0001171843-22-006734.txt : 20221025 0001171843-22-006734.hdr.sgml : 20221025 20221025160617 ACCESSION NUMBER: 0001171843-22-006734 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20221025 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20221025 DATE AS OF CHANGE: 20221025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANMI FINANCIAL CORP CENTRAL INDEX KEY: 0001109242 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 954788120 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-30421 FILM NUMBER: 221329564 BUSINESS ADDRESS: STREET 1: 3660 WILSHIRE BLVD SUITE PH-A CITY: LOS ANGELES STATE: CA ZIP: 90010 BUSINESS PHONE: 2133822200 8-K 1 f8k_102522.htm FORM 8-K Form 8-K
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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 25, 2022

HANMI FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware000-3042195-4788120
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification No.)

900 Wilshire Boulevard, Suite 1250

Los Angeles, CA 90017

(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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueHAFCNasdaq Global Select Market

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

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.

On October 25, 2022, Hanmi Financial Corporation (“Hanmi Financial”) issued a press release announcing its financial results for the quarter ended September 30, 2022. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K.

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.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1 Press release issued by Hanmi Financial dated October 25, 2022
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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 our 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 and strategic plans, 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;
 ·the effect of our rating under the Community Reinvestment Act and our ability to address any issues raised in our regulatory exams;
 ·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;
 ·inflation and fluctuations in interest rates and a decline in the level of our interest rate spread;
 ·the current or anticipated impact of military conflict, terrorism or other geopolitical events;
 ·risks of natural disasters;
 ·legal proceedings and litigation brought against us;
 ·a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;
 ·the failure to maintain current technologies;
 ·the inability to successfully implement future information technology enhancements;
 ·difficult business and economic conditions that can adversely affect our industry and business, including competition, 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;
 ·changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums;
 ·the continuing impact of the COVID-19 pandemic on our business and results of operation;
 ·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;
 ·strategic transactions we may enter into;
 ·the adequacy of our allowance for credit losses;
 ·our credit quality and the effect of credit quality on our credit losses expense 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.

 

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, 2021, 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.

 
 

SIGNATURES

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 25, 2022By: /s/ Bonita I. Lee        
  Bonita I. Lee
  Chief Executive Officer
  

 

EX-99.1 2 exh_991.htm PRESS RELEASE EdgarFiling

EXHIBIT 99.1

Hanmi Reports Third Quarter 2022 Results

LOS ANGELES, Oct. 25, 2022 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported financial results for the third quarter of 2022.

Net income for the third quarter of 2022 was $27.2 million, or $0.89 per diluted share, up 8.5% from $25.1 million, or $0.82 per diluted share for the second quarter of 2022. The sequential quarter increase in net income reflects growth in net interest income, carefully managed noninterest expenses and a modest credit loss expense. Return on average assets and return on average equity for the third quarter of 2022 were 1.52% and 15.58%, respectively.

CEO Commentary

“Our team delivered exceptional third quarter results by building on the positive momentum we have gained over the past year,” said Bonnie Lee, President and Chief Executive Officer of Hanmi Financial Corporation. “Our solid earnings reflected continued strong loan production, an increased net interest margin, excellent asset quality, and well managed expenses. This exceptional performance for both the quarter and year-to-date has put us on track to deliver another year of strong financial results for 2022.”

“Our strategic initiatives to diversify our business are fueling growth across our loan and lease portfolio in an increasingly competitive lending environment. We delivered strong net loan growth of 2.6% in the third quarter with solid production across most of our loan categories, particularly in our Corporate Korea, residential mortgage and equipment finance groups. This loan growth was more than funded by the increase in our deposits during the quarter, which were up 3.7% sequentially. We are proud of the deposit franchise that we have built over the years, with a focus on pursuing new customers and expanding our existing relationships. As a result, noninterest-bearing deposits comprised 45% of total deposits at quarter end.”

“Despite the current uncertain macroeconomic environment, we enter the fourth quarter with cautious optimism. Our loan pipeline remains solid, our net interest margin is healthy, our credit quality is excellent, and our expenses are well managed. We remain focused on continuing to drive disciplined growth and deliver attractive returns for our shareholders.”

Third Quarter 2022 Highlights:        

  • Third quarter net income increased 8.5% to $27.2 million, or $0.89 per diluted share from $25.1 million, or $0.82 per diluted share for the second quarter of 2022.
  • Loans receivable grew to $5.80 billion at September 30, 2022, up 2.6% sequentially from the end of the second quarter and 12.6% from year-end as loan production returned to more historical levels at $492.3 million for the third quarter.
  • Deposits grew to $6.20 billion at September 30, 2022, up 3.7% sequentially from the end of the second quarter and 7.2% from year-end; noninterest-bearing demand deposits were relatively unchanged sequentially and were 44.7% of the deposit portfolio at quarter end.
  • Net interest income was $63.1 million for the third quarter, up 6.8% from $59.0 million for the second quarter as interest-earning assets increased 2.7% sequentially to $6.85 billion and net interest margin increased.
  • Net interest margin (taxable-equivalent) increased 11 basis points to 3.66% for the third quarter, from 3.55% in the second quarter; the yield on loans increased 36 basis points sequentially while the cost of interest-bearing deposits increased 47 basis points.
  • Credit loss expense was $0.6 million for the third quarter and the allowance for credit losses was $71.6 million at September 30, 2022; the ratio of the allowance to loans was 1.23%.
  • Nonaccrual loans were $11.6 million and nonperforming assets were 0.17% of total assets at September 30, 2022 – both essentially unchanged from the end of the second quarter.
  • Noninterest income for the third quarter was $8.9 million, down 4.3% sequentially from the second quarter, largely on lower SBA gain on sale income due to lower trade premiums.
  • Noninterest expense was $33.3 million for the third quarter, up $1.8 million from the second quarter; however, the efficiency ratio for the third quarter remained relatively unchanged at 46.22% for the third quarter.
  • Hanmi’s tangible common equity to tangible assets was 8.40% at the end of the third quarter and it had a Common equity Tier 1 capital ratio of 11.19% and a Total capital ratio of 14.36%.

For more information about Hanmi, please see the Q3 2022 Investor Update (and Supplemental Financial Information), which is available on the Bank’s website at www.hanmi.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov. Also, please refer to “Non-GAAP Financial Measures” herein for further details of the presentation of certain non-GAAP financial measures.

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

               
 As of or for the Three Months Ended Amount Change 
 September 30, June 30, March 31, December 31, September 30, Q3-22 Q3-22 
 2022 2022 2022 2021 2021 vs. Q2-22 vs. Q3-21 
               
Net income$27,169  $25,050  $20,695  $33,331  $26,565  $2,119  $604  
Net income per diluted common share$0.89  $0.82  $0.68  $1.09  $0.86  $0.07  $0.03  
               
Assets$7,128,511  $6,955,968  $6,737,052  $6,858,587  $6,776,533  $172,543  $351,978  
Loans receivable$5,800,991  $5,655,403  $5,337,500  $5,151,541  $4,858,865  $145,588  $942,126  
Deposits$6,201,376  $5,979,390  $5,783,170  $5,786,269  $5,729,536  $221,986  $471,840  
               
Return on average assets 1.52%  1.45%  1.22%  1.93%  1.58%  0.07   -0.06  
Return on average stockholders' equity 15.58%  14.92%  12.74%  20.89%  17.13%  0.66   -1.55  
               
Net interest margin 3.66%  3.55%  3.10%  2.96%  3.07%  0.11   0.59  
Efficiency ratio (1) 46.22%  46.05%  53.29%  53.81%  52.01%  0.17   -5.79  
               
Tangible common equity to tangible assets (2) 8.40%  8.74%  9.07%  9.23%  8.98%  -0.34   -0.58  
Tangible common equity per common share (2)$19.60  $19.91  $20.02  $20.79  $19.96  $(0.31) $(0.36) 
               
(1)       Noninterest expense divided by net interest income plus noninterest income.           
(2)       Refer to "Non-GAAP Financial Measures" for further details.
 
               

Results of Operations
Net interest income was $63.1 million for the third quarter of 2022 compared with $59.0 million for the second quarter of 2022. Third quarter interest and fees on loans receivable increased 11.9%, or $7.1 million, from the preceding quarter primarily due to a 2.2% increase in the average balance of loans receivable and a 36 basis point increase in average loan yields. Interest on securities in the second quarter increased $0.3 million from the second quarter due to an $11.7 million increase in the average balance and a 13 basis point increase in the average yield. Third quarter loan prepayment penalties were $0.2 million compared with $0.5 million for the second quarter. Total interest expense for the third quarter increased $4.2 million from the preceding quarter primarily due to a 4.3% increase in the average balance of total interest-bearing liabilities and a 44 basis point increase in the average rate paid on total interest-bearing liabilities.

 As of or for the Three Months Ended (in thousands) Percentage Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-22 Q3-22 
Net Interest Income2022 2022 2022 2021 2021 vs. Q2-22 vs. Q3-21 
               
Interest and fees on loans receivable(1)$66,976  $59,855  $53,924  $52,240  $52,961   11.9%  26.5% 
Interest on securities 3,271   2,930   2,516   1,821   1,865   11.6%  75.4% 
Dividends on FHLB stock 245   242   248   248   245   1.2%  0.0% 
Interest on deposits in other banks 958   193   216   302   329   396.4%  191.2% 
Total interest and dividend income$71,450  $63,220  $56,904  $54,611  $55,400   13.0%  29.0% 
               
Interest on deposits 6,567   2,457   2,013   2,236   2,466   167.3%  166.3% 
Interest on borrowings 349   370   337   364   409   -5.7%  -14.7% 
Interest on subordinated debentures 1,448   1,349   3,598   2,515   2,545   7.3%  -43.1% 
Total interest expense 8,364   4,176   5,948   5,115   5,420   100.3%  54.3% 
Net interest income$63,086  $59,044  $50,956  $49,496  $49,980   6.8%  26.2% 
               
(1)       Includes loans held for sale. 
               

Net interest margin (taxable-equivalent) was 3.66% for the third quarter, up 11 basis points from the second quarter. The improvement was primarily due to an increase in interest-earning asset yields because of the higher level of interest rates, partially offset by a 47 basis point increase in the cost of interest-bearing deposits, also due to the increase in rates, as well as a shift in the composition of those deposits.

The yield on loans for the third quarter of 2022 increased 36 basis points to 4.67% from 4.31% for the second quarter of 2022 as average loans for the quarter increased 2.2% and average residential real estate loans grew to 10.1% of the average loan portfolio from 8.3% in the prior quarter.   Average interest-bearing deposits in other banks grew by 32.9% quarter-over-quarter to $181.4 million from $136.5 million and the yield on those assets increased by 152 basis points. Overall, average interest-earning assets for the third quarter increased 2.7% sequentially to $6.85 billion and the yield on those assets increased by 35 basis points to 4.15% from 3.80% in the prior quarter.

The cost of interest-bearing deposits increased 47 basis points to 0.78% for the third quarter compared with 0.31% for the previous quarter as a result of higher interest rates as well as a higher proportion of time deposits relative to total deposits. The total cost of deposits increased 26 basis points to 0.43% for the third quarter compared with 0.17% for the second quarter while the average balance on noninterest-bearing deposits remained relatively unchanged at 44.7% of the deposit portfolio.

 For the Three Months Ended (in thousands) Percentage Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-22 Q3-22 
Average Earning Assets and Interest-bearing Liabilities2022 2022 2022 2021 2021 vs. Q2-22 vs. Q3-21 
Loans receivable (1)$5,696,587  $5,572,504  $5,231,672  $4,896,952  $4,684,570   2.2%  21.6% 
Securities (2) 956,989   945,291   930,505   914,148   878,866   1.2%  8.9% 
FHLB stock 16,385   16,385   16,385   16,385   16,385   0.0%  0.0% 
Interest-bearing deposits in other banks 181,401   136,473   494,887   802,901   872,783   32.9%  -79.2% 
Average interest-earning assets$6,851,362  $6,670,653  $6,673,449  $6,630,386  $6,452,604   2.7%  6.2% 
               
Demand: interest-bearing$121,269  $122,771  $124,892  $122,602  $115,233   -1.2%  5.2% 
Money market and savings 2,079,490   2,139,488   2,106,008   2,078,659   2,033,876   -2.8%  2.2% 
Time deposits 1,120,149   894,345   937,044   1,013,681   1,061,359   25.2%  5.5% 
Average interest-bearing deposits 3,320,908   3,156,604   3,167,944   3,214,942   3,210,468   5.2%  3.4% 
Borrowings 123,370   140,245   130,556   137,500   143,750   -12.0%  -14.2% 
Subordinated debentures 129,176   129,029   213,171   214,899   163,340   0.1%  -20.9% 
Average interest-bearing liabilities$3,573,454  $3,425,878  $3,511,671  $3,567,341  $3,517,558   4.3%  1.6% 
               
Average Noninterest Bearing Deposits              
Demand deposits - noninterest bearing$2,717,810  $2,716,297  $2,634,398  $2,561,297  $2,444,759   0.1%  11.2% 
               
(1)       Includes loans held for sale. 
(2)       Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented. 
               
 For the Three Months Ended Yield/Rate Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-22 Q3-22 
Average Yields and Rates2022  2022  2022  2021  2021 vs. Q2-22 vs. Q3-21 
Loans receivable(1) 4.67%  4.31%  4.18%  4.23%  4.49%  0.36   0.18  
Securities (2) 1.40%  1.27%  1.11%  0.83%  0.87%  0.13   0.53  
FHLB stock 5.93%  5.93%  6.14%  6.00%  5.93%  0.00   0.00  
Interest-bearing deposits in other banks 2.09%  0.57%  0.18%  0.15%  0.15%  1.53   1.94  
Interest-earning assets 4.15%  3.80%  3.46%  3.27%  3.41%  0.34   0.74  
               
Interest-bearing deposits 0.78%  0.31%  0.26%  0.28%  0.30%  0.47   0.48  
Borrowings 1.24%  1.10%  1.05%  1.05%  1.13%  0.15   0.11  
Subordinated debentures 4.37%  4.14%  6.75%  4.68%  6.23%  0.23   -1.86  
Interest-bearing liabilities 0.93%  0.49%  0.69%  0.57%  0.61%  0.44   0.32  
               
Net interest margin (taxable equivalent basis) 3.66%  3.55%  3.10%  2.96%  3.07%  0.11   0.59  
               
Cost of deposits 0.43%  0.17%  0.14%  0.15%  0.17%  0.26   0.26  
               
(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 2022, Hanmi recorded a $0.6 million credit loss expense comprised of a $0.4 million negative provision for loan losses and a $1.0 million positive provision for off-balance sheet items. For the second quarter of 2022, the Company recorded a $1.6 million credit loss expense comprised of a $1.6 million positive provision for loan losses and a $45,000 negative provision for off-balance sheet items.

Third quarter 2022 noninterest income declined to $8.9 million from $9.3 million for the second quarter of 2022 due to a $0.5 million decrease in gains on the sale of SBA 7(a) loans, a $0.3 million decrease in trade finance and other service charges and fees, and a $0.3 million increase in other operating income. The volume of SBA loans sold in the third quarter increased to $43.7 million from $41.9 million for the second quarter while trade premiums declined to 6.67% for the third quarter from 7.97% for the second quarter.

               
 For the Three Months Ended (in thousands) Percentage Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-22 Q3-22 
Noninterest Income2022 2022 2022 2021 2021 vs. Q2-22 vs. Q3-21 
Service charges on deposit accounts$2,996  $2,875  $2,875  $3,007  $3,437   4.2%  -12.8% 
Trade finance and other service charges and fees 1,132   1,416   1,142   1,160   1,188   -20.1%  -4.7% 
Servicing income 635   663   734   666   768   -4.2%  -17.3% 
Bank-owned life insurance income 245   246   244   252   251   -0.4%  -2.4% 
All other operating income 1,656   1,336   1,004   1,017   978   24.0%  69.3% 
Service charges, fees & other 6,664   6,536   5,999   6,102   6,622   2.0%  0.6% 
               
Gain on sale of SBA loans 2,250   2,774   2,521   3,791   5,842   -18.9%  -61.5% 
Net gain (loss) on sales of securities -   -   -   (598)  -   0.0%  0.0% 
Gain (loss) on sale of bank premises -   -   -   -   45   0.0%  -100.0% 
Total noninterest income$8,914  $9,310  $8,520  $9,295  $12,509   -4.3%  -28.7% 
               
               

Noninterest expense increased by 5.7% to $33.3 million for the third quarter of 2022 from $31.5 million for the second quarter. Salaries and employee benefits expense increased by $0.6 million reflecting primarily lower deferred costs resulting from decreased loan production. Advertising and promotion expense increased $0.5 million because of increased marketing activity. Data processing expense increased by $0.2 million, occupancy and equipment expense increased by $0.1 million, and supplies and communications expense increased by $0.1 million. The efficiency ratio for the third quarter remained relatively unchanged at 46.22%.

               
 For the Three Months Ended (in thousands) Percentage Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-22 Q3-22 
 2022 2022 2022 2021 2021 vs. Q2-22 vs. Q3-21 
Noninterest Expense              
Salaries and employee benefits$19,365  $18,779  $17,717  $18,644  $18,795   3.1%  3.0% 
Occupancy and equipment 4,736   4,597   4,646   4,840   5,037   3.0%  -6.0% 
Data processing 3,352   3,114   3,236   3,228   2,934   7.6%  14.2% 
Professional fees 1,249   1,231   1,430   1,443   1,263   1.5%  -1.1% 
Supplies and communication 710   581   665   795   741   22.2%  -4.2% 
Advertising and promotion 1,186   660   817   964   953   79.7%  24.4% 
All other operating expenses 2,698   2,463   3,186   1,980   2,906   9.5%  -7.2% 
Subtotal 33,296   31,425    31,697    31,894    32,629   6.0%  2.0% 
               
Other real estate owned expense (income) 2   50   12   -   23   -96.0%  -91.3% 
Repossessed personal property expense (income) (23)  -   (17)  (258)  (150)  -100.0%  -84.7% 
Total noninterest expense$33,275  $31,475  $31,692  $31,636  $32,502   5.7%  2.4% 
               

Hanmi recorded a provision for income taxes of $11.0 million for the third quarter of 2022, representing an effective tax rate of 28.8%, compared with $10.2 million, representing an effective tax rate of 29.0% for the second quarter. The effective tax rate for the first nine months of 2022 was 28.9% compared to 29.3% for the first nine months of 2021.

Financial Position
Total assets at September 30, 2022 increased 2.5%, or $172.5 million, to $7.13 billion from $6.96 billion at June 30, 2022. The increase reflects a 2.6%, or $145.6 million, growth in loans receivable as well as a $58.0 million increase in cash and due from banks. Loans receivable, before the allowance for credit losses, were $5.80 billion at September 30, 2022, up from $5.66 billion at June 30, 2022. Loans held for sale, representing the guaranteed portion of SBA 7(a) loans, were $10.0 million at the end of the third quarter of 2022 compared with $18.5 million at the end of the second quarter.

               
 As of (in thousands) Percentage Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-22 Q3-22 
 2022 2022 2022 2021 2021 vs. Q2-22 vs. Q3-21 
Loan Portfolio              
Commercial real estate loans$3,853,947  $3,829,656  $3,771,453  $3,701,864  $3,528,506   0.6%  9.2% 
Residential/consumer loans 649,591   521,576   432,805   400,548   354,860   24.5%  83.1% 
Commercial and industrial loans 732,030   766,813   633,107   561,830   516,357   -4.5%  41.8% 
Leases 565,423   537,358   500,135   487,299   459,142   5.2%  23.1% 
Loans receivable 5,800,991   5,655,403   5,337,500   5,151,541   4,858,865   2.6%  19.4% 
Loans held for sale 10,044   18,528   15,617   13,342   17,881   -45.8%  -43.8% 
Total$5,811,035  $5,673,931  $5,353,117  $5,164,883  $4,876,746   2.4%  19.2% 
               
               
 As of   
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,     
 2022 2022 2022 2021 2021     
Composition of Loan Portfolio              
Commercial real estate loans 66.3%  67.5%  70.5%  71.6%  72.3%     
Residential/consumer loans 11.2%  9.2%  8.1%  7.8%  7.3%     
Commercial and industrial loans 12.6%  13.5%  11.8%  10.9%  10.6%     
Leases 9.7%  9.5%  9.3%  9.4%  9.4%     
Loans receivable 99.8%  99.7%  99.7%  99.7%  99.6%     
Loans held for sale 0.2%  0.3%  0.3%  0.3%  0.4%     
Total 100.0%  100.0%  100.0%  100.0%  100.0%     
               

New loan production was $492.3 million for the third quarter at an average rate of 5.55% while $139.9 million of loans paid-off during the quarter at an average rate of 5.26%.

Commercial real estate loan production for the third quarter was $132.9 million. Commercial and industrial loan production was $88.0 million, SBA loan production was $44.9 million, equipment finance production was $86.1 million and residential mortgage loan production was $140.4 million. The strong loan growth for the third quarter was more than funded by the increase in total deposits, which grew by $222.0 million in the quarter.

New Loan Production          
(In thousands)          
 For the Three Months Ended (in thousands) 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, 
 2022 2022 2022 2021 2021 
New Loan Production          
Commercial real estate loans$132,870  $271,006  $233,295  $291,543  $214,380  
Commercial and industrial loans 88,015   96,187   98,432   116,365   114,263  
SBA loans 44,898   67,900   42,632   47,397   46,264  
Leases receivable 86,092   95,371   71,487   83,813   83,642  
Residential/consumer loans 140,432   111,766   61,023   85,966   41,497  
subtotal 492,307   642,230   506,869   625,084   500,046  
           
           
Payoffs (139,883)  (230,536)  (181,026)  (152,134)  (291,686) 
Amortization (80,294)  (94,543)  (96,852)  (90,358)  (63,435) 
Loan sales (45,418)  (41,937)  (29,577)  (41,274)  (65,253) 
Net line utilization (78,927)  43,295   (12,620)  (48,203)  (39,941) 
Charge-offs & OREO (2,197)  (606)  (835)  (439)  (958) 
           
Loans receivable-beginning balance 5,655,403   5,337,500   5,151,541   4,858,865   4,820,092  
Loans receivable-ending balance$5,800,991  $5,655,403  $5,337,500  $5,151,541  $4,858,865  
           

Deposits were $6.20 billion at the end of the third quarter of 2022, up $222.0 million, or 3.7%, from $5.98 billion at the end of the preceding quarter. The change was primarily driven by a $276.8 million increase in time deposits partially offset by a $45.4 million decline in money market and savings deposits and an $11.2 million decrease in noninterest-bearing demand deposits. Noninterest-bearing demand deposits represented 44.7% of total deposits at September 30, 2022 and the loan-to-deposit ratio was 93.5%.

 As of (in thousands) Percentage Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-22 Q3-22 
 2022 2022 2022 2021 2021 vs. Q2-22 vs. Q3-21 
Deposit Portfolio              
Demand: noninterest-bearing$2,771,498  $2,782,737  $2,678,726  $2,574,517  $2,548,591   -0.4%  8.7% 
Demand: interest-bearing 125,408   123,614   126,907   125,183   118,334   1.5%  6.0% 
Money market and savings 2,056,793   2,102,161   2,080,969   2,099,381   2,033,000   -2.2%  1.2% 
Time deposits 1,247,677   970,878   896,568   987,188   1,029,611   28.5%  21.2% 
Total deposits$6,201,376  $5,979,390  $5,783,170  $5,786,269  $5,729,536   3.7%  8.2% 
               
               
 As of   
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,     
 2022 2022 2022 2021 2021     
Composition of Deposit Portfolio              
Demand: noninterest-bearing 44.7%  46.5%  46.3%  44.4%  44.4%     
Demand: interest-bearing 2.0%  2.1%  2.2%  2.2%  2.1%     
Money market and savings 33.2%  35.2%  36.0%  36.3%  35.5%     
Time deposits 20.1%  16.2%  15.5%  17.1%  18.0%     
Total deposits 100.0%  100.0%  100.0%  100.0%  100.0%     
               

Stockholders’ equity at September 30, 2022 was $608.9 million compared with $618.3 million at June 30, 2022. The sequential decline was primarily due to the $29.5 million unrealized after-tax loss due to changes in the value of the securities portfolio resulting from increases in interest rates during the quarter which outpaced the $19.5 million contribution of third quarter net income less dividends. Tangible common stockholders’ equity was $597.6 million, or 8.40% of tangible assets, at September 30, 2022, compared with $607.0 million, or 8.74% of tangible assets at the end of the second quarter. Tangible book value per share decreased to $19.60 at September 30, 2022 from $19.91 at the end of the prior quarter.

Hanmi and the Bank exceeded the minimum regulatory capital requirements and the Bank continues to exceed the minimum for the “well capitalized” category. At September 30, 2022, Hanmi’s preliminary Common equity Tier 1 capital ratio was 11.19% and its Total risk-based capital ratio was 14.36% compared with 11.07% and 14.31%, respectively, at the end of the second quarter of 2022.

               
 As of Ratio Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-22 Q3-22 
 2022 2022 2022 2021 2021 vs. Q2-22 vs. Q3-21 
Regulatory Capital ratios (1)              
Hanmi Financial              
Total risk-based capital 14.36%  14.31%  14.73%  16.57%  17.18%  0.05   -2.82  
Tier 1 risk-based capital 11.53%  11.42%  11.71%  11.93%  12.18%  0.11   -0.65  
Common equity tier 1 capital 11.19%  11.07%  11.34%  11.55%  11.78%  0.12   -0.59  
Tier 1 leverage capital ratio 9.99%  9.94%  9.70%  9.63%  9.50%  0.05   0.49  
Hanmi Bank              
Total risk-based capital 13.73%  13.70%  14.19%  14.70%  15.17%  0.03   -1.44  
Tier 1 risk-based capital 12.70%  12.64%  13.09%  13.59%  13.91%  0.06   -1.21  
Common equity tier 1 capital 12.70%  12.64%  13.09%  13.59%  13.91%  0.06   -1.21  
Tier 1 leverage capital ratio 11.02%  11.00%  10.84%  10.96%  10.86%  0.02   0.16  
               
(1)       Preliminary ratios for September 30, 2022              
               

Asset Quality
Loans 30 to 89 days past due and still accruing were 0.09% of loans at the end of the third quarter of 2022, compared with 0.07% at the end of the prior quarter.

Special mention loans were $123.0 million at the end of the third quarter, up from $80.5 million at June 30, 2022. The increase includes a $41.1 million current loan relationship due to turnover in executive management at the borrower and delays in receipt of acceptable business borrowing certificates under an asset-based lending facility. The loan relationship is comprised of a $25.0 million asset-based line of credit (of which $18.0 million was outstanding at quarter-end), a $13.5 million commercial real estate loan and a $9.6 million commercial term loan. We are actively working with the borrower’s new management team to ensure satisfactory performance under the loan agreements. Additionally, the quarter-over-quarter change included increases from downgrades of pass loans of $10.0 million and upgrades from classified loans of $1.1 million. Reductions included upgrades to pass of $9.2 million and paydowns of $0.5 million.

Classified loans were $47.7 million at September 30, 2022, down from $53.0 million at the end of the second quarter.

Nonperforming loans were $11.6 million at September 30, 2022, up from $11.0 million at the end of the second quarter. As a percentage of the loan portfolio, nonperforming loans remained unchanged sequentially at 0.20%.

Nonperforming assets were $12.4 million at the end of the third quarter of 2022, up from $11.7 million at the end of the prior quarter. As a percentage of total assets, nonperforming assets also were unchanged sequentially at 0.17%.

Gross charge-offs for the third quarter of 2022 were $2.1 million compared with $0.6 million for the preceding quarter. Recoveries of previously charged-off loans for the third quarter of 2022 were $1.0 million, compared with $0.5 million for the prior quarter. As a result, there were net charge-offs of $1.1 million for the third quarter of 2022, compared with net charge-offs of $0.1 million for the prior quarter. For the third quarter of 2022, net charge-offs represented 0.08% of average loans on an annualized basis compared with net charge-offs of 0.01% of average loans for the second quarter on an annualized basis.

The allowance for credit losses was $71.6 million at September 30, 2022, down $1.5 million from $73.1 million at June 30, 2022. The ratio of the allowance for credit losses to loans declined to 1.23% at the end of the third quarter, compared to 1.29% at the end of the second quarter. Specific allowances for loans increased $0.2 million while the allowance for quantitative and qualitative considerations decreased $1.7 million.

               
 As of or for the Three Months Ended (in thousands) Amount Change 
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-22 Q3-22 
 2022 2022 2022 2021 2021 vs. Q2-22 vs. Q3-21 
Asset Quality Data and Ratios              
               
Delinquent loans:              
Loans, 30 to 89 days past due and still accruing$4,936  $4,174  $5,493  $5,881  $6,017  $762  $(1,081) 
Delinquent loans to total loans 0.09%  0.07%  0.10%  0.11%  0.12%  0.02   -0.04  
               
Criticized loans:              
Special mention$122,952  $80,453  $140,958  $95,295  $130,564  $42,499  $(7,612) 
Classified 47,740   53,007   57,402   60,632   82,436   (5,267)  (34,696) 
Total criticized loans$170,692  $133,460  $198,360  $155,927  $213,000  $37,232  $(42,308) 
               
Nonperforming assets:              
Nonaccrual loans$11,592  $11,044  $11,470  $13,360  $21,223  $548  $(9,631) 
Loans 90 days or more past due and still accruing -   -   -   -   13   -   (13) 
Nonperforming loans 11,592   11,044   11,470   13,360   21,236   548   (9,644) 
Other real estate owned, net 792   675   675   675   675   117   117  
Nonperforming assets$12,384  $11,719  $12,145  $14,035  $21,911  $665  $(9,527) 
               
Nonperforming loans to total loans 0.20%  0.20%  0.21%  0.26%  0.44%     
Nonperforming assets to assets 0.17%  0.17%  0.18%  0.20%  0.32%     
               
Allowance for credit losses:              
Balance at beginning of period$73,067  $71,512  $72,557  $76,613  $83,372      
Credit loss expense (recovery) on loans (374)  1,640   (1,147)  (13,375)  (7,623)     
Net loan (charge-offs) recoveries (1,109)  (85)  102   9,319   864      
Balance at end of period$71,584  $73,067   $71,512   $72,557   $76,613      
               
Net loan charge-offs (recoveries) to average loans (1) 0.08%  0.01%  -0.01%  -0.76%  -0.07%     
Allowance for credit losses to loans 1.23%  1.29%  1.34%  1.41%  1.58%     
               
Allowance for credit losses related to off-balance sheet items:              
Balance at beginning of period$2,313  $2,358  $2,586  $4,851  $3,643      
Credit loss expense (recovery) on off-balance sheet items 937   (45)  (228)  (2,265)  1,208      
Balance at end of period$3,250  $2,313  $2,358  $2,586  $4,851      
               
Unused commitments to extend credit$746,354  $613,804  $626,615  $626,474  $536,149      
               
Allowance for Losses on Accrued Interest Receivable:              
Balance at beginning of period -   -   -  $311  $680      
Interest reversal for loans placed on nonaccrual -   -   -   -   -      
Credit loss expense (recovery) on interest accrued on CARES Act modifications -   -   -   (311)  (369)     
Balance at end of period -   -   -  $-  $311      
               
(1)       Annualized              
               

Corporate Developments
On July 28, 2022, Hanmi’s Board of Directors declared a cash dividend on its common stock for the 2022 third quarter of $0.25 per share. The dividend was paid on August 24, 2022, to stockholders of record as of the close of business on August 8, 2022.

Earnings Conference Call        
Hanmi Bank will host its third quarter 2022 earnings conference call today, October 25, 2022 at 2:00 p.m. PST (5:00 p.m. EST) to discuss these results. This call will also be webcast. To access the event the call, please dial 1-877-407-9039 before 2:00 p.m. PST, using access code Hanmi Bank. To listen to the call online, either live or archived, please visit Hanmi’s Investor Relations 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 eight 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 our 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 and strategic plans, 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;
  • the effect of our rating under the Community Reinvestment Act and our ability to address any issues raised in our regulatory exams;
  • 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;
  • inflation and fluctuations in interest rates and a decline in the level of our interest rate spread;
  • the current or anticipated impact of military conflict, terrorism or other geopolitical events;
  • risks of natural disasters;
  • legal proceedings and litigation brought against us;
  • a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;
  • the failure to maintain current technologies;
  • the inability to successfully implement future information technology enhancements;
  • difficult business and economic conditions that can adversely affect our industry and business, including competition, 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;
  • changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums;
  • the continuing impact of the COVID-19 pandemic on our business and results of operation;
  • 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;
  • strategic transactions we may enter into;
  • the adequacy of our allowance for credit losses;
  • our credit quality and the effect of credit quality on our credit losses expense 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.

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, 2021, 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

Larry Clark, CFA
Investor Relations
Financial Profiles, Inc.
lclark@finprofiles.com
310-622-8223


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

 September 30, June 30, Percentage September 30, Percentage 
 2022 2022 Change 2021 Change 
Assets          
Cash and due from banks$275,159  $217,237  26.7% $824,347  -66.6% 
Securities available for sale, at fair value 830,151   860,221  -3.5%  906,996  -8.5% 
Loans held for sale, at the lower of cost or fair value 10,044   18,528  -45.8%  17,881  -43.8% 
Loans receivable, net of allowance for credit losses 5,729,407   5,582,335  2.6%  4,782,252  19.8% 
Accrued interest receivable 15,356   14,044  9.3%  11,943  28.6% 
Premises and equipment, net 23,591   24,207  -2.5%  25,582  -7.8% 
Customers' liability on acceptances 200   616  -67.5%  352  -43.2% 
Servicing assets 7,424   7,353  1.0%  6,838  8.6% 
Goodwill and other intangible assets, net 11,267   11,310  -0.4%  11,450  -1.6% 
Federal Home Loan Bank ("FHLB") stock, at cost 16,385   16,385  0.0%  16,385  0.0% 
Bank-owned life insurance 55,641   55,395  0.4%  54,653  1.8% 
Prepaid expenses and other assets 153,886   148,337  3.7%  117,854  30.6% 
Total assets$ 7,128,511  $ 6,955,968  2.5% $ 6,776,533  5.2% 
           
Liabilities and Stockholders' Equity          
Liabilities:          
Deposits:          
Noninterest-bearing$2,771,498  $2,782,737  -0.4% $2,548,591  8.7% 
Interest-bearing 3,429,878   3,196,653  7.3%  3,180,945  7.8% 
Total deposits 6,201,376   5,979,390  3.7%  5,729,536  8.2% 
Accrued interest payable 2,180   986  121.1%  1,235  76.5% 
Bank's liability on acceptances 200   616  -67.5%  352  -43.2% 
Borrowings 100,000   145,000  -31.0%  137,500  -27.3% 
Subordinated debentures 129,261   129,113  0.1%  214,844  -39.8% 
Accrued expenses and other liabilities 86,601   82,567  4.9%  74,011  17.0% 
Total liabilities 6,519,618   6,337,672  2.9%  6,157,478  5.9% 
           
Stockholders' equity:          
Common stock 33   33  0.0%  33  0.0% 
Additional paid-in capital 582,695   582,018  0.1%  580,259  0.4% 
Accumulated other comprehensive income (96,062)  (66,568) -44.3%  (5,357) -1693.2% 
Retained earnings 248,684   229,135  8.5%  169,534  46.7% 
Less treasury stock (126,457)  (126,322) -0.1%  (125,414) -0.8% 
Total stockholders' equity 608,893   618,296  -1.5%  619,055  -1.6% 
Total liabilities and stockholders' equity$ 7,128,511  $ 6,955,968  2.5% $ 6,776,533  5.2% 


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

 Three Months Ended 
 September 30, June 30, Percentage September 30, Percentage 
 2022 2022 Change 2021 Change 
Interest and dividend income:          
Interest and fees on loans receivable$66,976 $59,855  11.9% $52,961  26.5% 
Interest on securities 3,271  2,930  11.6%  1,865  75.4% 
Dividends on FHLB stock 245  242  1.2%  245  0.0% 
Interest on deposits in other banks 958  193  396.4%  329  191.2% 
Total interest and dividend income 71,450  63,220  13.0%  55,400  29.0% 
Interest expense:          
Interest on deposits 6,567  2,457  167.3%  2,466  166.3% 
Interest on borrowings 349  370  -5.7%  409  -14.7% 
Interest on subordinated debentures 1,448  1,349  7.3%  2,545  -43.1% 
Total interest expense 8,364  4,176  100.3%  5,420  54.3% 
Net interest income before credit loss expense 63,086  59,044  6.8%  49,980  26.2% 
Credit loss expense (recovery) 563  1,596  -64.7%  (7,234) 1384.9% 
Net interest income after credit loss expense 62,523  57,448  8.8%  57,214  9.3% 
Noninterest income:          
Service charges on deposit accounts 2,996  2,875  4.2%  3,437  -12.8% 
Trade finance and other service charges and fees 1,132  1,416  -20.1%  1,188  -4.7% 
Gain on sale of Small Business Administration ("SBA") loans 2,250  2,774  -18.9%  5,842  -61.5% 
Other operating income 2,536  2,245  13.0%  2,042  24.2% 
Total noninterest income 8,914  9,310  -4.3%  12,509  -28.7% 
Noninterest expense:          
Salaries and employee benefits 19,365  18,779  3.1%  18,795  3.0% 
Occupancy and equipment 4,736  4,597  3.0%  5,037  -6.0% 
Data processing 3,352  3,114  7.6%  2,934  14.2% 
Professional fees 1,249  1,231  1.5%  1,263  -1.1% 
Supplies and communications 710  581  22.2%  741  -4.2% 
Advertising and promotion 1,186  660  79.7%  953  24.4% 
Other operating expenses 2,677  2,513  6.5%  2,779  -3.7% 
Total noninterest expense 33,275  31,475  5.7%  32,502  2.4% 
Income before tax 38,162  35,283  8.2%  37,221  2.5% 
Income tax expense 10,993  10,233  7.4%  10,656  3.2% 
Net income$ 27,169 $ 25,050  8.5% $ 26,565  2.3% 
            
Basic earnings per share:$0.89 $0.82    $0.87    
Diluted earnings per share:$0.89 $0.82    $0.86    
           
Weighted-average shares outstanding:          
Basic 30,314,439  30,296,897     30,474,391    
Diluted 30,396,762  30,412,348     30,552,196    
Common shares outstanding 30,484,004  30,482,990     30,441,601    


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

 Nine Months Ended 
 September 30, September 30, Percentage 
 2022 2021 Change 
Interest and dividend income:      
Interest and fees on loans receivable$180,755 $156,361  15.6% 
Interest on securities 8,718  4,409  97.7% 
Dividends on FHLB stock 735  693  6.1% 
Interest on deposits in other banks 1,366  601  127.3% 
Total interest and dividend income 191,574  162,064  18.2% 
Interest expense:      
Interest on deposits 11,038  9,419  17.2% 
Interest on borrowings 1,056  1,332  -20.7% 
Interest on subordinated debentures 6,394  5,759  11.0% 
Total interest expense 18,488  16,510  12.0% 
Net interest income before credit loss expense 173,086  145,554  18.9% 
Credit loss expense (recovery) 783  (8,452) 109.3% 
Net interest income after credit loss expense 172,303  154,006  11.9% 
Noninterest income:      
Service charges on deposit accounts 8,745  8,036  8.8% 
Trade finance and other service charges and fees 3,690  3,468  6.4% 
Gain on sale of Small Business Administration ("SBA") loans 7,545  13,475  -44.0% 
Other operating income 6,763  6,222  8.7% 
Total noninterest income 26,743  31,201  -14.3% 
Noninterest expense:      
Salaries and employee benefits 55,861  53,917  3.6% 
Occupancy and equipment 13,979  14,235  -1.8% 
Data processing 9,702  8,775  10.6% 
Professional fees 3,909  4,123  -5.2% 
Supplies and communications 1,956  2,231  -12.3% 
Advertising and promotion 2,664  1,685  58.1% 
Other operating expenses 8,371  7,852  6.6% 
Total noninterest expense 96,442  92,818  3.9% 
Income before tax 102,604  92,389  11.1% 
Income tax expense 29,690  27,042  9.8% 
Net income$ 72,914 $ 65,346  11.6% 
     -  
Basic earnings per share:$2.39 $2.13    
Diluted earnings per share:$2.39 $2.13    
       
Weighted-average shares outstanding:      
Basic 30,289,068  30,222,978    
Diluted 30,369,538  30,298,553    
Common shares outstanding 30,484,004  30,441,601    


Hanmi Financial Corporation and Subsidiaries

Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(Dollars in thousands)

 Three Months Ended
 September 30, 2022 June 30, 2022 September 30, 2021
   InterestAverage   InterestAverage   InterestAverage
 Average Income /Yield / Average Income /Yield / Average Income /Yield /
 Balance ExpenseRate Balance ExpenseRate Balance ExpenseRate
Assets              
Interest-earning assets:              
Loans receivable (1)$5,696,587  $66,9764.67% $5,572,504  $59,8554.31% $4,684,570  $52,9614.49%
Securities (2) 956,989   3,2721.40%  945,291   2,9301.27%  878,866   1,8650.87%
FHLB stock 16,385   2455.93%  16,385   2425.93%  16,385   2455.93%
Interest-bearing deposits in other banks 181,401   9572.09%  136,473   1930.57%  872,783   3290.15%
Total interest-earning assets 6,851,362   71,4504.15%  6,670,653   63,2203.80%  6,452,604   55,4003.41%
               
Noninterest-earning assets:              
Cash and due from banks 66,865      67,859      64,454    
Allowance for credit losses (73,338)     (73,896)     (83,252)   
Other assets 250,500      255,095      223,261    
Total assets$ 7,095,389     $ 6,919,711     $ 6,657,067    
               
Liabilities and Stockholders' Equity              
Interest-bearing liabilities:              
Deposits:              
Demand: interest-bearing$121,269  $320.10% $122,771  $180.06% $115,233  $150.05%
Money market and savings 2,079,490   3,8070.73%  2,139,488   1,5700.29%  2,033,876   1,2070.24%
Time deposits 1,120,149   2,7280.97%  894,345   8690.39%  1,061,359   1,2440.46%
Total interest-bearing deposits 3,320,908   6,5670.78%  3,156,604   2,4570.31%  3,210,468   2,4660.30%
Borrowings 123,370   3871.24%  140,245   3841.10%  143,750   4091.13%
Subordinated debentures 129,176   1,4104.37%  129,029   1,3354.14%  163,340   2,5456.23%
Total interest-bearing liabilities 3,573,454   8,3640.93%  3,425,878   4,1760.49%  3,517,558   5,4200.61%
               
Noninterest-bearing liabilities and equity:              
Demand deposits: noninterest-bearing 2,717,810      2,716,297      2,444,759    
Other liabilities 112,336      104,084      79,348    
Stockholders' equity 691,789      673,452      615,402    
Total liabilities and stockholders' equity$ 7,095,389     $ 6,919,711     $ 6,657,067    
               
Net interest income (tax equivalent basis)  $ 63,086    $ 59,044    $ 49,980 
               
Cost of deposits   0.43%    0.17%    0.17%
Net interest spread (taxable equivalent basis)   3.22%    3.31%    2.80%
Net interest margin (taxable equivalent basis)   3.66%    3.55%    3.07%
               
               
(1)       Includes average loans held for sale              
(2)       Income 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)
(Dollars in thousands)

 Nine Months Ended 
 September 30, 2022 September 30, 2021 
   InterestAverage   InterestAverage 
 Average Income /Yield / Average Income /Yield / 
 Balance ExpenseRate Balance ExpenseRate 
Assets          
Interest-earning assets:          
Loans receivable (1)$5,501,957  $180,7554.39% $4,759,980  $156,3614.39% 
Securities (2) 944,359   8,7181.89%  822,282   4,4090.73% 
FHLB stock 16,385   7356.00%  16,385   6935.66% 
Interest-bearing deposits in other banks 269,772   1,3660.68%  644,521   6010.12% 
Total interest-earning assets 6,732,473   191,5743.81%  6,243,168   162,0643.47% 
           
Noninterest-earning assets:          
Cash and due from banks 65,911      60,923     
Allowance for credit losses (73,471)     (86,970)    
Other assets 245,259      225,687     
           
Total assets$ 6,970,172     $ 6,442,808     
           
Liabilities and Stockholders' Equity          
Interest-bearing liabilities:          
Deposits:          
Demand: interest-bearing$122,964  $680.07% $110,200  $440.05% 
Money market and savings 2,108,232   6,5660.42%  2,011,242   3,9840.26% 
Time deposits 984,517   4,4040.60%  1,144,942   5,3910.63% 
Total interest-bearing deposits 3,215,713   11,0380.46%  3,266,384   9,4190.39% 
Borrowings 131,364   1,1131.13%  147,924   1,3321.20% 
Subordinated debentures 156,817   6,3375.39%  134,012   5,7595.73% 
Total interest-bearing liabilities 3,503,894   18,4880.70%  3,548,320   16,5100.62% 
           
Noninterest-bearing liabilities and equity:          
Demand deposits: noninterest-bearing 2,689,807      2,221,373     
Other liabilities 101,685      75,720     
Stockholders' equity 674,786      597,395     
Total liabilities and stockholders' equity$ 6,970,172     $ 6,442,808     
           
Net interest income (tax equivalent basis)  $ 173,086    $ 145,554  
           
Cost of deposits   0.25%    0.23% 
Net interest spread (taxable equivalent basis)   3.10%    2.85% 
Net interest margin (taxable equivalent basis)   3.44%    3.12% 
           
           
(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. 

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 common 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 substitute 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)

 September 30, June 30, March 31, December 31, September 30,
Hanmi Financial Corporation2022 2022 2022 2021 2021
Assets$7,128,511  $6,955,968  $6,737,052  $6,858,587  $6,776,533 
Less goodwill and other intangible assets (11,267)  (11,310)  (11,353)  (11,395)  (11,450)
Tangible assets$7,117,244  $6,944,658  $6,725,699  $6,847,192  $6,765,083 
          
Stockholders' equity (1)$608,893  $618,296  $621,452  $643,417  $619,055 
Less goodwill and other intangible assets (11,267)  (11,310)  (11,353)  (11,395)  (11,450)
Tangible stockholders' equity (1)$597,626  $606,986  $610,099  $632,022  $607,605 
          
Stockholders' equity to assets 8.54%  8.89%  9.22%  9.38%  9.14%
Tangible common equity to tangible assets (1) 8.40%  8.74%  9.07%  9.23%  8.98%
          
Common shares outstanding 30,484,004   30,482,990   30,468,458   30,407,261   30,441,601 
Tangible common equity per common share$19.60  $19.91  $20.02  $20.79  $19.96 
          
(1)       There were no preferred shares outstanding at the periods indicated.        
          

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