533    30,928,437       32,502,658   
               

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

 Three Months Ended
 March 31, 2019 December 31, 2018 March 31, 2018
  InterestAverage  InterestAverage  InterestAverage
 AverageIncome /Yield / AverageIncome /Yield / AverageIncome /Yield /
 BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
Assets           
Interest-earning assets:           
Loans and leases receivable (1)$  4,533,120 $  58,3345.22% $  4,544,722 $  57,9465.06% $  4,310,964 $  51,5744.85%
Securities (2)   589,547    3,5972.44%    581,550    3,4422.37%    588,738    3,2962.24%
FHLB stock   16,385    2897.15%    16,385    55513.44%    16,385    2897.15%
Interest-bearing deposits in other banks   53,022    3352.56%    34,301    1792.07%    32,401    1141.43%
Total interest-earning assets   5,192,074    62,5554.89%    5,176,958    62,1224.76%    4,948,488    55,2734.53%
            
Noninterest-earning assets:           
Cash and due from banks   108,992       120,684       122,580   
Allowance for loan and lease losses   (31,982)      (31,005)      (32,487)  
Other assets   171,867       173,896       175,209   
            
Total assets$  5,440,951     $  5,440,533     $  5,213,790    
            
Liabilities and Stockholders' Equity           
Interest-bearing liabilities:           
Deposits:           
Demand: interest-bearing$  85,291 $  290.14% $  89,971 $  340.15% $  91,378 $  180.08%
Money market and savings   1,526,710    5,6771.51%    1,510,428    5,3001.39%    1,478,795    3,3260.91%
Time deposits   1,852,562    9,9772.18%    1,751,429    8,8051.99%    1,440,382    4,4411.25%
Total interest-bearing deposits   3,464,563    15,6831.84%    3,351,828    14,1391.67%    3,010,555    7,7851.05%
Borrowings   10,611    712.71%    65,217    4202.56%    179,000    6791.54%
Subordinated debentures   117,863    1,7726.01%    117,728    1,7545.94%    117,323    1,6945.77%
Total interest-bearing liabilities   3,593,037    17,5261.98%    3,534,773    16,3131.83%    3,306,878    10,1581.25%
            
Noninterest-bearing liabilities and equity:           
Demand deposits: noninterest-bearing   1,251,659       1,305,860       1,307,072   
Other liabilities   36,218       29,462       33,973   
Stockholders' equity   560,037       570,438       565,867   
            
Total liabilities and stockholders' equity$  5,440,951     $  5,440,533     $  5,213,790    
            
Net interest income (tax equivalent basis) $  45,029    $  45,809    $  45,115  
            
Cost of deposits  1.35%   1.20%   0.73%
Net interest spread (taxable equivalent basis) 2.91%   2.93%   3.28%
Net interest margin (taxable equivalent basis) 3.52%   3.51%   3.70%
              

(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.

Non-GAAP Financial Measures

Tangible Common Equity to Tangible Assets Ratio

Tangible common equity to tangible assets ratio is supplemental financial information determined by a method other than in accordance with U.S. generally accepted accounting principles (“GAAP”). This non-GAAP measure is used by management in the analysis of Hanmi’s capital strength. Tangible equity is calculated by subtracting goodwill and other intangible assets from stockholders’ equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from stockholders’ equity when assessing the capital adequacy of a financial institution. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the capital strength of Hanmi. This disclosure should not be viewed as a substitution for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following table reconciles this non-GAAP performance measure to the GAAP performance measure for the periods indicated:

Tangible Common Equity to Tangible Assets Ratio
(Unaudited)
(In thousands, except share, per share data and ratios)

 March 31, December 31, September 30, June 30, March 31,
Hanmi Financial Corporation2019 2018 2018 2018 2018
Assets$5,571,068  $5,502,219  $5,487,042  $5,415,202  $5,305,641 
Less goodwill and other intangible assets (12,105)  (12,182)  (12,273)  (12,363)  (12,454)
Tangible assets$5,558,963  $5,490,037  $5,474,769  $5,402,839  $5,293,187 
          
Stockholders' equity$564,292  $552,568  $567,748  $571,707  $564,278 
Less goodwill and other intangible assets (12,105)  (12,182)  (12,273)  (12,363)  (12,454)
Tangible stockholders' equity$552,187  $540,386  $555,475  $559,344  $551,824 
          
Stockholders' equity to assets 10.13%  10.04%  10.35%  10.56%  10.64%
Tangible common equity to tangible assets 9.93%  9.84%  10.15%  10.35%  10.43%
          
Common shares outstanding 30,860,533   30,928,437   32,087,236   32,513,518   32,502,658 
Tangible common equity per common share$17.89  $17.47  $17.31  $17.20  $16.98 
                    

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