LOS ANGELES, July 23, 2024 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ:HAFC, or "Hanmi"))), the parent company of Hanmi Bank (the "Bank"), today reported financial results for the second quarter of 2024.

Net income for the second quarter of 2024 was $14.5 million, or $0.48 per diluted share, compared with $15.2 million, or $0.50 per diluted share, for the first quarter of 2024. The return on average assets for the second quarter of 2024 was 0.77% and the return on average equity was 7.50%, compared with a return on average assets of 0.81% and the return on average equity of 7.90% for the first quarter of 2024.

CEO Commentary

"Our second quarter results demonstrate that while the economic environment has been challenging, we are observing improved business activity and stabilizing margin pressure," said Bonnie Lee, President and Chief Executive Officer of Hanmi. Our relationship banking model has enabled us to attract new customers, resulting in 17% quarterly growth in loan production as well as growth in demand deposit accounts, further expanding our market share. Importantly, our rigorous underwriting practices continue to generate excellent asset quality."

"As we look to the second half of 2024, we are progressing with a robust balance sheet, ample liquidity and strong capital ratios. We continue to prioritize our customers by enhancing their Hanmi experience through strategic technology investments, which are also enabling us to achieve operational efficiencies. Finally, our prudent expense and credit management has positioned Hanmi to capitalize on the growth opportunities ahead. I am thankful to our team of bankers and support staff who continue to foster meaningful relationships with our customers and enhance our franchise value."

Second Quarter 2024 Highlights:

Second quarter net income was $14.5 million, or $0.48 per diluted share, compared with $15.2 million, or $0.50 per diluted share for the first quarter of 2024. The decline in net income reflects lower net interest income, and a higher credit loss expense, partially offset by lower noninterest expenses.
Loans receivable were $6.18 billion at June 30, 2024, essentially unchanged from the end of the first quarter of 2024; loan production for the second quarter was $273.9 million with a weighted average interest rate of 8.31%.
Deposits were $6.33 billion at June 30, 2024, down 0.7% from the end of the first quarter of 2024; noninterest-bearing demand deposits were 31.0% of total deposits at the end of the second quarter.
Net interest income for the second quarter was $48.6 million, down 4.0% from the first quarter of 2024, and net interest margin (taxable equivalent) was 2.69% for the second quarter, down 9 basis points; the average yield on loans decreased 1 basis point, while the cost of interest-bearing deposits increased 11 basis points.
Noninterest income for the second quarter was $8.1 million, up $0.4 million, or 4.2%, from the first quarter of 2024.
Noninterest expenses were $35.3 million for the second quarter, down 3.2% from the first quarter of 2024, primarily reflecting a decrease in salaries and benefits.
Asset quality remained favorable with criticized loans declining 17.6% from the first quarter of 2024, to $70.9 million, or 1.1% of loans. Nonperforming assets rose 7 basis points, to 0.26% of total assets, and net charge offs continued to be low at $1.8 million, or 0.12% of average loans (annualized).

For more information about Hanmi, please see the Q2 2024 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
	June 30,			March 31,			December 31,			September 30,			June 30,			Q2-24			Q2-24
	2024			2024			2023			2023			2023			vs. Q1-24			vs. Q2-23

Net income	$	14,451		$	15,164		$	18,633		$	18,796		$	20,620		$	(713	)	$	(6,169	)
Net income per diluted common share	$	0.48		$	0.50		$	0.61		$	0.62		$	0.67		$	(0.02	)	$	(0.19	)

Assets	$	7,586,347		$	7,512,046		$	7,570,341		$	7,350,140		$	7,344,924		$	74,301		$	241,423
Loans receivable	$	6,176,359		$	6,177,840		$	6,182,434		$	6,020,785		$	5,965,171		$	(1,481	)	$	211,188
Deposits	$	6,329,340		$	6,376,060		$	6,280,574		$	6,260,072		$	6,315,768		$	(46,720	)	$	13,572

Return on average assets		0.77	%		0.81	%		0.99	%		1.00	%		1.12	%		-0.04			-0.35
Return on average stockholders' equity		7.50	%		7.90	%		9.70	%		9.88	%		11.14	%		-0.40			-3.64

Net interest margin		2.69	%		2.78	%		2.92	%		3.03	%		3.11	%		-0.09			-0.42
Efficiency ratio ⁽¹⁾		62.24	%		62.42	%		58.86	%		51.82	%		54.11	%		-0.18			8.13

Tangible common equity to tangible assets ⁽²⁾		9.19	%		9.23	%		9.14	%		8.89	%		8.96	%		-0.04			0.23
Tangible common equity per common share ⁽²⁾	$	22.99		$	22.86		$	22.75		$	21.45		$	21.56			0.13			1.43


⁽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 for the second quarter decreased to $48.6 million from $50.7 million for the second quarter of 2024, down 4.0%. The decrease was primarily due to an increase in the cost of interest-bearing deposits. The cost of interest-bearing deposits increased 11 basis points to 4.27% for the second quarter of 2024, from 4.16% for the first quarter of 2024. The increase in the cost of interest-bearing deposits was due to higher market interest rates. Average interest-bearing deposits were $4.38 billion for the second quarter, down 0.6% from $4.41 billion for the first quarter of 2024. The yield on average loans for the second quarter decreased to 5.99% from 6.00% for the first quarter of 2024. Average loans were $6.09 billion for the second quarter, down 0.8% from $6.14 billion for the first quarter of 2024. Second quarter loan prepayment fees were $0.1 million, compared with $0.2 million for the first quarter of 2024. Net interest margin (taxable-equivalent) for the second quarter was 2.69%, compared with 2.78% for the first quarter of 2024.

	As of or For the Three Months Ended (in thousands)										Percentage Change
	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,		Q2-24			Q2-24
Net Interest Income	2024		2024		2023		2023		2023		vs. Q1-24			vs. Q2-23

Interest and fees on loans receivable⁽¹⁾	$	90,752	$	91,674	$	89,922	$	85,398	$	83,567		-1.0	%		8.6	%
Interest on securities		5,238		4,955		4,583		4,204		4,126		5.7	%		27.0	%
Dividends on FHLB stock		357		361		341		317		283		-1.1	%		26.1	%
Interest on deposits in other banks		2,313		2,604		2,337		4,153		2,794		-11.2	%		-17.2	%
Total interest and dividend income	$	98,660	$	99,594	$	97,183	$	94,072	$	90,770		-0.9	%		8.7	%

Interest on deposits		46,495		45,638		40,277		36,818		32,115		1.9	%		44.8	%
Interest on borrowings		1,896		1,655		2,112		753		1,633		14.6	%		16.1	%
Interest on subordinated debentures		1,649		1,646		1,654		1,646		1,600		0.2	%		3.1	%
Total interest expense		50,040		48,939		44,043		39,217		35,348		2.2	%		41.6	%
Net interest income	$	48,620	$	50,655	$	53,140	$	54,855	$	55,422		-4.0	%		-12.3	%

⁽¹⁾Includes loans held for sale.

	For the Three Months Ended (in thousands)										Percentage Change
Average Earning Assets and	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,		Q2-24			Q2-24
Interest-bearing Liabilities	2024		2024		2023		2023		2023		vs. Q1-24			vs. Q2-23
Loans receivable ⁽¹⁾	$	6,089,440	$	6,137,888	$	6,071,644	$	5,915,423	$	5,941,071		-0.8	%		2.5	%
Securities		979,671		969,520		961,551		955,473		971,531		1.0	%		0.8	%
FHLB stock		16,385		16,385		16,385		16,385		16,385		0.0	%		0.0	%
Interest-bearing deposits in other banks		180,177		201,724		181,140		317,498		230,974		-10.7	%		-22.0	%
Average interest-earning assets	$	7,265,673	$	7,325,517	$	7,230,720	$	7,204,779	$	7,159,961		-0.8	%		1.5	%

Demand: interest-bearing	$	85,443	$	86,401	$	86,679	$	94,703	$	99,057		-1.1	%		-13.7	%
Money market and savings		1,845,870		1,815,085		1,669,973		1,601,826		1,463,304		1.7	%		26.1	%
Time deposits		2,453,154		2,507,830		2,417,803		2,438,112		2,403,685		-2.2	%		2.1	%
Average interest-bearing deposits		4,384,467		4,409,316		4,174,455		4,134,641		3,966,046		-0.6	%		10.6	%
Borrowings		169,525		162,418		205,951		120,381		196,776		4.4	%		-13.8	%
Subordinated debentures		130,239		130,088		129,933		129,780		129,631		0.1	%		0.5	%
Average interest-bearing liabilities	$	4,684,231	$	4,701,822	$	4,510,339	$	4,384,802	$	4,292,453		-0.4	%		9.1	%

Average Noninterest Bearing Deposits
Demand deposits - noninterest bearing	$	1,883,765	$	1,921,189	$	2,025,212	$	2,136,156	$	2,213,171		-1.9	%		-14.9	%

⁽¹⁾Includes loans held for sale.

	For the Three Months Ended															Yield/Rate Change
	Jun 30,			Mar 31,			Dec 31,			Sep 30,			Jun 30,			Q2-24		Q2-24
Average Yields and Rates	2024			2024			2023			2023			2023			vs. Q1-24		vs. Q2-23
Loans receivable⁽¹⁾		5.99	%		6.00	%		5.88	%		5.73	%		5.64	%		-0.01		0.35
Securities ⁽²⁾		2.17	%		2.07	%		1.93	%		1.79	%		1.73	%		0.10		0.44
FHLB stock		8.77	%		8.87	%		8.25	%		7.67	%		6.92	%		-0.10		1.85
Interest-bearing deposits in other banks		5.16	%		5.19	%		5.12	%		5.19	%		4.85	%		-0.03		0.31
Interest-earning assets		5.46	%		5.47	%		5.34	%		5.19	%		5.09	%		-0.01		0.37

Interest-bearing deposits		4.27	%		4.16	%		3.83	%		3.53	%		3.25	%		0.11		1.02
Borrowings		4.50	%		4.10	%		4.07	%		2.48	%		3.33	%		0.40		1.17
Subordinated debentures		5.07	%		5.06	%		5.09	%		5.07	%		4.94	%		0.01		0.13
Interest-bearing liabilities		4.30	%		4.19	%		3.88	%		3.55	%		3.30	%		0.11		1.00

Net interest margin (taxable equivalent basis)		2.69	%		2.78	%		2.92	%		3.03	%		3.11	%		-0.09		-0.42

Cost of deposits		2.98	%		2.90	%		2.58	%		2.33	%		2.08	%		0.08		0.90

⁽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.

Credit loss expense for the second quarter was $1.0 million, compared with $0.2 million for the first quarter of 2024. Second quarter credit loss expense included a $1.3 million credit loss expense for loan losses, offset by a $0.3 million recovery for off-balance sheet items. Second quarter net loan charge-offs were $1.8 million, compared with first quarter of 2024 net loan charge-offs of $1.6 million.

Noninterest income for the second quarter increased $0.4 million to $8.1 million, or 4.2%, from $7.7 million for the first quarter of 2024. The increase primarily reflected $0.3 million in bank-owned life insurance benefit income in the second quarter of 2024. Additionally, gains on sales of SBA loans were $1.6 million for the second quarter of 2024, compared with $1.5 million for the first quarter of 2024. The volume of SBA loans sold in the second quarter decreased to $23.5 million, from $25.6 million for the first quarter of 2024, while trade premiums increased to 8.54% for the second quarter, from 7.23% for the first quarter of 2024. Moreover, gains on the sale of mortgage loans continued in the second quarter, whereby loans sold were $19.5 million, at a premium of 2.00%, compared with $29.7 million and 2.27% for the first quarter, resulting in income of $0.4 million for each period.

	For the Three Months Ended (in thousands)												Percentage Change
	Jun 30,		Mar 31,		Dec 31,			Sep 30,		Jun 30,			Q2-24			Q2-24
Noninterest Income	2024		2024		2023			2023		2023			vs. Q1-24			vs. Q2-23
Service charges on deposit accounts	$	2,429	$	2,450	$	2,391		$	2,605	$	2,571			-0.9	%		-5.5	%
Trade finance and other service charges and fees		1,277		1,414		1,245			1,155		1,173			-9.7	%		8.9	%
Servicing income		796		712		772			838		825			11.8	%		-3.5	%
Bank-owned life insurance income (expense)		638		304		(29	)		280		271			109.9	%		135.4	%
All other operating income		908		928		853			1,178		1,811			-2.2	%		-49.9	%
Service charges, fees & other		6,048		5,808		5,232			6,056		6,651			4.1	%		-9.1	%

Gain on sale of SBA loans		1,644		1,482		1,448			1,172		1,212			10.9	%		35.6	%
Gain on sale of mortgage loans		365		443		-			-		-			-17.6	%		100.0	%
Net gain (loss) on sales of securities		-		-		-			-		(1,871	)		0.0	%		-100.0	%
Gain (loss) on sale of bank premises		-		-		-			4,000		-			0.0	%		0.0	%
Legal settlement		-		-		-			-		1,943			0.0	%		-100.0	%
Total noninterest income	$	8,057	$	7,733	$	6,680		$	11,228	$	7,935			4.2	%		1.5	%

Noninterest expense for the second quarter decreased to $35.3 million from $36.4 million for the first quarter of 2024. The decline was primarily due to a $1.2 million decrease in salaries and benefits arising from $0.6 million in seasonally lower employer taxes and benefits and a $0.6 million decrease in capitalized labor costs associated with the Company's investment in a new loan origination system. All other categories of recurring noninterest expense combined, except for data processing, which increased by $0.1 million, decreased $0.5 million for the second quarter from the first quarter of 2024. Additionally, Hanmi recorded $0.3 million in nonrecurring branch consolidation expenses in the second quarter due to the consolidation of three branches; two branches in Texas and one branch in California. The efficiency ratio for the second quarter was 62.2%, compared with 62.4% for the first quarter of 2024.

	For the Three Months Ended (in thousands)											Percentage Change
	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,			Q2-24			Q2-24
	2024		2024		2023		2023		2023			vs. Q1-24			vs. Q2-23
Noninterest Expense
Salaries and employee benefits	$	20,434	$	21,585	$	20,062	$	20,361	$	20,365			-5.3	%		0.3	%
Occupancy and equipment		4,348		4,537		4,604		4,825		4,500			-4.2	%		-3.4	%
Data processing		3,686		3,551		3,487		3,490		3,465			3.8	%		6.4	%
Professional fees		1,749		1,893		1,977		1,568		1,376			-7.6	%		27.1	%
Supplies and communication		570		601		613		552		638			-5.2	%		-10.7	%
Advertising and promotion		669		907		990		534		748			-26.2	%		-10.6	%
All other operating expenses		3,251		3,160		3,252		2,852		3,243			2.9	%		0.2	%
Subtotal		34,707		36,234		34,985		34,182		34,335			-4.2	%		1.1	%

Branch consolidation expense		301		-		-		-		-			100.0	%		100.0	%
Other real estate owned expense		6		22		15		16		4			-72.7	%		50.0	%
Repossessed personal property expense (income)		262		189		211		47		(59	)		38.6	%		-544.1	%
Total noninterest expense	$	35,276	$	36,445	$	35,211	$	34,245	$	34,280			-3.2	%		2.9	%

Hanmi recorded a provision for income taxes of $6.0 million for the second quarter of 2024, compared with $6.6 million for the first quarter of 2024, representing an effective tax rate of 29.3% and 30.2%, respectively. The first quarter of 2024 income tax expense included a $0.2 million charge for share-based compensation vesting and $0.2 million of additional expense associated with amended state tax returns.

Financial Position

Total assets at June 30, 2024 increased 1.0%, or $74.3 million, to $7.59 billion from $7.51 billion at March 31, 2024. The sequential quarter increase mainly reflected a 22.3%, or $57.0 million, increase in cash and due from banks, a $6.5 million increase in loans held for sale, and a $5.4 million increase in securities.

Loans receivable, before allowance for credit losses, were $6.18 billion at June 30, 2024, and was consistent with the balance at March 31, 2024. Loans held for sale, representing the guaranteed portion of SBA 7(a) loans, were $10.5 million as of June 30, 2024, up from $4.0 million as of March 31, 2024.

As of (in thousands)