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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 June 30, 2023

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 August 1, 2023, there were 30,477,301 outstanding shares of the Registrant’s Common Stock.

 

 

 

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

Three Months Ended June 30, 2023

Table of Contents

 

 

 

Part I – Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

Consolidated Balance Sheets at June 30, 2023 (unaudited) and December 31, 2022

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022 (unaudited)

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2023 and 2022 (unaudited)

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)

 

8

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

9

 

 

 

 

 

Item 2.

 

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

 

39

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

58

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

58

 

 

 

 

 

 

 

Part II – Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

59

 

 

 

 

 

Item 1A.

 

Risk Factors

 

59

 

 

 

 

 

Item 2.

 

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

 

59

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

59

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

59

 

 

 

 

 

Item 5.

 

Other Information

 

59

 

 

 

 

 

Item 6.

 

Exhibits

 

60

 

 

 

Signatures

 

61

 

2

 

Part I — Financial Information

Item 1. Financial Statements

Hanmi Financial Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

344,907

 

 

$

352,421

 

Securities available for sale, at fair value (amortized cost of $955,860 and $978,796 as of June 30, 2023 and December 31, 2022, respectively)

 

 

836,650

 

 

 

853,838

 

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

 

 

7,293

 

 

 

8,043

 

Loans receivable, net of allowance for credit losses of $71,024 and $71,523 as of June 30, 2023 and December 31, 2022, respectively

 

 

5,894,147

 

 

 

5,895,610

 

Accrued interest receivable

 

 

18,163

 

 

 

18,537

 

Premises and equipment, net

 

 

22,849

 

 

 

22,850

 

Customers' liability on acceptances

 

 

1,688

 

 

 

328

 

Servicing assets

 

 

7,352

 

 

 

7,176

 

Goodwill and other intangible assets, net

 

 

11,162

 

 

 

11,225

 

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

 

 

16,385

 

 

 

16,385

 

Income tax assets

 

 

43,431

 

 

 

51,924

 

Bank-owned life insurance

 

 

56,085

 

 

 

55,544

 

Prepaid expenses and other assets

 

 

84,812

 

 

 

84,381

 

Total assets

 

$

7,344,924

 

 

$

7,378,262

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing

 

$

2,206,078

 

 

$

2,539,602

 

Interest-bearing

 

 

4,109,690

 

 

 

3,628,470

 

Total deposits

 

 

6,315,768

 

 

 

6,168,072

 

Accrued interest payable

 

 

34,621

 

 

 

7,792

 

Bank's liability on acceptances

 

 

1,688

 

 

 

328

 

Borrowings

 

 

125,000

 

 

 

350,000

 

Subordinated debentures ($136,800 and $136,800 face amount less unamortized discount and debt issuance costs of $7,092 and $7,391 as of June 30, 2023 and December 31, 2022, respectively)

 

 

129,708

 

 

 

129,409

 

Accrued expenses and other liabilities

 

 

69,579

 

 

 

85,146

 

Total liabilities

 

 

6,676,364

 

 

 

6,740,747

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of June 30, 2023 and December 31, 2022

 

 

—

 

 

 

—

 

Common stock, $0.001 par value; authorized 62,500,000 shares; issued 33,863,421 shares (30,485,788 shares outstanding) and 33,708,234 shares (30,485,621 shares outstanding) as of June 30, 2023 and December 31, 2022, respectively

 

 

33

 

 

 

33

 

Additional paid-in capital

 

 

585,391

 

 

 

583,410

 

Accumulated other comprehensive loss, net of tax benefit of $34,571 and $35,973 as of June 30, 2023 and December 31, 2022, respectively

 

 

(84,639

)

 

 

(88,985

)

Retained earnings

 

 

296,901

 

 

 

269,542

 

Less treasury stock; 3,377,633 shares and 3,222,613 shares as of June 30, 2023 and December 31, 2022, respectively

 

 

(129,126

)

 

 

(126,485

)

Total stockholders’ equity

 

 

668,560

 

 

 

637,515

 

Total liabilities and stockholders’ equity

 

$

7,344,924

 

 

$

7,378,262

 

 

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

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans receivable

 

$

83,567

 

 

$

59,855

 

 

$

164,490

 

 

$

113,779

 

Interest on securities

 

 

4,126

 

 

 

2,930

 

 

 

8,152

 

 

 

5,447

 

Dividends on FHLB stock

 

 

283

 

 

 

242

 

 

 

572

 

 

 

490

 

Interest on deposits in other banks

 

 

2,794

 

 

 

193

 

 

 

4,859

 

 

 

408

 

Total interest and dividend income

 

 

90,770

 

 

 

63,220

 

 

 

178,073

 

 

 

120,124

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

32,115

 

 

 

2,457

 

 

 

57,613

 

 

 

4,470

 

Interest on borrowings

 

 

1,633

 

 

 

370

 

 

 

4,002

 

 

 

707

 

Interest on subordinated debentures

 

 

1,600

 

 

 

1,349

 

 

 

3,182

 

 

 

4,947

 

Total interest expense

 

 

35,348

 

 

 

4,176

 

 

 

64,797

 

 

 

10,124

 

Net interest income before credit loss expense

 

 

55,422

 

 

 

59,044

 

 

 

113,276

 

 

 

110,000

 

Credit loss expense (recovery)

 

 

(77

)

 

 

1,596

 

 

 

2,056

 

 

 

220

 

Net interest income after credit loss expense (recovery)

 

 

55,499

 

 

 

57,448

 

 

 

111,220

 

 

 

109,780

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

2,571

 

 

 

2,875

 

 

 

5,151

 

 

 

5,750

 

Trade finance and other service charges and fees

 

 

1,173

 

 

 

1,416

 

 

 

2,431

 

 

 

2,558

 

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

 

 

1,212

 

 

 

2,774

 

 

 

3,081

 

 

 

5,295

 

Other operating income

 

 

2,979

 

 

 

2,245

 

 

 

5,608

 

 

 

4,226

 

Total noninterest income

 

 

7,935

 

 

 

9,310

 

 

 

16,271

 

 

 

17,829

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

20,365

 

 

 

18,779

 

 

 

40,975

 

 

 

36,496

 

Occupancy and equipment

 

 

4,500

 

 

 

4,597

 

 

 

8,912

 

 

 

9,243

 

Data processing

 

 

3,465

 

 

 

3,114

 

 

 

6,718

 

 

 

6,351

 

Professional fees

 

 

1,376

 

 

 

1,231

 

 

 

2,710

 

 

 

2,661

 

Supplies and communications

 

 

638

 

 

 

581

 

 

 

1,314

 

 

 

1,245

 

Advertising and promotion

 

 

748

 

 

 

660

 

 

 

1,581

 

 

 

1,477

 

Other operating expenses

 

 

3,188

 

 

 

2,513

 

 

 

4,862

 

 

 

5,694

 

Total noninterest expense

 

 

34,280

 

 

 

31,475

 

 

 

67,072

 

 

 

63,167

 

Income before tax

 

 

29,154

 

 

 

35,283

 

 

 

60,419

 

 

 

64,442

 

Income tax expense

 

 

8,534

 

 

 

10,233

 

 

 

17,807

 

 

 

18,697

 

Net income

 

$

20,620

 

 

$

25,050

 

 

$

42,612

 

 

$

45,745

 

Basic earnings per share

 

$

0.68

 

 

$

0.82

 

 

$

1.40

 

 

$

1.50

 

Diluted earnings per share

 

$

0.67

 

 

$

0.82

 

 

$

1.39

 

 

$

1.50

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

30,324,264

 

 

 

30,296,897

 

 

 

30,320,281

 

 

 

30,271,761

 

Diluted

 

 

30,387,041

 

 

 

30,412,348

 

 

 

30,383,226

 

 

 

30,391,273

 

 

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

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

20,620

 

 

$

25,050

 

 

$

42,612

 

 

$

45,745

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain (loss) arising during period

 

 

(9,730

)

 

 

(31,070

)

 

 

3,877

 

 

 

(83,233

)

Unrealized gain (loss) on securities

 

 

(9,730

)

 

 

(31,070

)

 

 

3,877

 

 

 

(83,233

)

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

 

 

2,827

 

 

 

9,321

 

 

 

(849

)

 

 

25,108

 

Other comprehensive income (loss), net of tax

 

 

(6,903

)

 

 

(21,749

)

 

 

3,028

 

 

 

(58,125

)