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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended March 31, 2024

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period From To

Commission File Number: 000-30421

HANMI FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

95-4788120

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

900 Wilshire Boulevard, Suite 1250

 

Los Angeles, California

 

90017

(Address of Principal Executive Offices)

 

(Zip Code)

(213) 382-2200

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value

 

HAFC

 

Nasdaq Global Select Market

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

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.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of April 30, 2024, there were 30,387,062 outstanding shares of the Registrant’s Common Stock.

 

 


 

Hanmi Financial Corporation and Subsidiaries Quarterly Report on Form 10-Q

Three Months Ended March 31, 2024

Table of Contents

 

 

 

Part I – Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

Consolidated Balance Sheets at March 31, 2024 (unaudited) and December 31, 2023

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the three months ended March 31, 2024 and 2023 (unaudited)

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023 (unaudited)

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023 (unaudited)

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited)

 

7

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

8

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

39

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

55

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

55

 

 

 

 

 

 

 

Part II – Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

56

 

 

 

 

 

Item 1A.

 

Risk Factors

 

56

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

 

56

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

56

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

56

 

 

 

 

 

Item 5.

 

Other Information

 

56

 

 

 

 

 

Item 6.

 

Exhibits

 

57

 

 

 

Signatures

 

58

 

2


 

Part I — Financial Information

Item 1. Financial Statements

Hanmi Financial Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

256,038

 

 

$

302,324

 

Securities available for sale, at fair value (amortized cost of $978,580 and $967,031 as of March 31, 2024 and December 31, 2023, respectively)

 

 

872,190

 

 

 

865,739

 

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

 

 

3,999

 

 

 

12,013

 

Loans receivable, net of allowance for credit losses of $68,270 and $69,462 as of March 31, 2024 and December 31, 2023, respectively

 

 

6,109,570

 

 

 

6,112,972

 

Accrued interest receivable

 

 

23,032

 

 

 

23,371

 

Premises and equipment, net

 

 

21,952

 

 

 

21,959

 

Customers' liability on acceptances

 

 

161

 

 

 

625

 

Servicing assets

 

 

6,890

 

 

 

7,070

 

Goodwill and other intangible assets, net

 

 

11,074

 

 

 

11,099

 

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

 

 

16,385

 

 

 

16,385

 

Income tax assets

 

 

35,863

 

 

 

35,226

 

Bank-owned life insurance

 

 

56,639

 

 

 

56,335

 

Prepaid expenses and other assets

 

 

98,253

 

 

 

105,223

 

Total assets

 

$

7,512,046

 

 

$

7,570,341

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing

 

$

1,933,060

 

 

$

2,003,596

 

Interest-bearing

 

 

4,443,000

 

 

 

4,276,978

 

Total deposits

 

 

6,376,060

 

 

 

6,280,574

 

Accrued interest payable

 

 

38,007

 

 

 

39,306

 

Bank's liability on acceptances

 

 

161

 

 

 

625

 

Borrowings

 

 

172,500

 

 

 

325,000

 

Subordinated debentures ($136,800 and $136,800 face amount less unamortized discount and debt issuance costs of $6,635 and $6,788 as of March 31, 2024 and December 31, 2023, respectively)

 

 

130,165

 

 

 

130,012

 

Accrued expenses and other liabilities

 

 

92,053

 

 

 

92,933

 

Total liabilities

 

 

6,808,946

 

 

 

6,868,450

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.001 par value; authorized 62,500,000 shares; issued 33,957,284 shares (30,276,358 shares outstanding) and 33,918,035 shares (30,368,655 shares outstanding) as of March 31, 2024 and December 31, 2023, respectively

 

 

34

 

 

 

34

 

Additional paid-in capital

 

 

587,687

 

 

 

586,912

 

Accumulated other comprehensive loss, net of tax benefit of $31,401 and $29,058 as of March 31, 2024 and December 31, 2023, respectively

 

 

(76,890

)

 

 

(71,928

)

Retained earnings

 

 

326,526

 

 

 

319,048

 

Less treasury stock; 3,680,926 shares and 3,549,380 shares as of March 31, 2024 and December 31, 2023, respectively

 

 

(134,257

)

 

 

(132,175

)

Total stockholders’ equity

 

 

703,100

 

 

 

701,891

 

Total liabilities and stockholders’ equity

 

$

7,512,046

 

 

$

7,570,341

 

 

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

3


 

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Income (Unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Interest and dividend income:

 

 

 

 

 

 

Interest and fees on loans receivable

 

$

91,674

 

 

$

80,923

 

Interest on securities

 

 

4,955

 

 

 

4,025

 

Dividends on FHLB stock

 

 

361

 

 

 

289

 

Interest on deposits in other banks

 

 

2,604

 

 

 

2,066

 

Total interest and dividend income

 

 

99,594

 

 

 

87,303

 

Interest expense:

 

 

 

 

 

 

Interest on deposits

 

 

45,638

 

 

 

25,498

 

Interest on borrowings

 

 

1,655

 

 

 

2,369

 

Interest on subordinated debentures

 

 

1,646

 

 

 

1,583

 

Total interest expense

 

 

48,939

 

 

 

29,450

 

Net interest income before credit loss expense

 

 

50,655

 

 

 

57,853

 

Credit loss expense

 

 

227

 

 

 

2,133

 

Net interest income after credit loss expense

 

 

50,428

 

 

 

55,720

 

Noninterest income:

 

 

 

 

 

 

Service charges on deposit accounts

 

 

2,450

 

 

 

2,579

 

Trade finance and other service charges and fees

 

 

1,414

 

 

 

1,258

 

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

 

 

1,482

 

 

 

1,869

 

Other operating income

 

 

2,387

 

 

 

2,630

 

Total noninterest income

 

 

7,733

 

 

 

8,336

 

Noninterest expense:

 

 

 

 

 

 

Salaries and employee benefits

 

 

21,585

 

 

 

20,610

 

Occupancy and equipment

 

 

4,537

 

 

 

4,412

 

Data processing

 

 

3,551

 

 

 

3,253

 

Professional fees

 

 

1,893

 

 

 

1,335

 

Supplies and communications

 

 

601

 

 

 

676

 

Advertising and promotion

 

 

907

 

 

 

833

 

Other operating expenses

 

 

3,371

 

 

 

1,672

 

Total noninterest expense

 

 

36,445

 

 

 

32,791

 

Income before tax

 

 

21,716

 

 

 

31,265

 

Income tax expense

 

 

6,552

 

 

 

9,274

 

Net income

 

$

15,164

 

 

$

21,991

 

Basic earnings per share

 

$

0.50

 

 

$

0.72

 

Diluted earnings per share

 

$

0.50

 

 

$

0.72

 

Weighted-average shares outstanding:

 

 

 

 

 

 

Basic

 

 

30,119,646

 

 

 

30,347,325

 

Diluted

 

 

30,119,646

 

 

 

30,430,745

 

 

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

4


 

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Net income

 

$

15,164

 

 

$

21,991

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Unrealized gain (loss):

 

 

 

 

 

 

Unrealized holding gain (loss) on available for sale securities

 

 

(5,098

)

 

 

13,607

 

Unrealized gain (loss) on cash flow hedges

 

 

(2,207

)

 

 

 

Unrealized gain (loss)

 

 

(7,305

)

 

 

13,607

 

Income tax benefit (expense) related to other comprehensive income items

 

 

2,343

 

 

 

(3,681

)

Other comprehensive income (loss), net of tax

 

 

(4,962

)

 

 

9,926

 

Total comprehensive income

 

$

10,202

 

 

$

31,917

 

 

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

5


 

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

For the Three Months Ended March 31, 2024 and 2023

(in thousands, except share data)

 

 

 

Common Stock - Number of Shares

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Treasury

 

 

Total

 

 

 

Shares

 

 

Treasury

 

 

Shares

 

 

Common

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

Stock,

 

 

Stockholders'

 

 

 

Issued

 

 

Shares

 

 

Outstanding

 

 

Stock

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

at Cost

 

 

Equity

 

Balance at January 1, 2023

 

 

33,708,234

 

 

 

(3,222,613

)

 

 

30,485,621

 

 

$

33

 

 

$

583,410

 

 

$

(88,985

)

 

$

269,542

 

 

$

(126,485

)

 

$

637,515

 

Stock options exercised

 

 

50,000

 

 

 

(35,273

)

 

 

14,727

 

 

 

 

 

 

822

 

 

 

 

 

 

 

 

 

(1,003

)

 

 

(181

)

Issuance of awards pursuant to equity incentive plans, net of forfeitures

 

 

69,567

 

 

 

 

 

 

69,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

652

 

 

 

 

 

 

 

 

 

 

 

 

652

 

Shares surrendered to satisfy tax liability upon vesting of equity awards

 

 

 

 

 

(11,392

)

 

 

(11,392

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(115

)

 

 

(115

)

Repurchase of common stock

 

 

 

 

 

(3,236

)

 

 

(3,236

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid (common stock, $0.25/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,623

)

 

 

 

 

 

(7,623

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,991

 

 

 

 

 

 

21,991

 

Change in unrealized gain (loss) on securities available for sale, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,926

 

 

 

 

 

 

 

 

 

9,926

 

Balance at March 31, 2023

 

 

33,827,801

 

 

 

(3,272,514

)

 

 

30,555,287

 

 

$

33

 

 

$

584,884

 

 

$

(79,059

)

 

$

283,910

 

 

$

(127,603

)

 

$

662,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2024

 

 

33,918,035

 

 

 

(3,549,380

)

 

 

30,368,655

 

 

$

34

 

 

$

586,912

 

 

$

(71,928

)

 

$

319,048

 

 

$

(132,175

)

 

$

701,891

 

Issuance of awards pursuant to equity incentive plans, net of forfeitures

 

 

39,249

 

 

 

 

 

 

39,249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

775

 

 

 

 

 

 

 

 

 

 

 

 

775

 

Shares surrendered to satisfy tax liability upon vesting of equity awards

 

 

 

 

 

(31,546

)

 

 

(31,546

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(490

)

 

 

(490

)

Repurchase of common stock

 

 

 

 

 

(100,000

)

 

 

(100,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,592

)

 

 

(1,592

)

Cash dividends paid (common stock, $0.25/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,686

)

 

 

 

 

 

(7,686

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,164

 

 

 

 

 

 

15,164

 

Change in unrealized gain (loss) on securities available for sale, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,394

)

 

 

 

 

 

 

 

 

(3,394

)

Change in unrealized gain (loss) on cash flow hedge, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,568

)

 

 

 

 

 

 

 

 

(1,568

)

Balance at March 31, 2024

 

 

33,957,284

 

 

 

(3,680,926

)

 

 

30,276,358

 

 

$

34

 

 

$

587,687

 

 

$

(76,890

)

 

$

326,526

 

 

$

(134,257

)

 

$

703,100

 

 

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

6


 

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

15,164

 

 

$

21,991

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

1,604

 

 

 

1,742

 

Amortization of servicing assets - net

 

 

694

 

 

 

634

 

Share-based compensation expense

 

 

775

 

 

 

652

 

Credit loss expense

 

 

227

 

 

 

2,133

 

Gain on sales of SBA loans

 

 

(1,482

)

 

 

(1,869

)

Origination of SBA loans held for sale

 

 

(17,632

)

 

 

(25,316

)

Proceeds from sales of SBA loans

 

 

26,555

 

 

 

30,954

 

Gain on sales of mortgage loans

 

 

(443

)

 

 

 

Change in bank-owned life insurance

 

 

(304

)

 

 

(270

)

Change in prepaid expenses and other assets

 

 

5,564

 

 

 

(3,000

)

Change in income tax assets

 

 

1,707

 

 

 

8,585

 

Valuation adjustment on servicing assets

 

 

 

 

 

(384

)

Change in accrued interest payable and other liabilities

 

 

(2,446

)

 

 

276

 

Net cash provided by operating activities

 

 

29,983

 

 

 

36,128

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of securities available for sale

 

 

(38,424

)

 

 

(29,504

)

Proceeds from matured, called and repayment of securities

 

 

26,233

 

 

 

17,499

 

Purchases of loans receivable

 

 

(10,198

)

 

 

 

Proceeds from sales of mortgage loans

 

 

30,427

 

 

 

 

Purchases of premises and equipment

 

 

(794

)

 

 

(617

)

Change in loans receivable, excluding purchases

 

 

(16,729

)

 

 

(14,773

)

Net cash used in investing activities

 

 

(9,485

)

 

 

(27,395

)

Cash flows from financing activities:

 

 

 

 

 

 

Change in deposits

 

 

95,486

 

 

 

32,966

 

Change in borrowings

 

 

(152,500

)

 

 

 

Proceeds from exercise of stock options

 

 

 

 

 

822

 

Cash paid for employee vested shares surrendered due to employee tax liability

 

 

(490

)

 

 

(1,118

)

Repurchase of common stock

 

 

(1,594

)

 

 

 

Cash dividends paid

 

 

(7,686

)

 

 

(7,623

)

Net cash provided by (used in) financing activities

 

 

(66,784

)

 

 

25,047

 

Net increase (decrease) in cash and due from banks

 

 

(46,286

)

 

 

33,780

 

Cash and due from banks at beginning of year

 

 

302,324

 

 

 

352,421

 

Cash and due from banks at end of period

 

$

256,038

 

 

$