Hanmi Financial (HAFC) - 2022 Q2 - Quarterly Report

Part I – Financial Information Financial Statements This section presents Hanmi Financial Corporation's unaudited consolidated financial statements for the periods ended June 30, 2022, detailing financial position, performance, and cash flows Consolidated Balance Sheets Total assets increased to $6.96 billion by June 30, 2022, driven by loan growth, while stockholders' equity decreased to $618.3 million due to unrealized losses on securities Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and due from banks | $217,237 | $608,965 | $(391,728) | | Securities available for sale | $860,221 | $910,790 | $(50,569) | | Loans receivable, net | $5,582,335 | $5,078,984 | $503,351 | | Total Assets | $6,955,968 | $6,858,587 | $97,381 | | Liabilities & Equity | | | | | Total deposits | $5,979,390 | $5,786,269 | $193,121 | | Borrowings | $145,000 | $137,500 | $7,500 | | Subordinated debentures | $129,113 | $215,006 | $(85,893) | | Total Liabilities | $6,337,672 | $6,215,170 | $122,502 | | Total Stockholders' Equity | $618,296 | $643,417 | $(25,121) | Consolidated Statements of Income Net income increased to $25.1 million in Q2 2022 and $45.7 million year-to-date, primarily driven by higher net interest income despite a shift to credit loss expense Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $59,044 | $49,572 | $110,000 | $95,574 | | Credit Loss Expense (Recovery) | $1,596 | $(3,327) | $220 | $(1,217) | | Noninterest Income | $9,310 | $8,886 | $17,829 | $18,692 | | Noninterest Expense | $31,475 | $30,783 | $63,167 | $60,316 | | Net Income | $25,050 | $22,122 | $45,745 | $38,781 | | Diluted EPS | $0.82 | $0.72 | $1.50 | $1.26 | Consolidated Statements of Comprehensive Income Comprehensive income (loss) was significantly impacted by unrealized losses on available-for-sale securities, resulting in a comprehensive loss of $(12.4) million year-to-date 2022 Comprehensive Income (Loss) (in thousands) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $25,050 | $22,122 | $45,745 | $38,781 | | Other Comprehensive Income (Loss), net of tax | $(21,749) | $2,434 | $(58,125) | $(5,935) | | Comprehensive Income (Loss) | $3,301 | $24,556 | $(12,380) | $32,846 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased to $618.3 million by June 30, 2022, primarily due to unrealized losses on securities and cash dividends, partially offset by net income - Key drivers for the change in stockholders' equity in the first six months of 2022 include net income of $45.7 million, cash dividends of $13.4 million, and a significant negative impact of $58.1 million from unrealized losses on securities available for sale[17] Consolidated Statements of Cash Flows Cash and equivalents decreased by $391.7 million for the six months ended June 30, 2022, primarily due to significant cash used in investing activities for loan growth Six-Month Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $50,684 | $130,669 | | Net Cash from Investing Activities | $(541,770) | $(171,403) | | Net Cash from Financing Activities | $99,358 | $346,674 | | Net (Decrease) in Cash | $(391,728) | $305,940 | Notes to Consolidated Financial Statements This section provides detailed disclosures supporting the financial statements, covering securities, loan portfolio, deposits, borrowings, capital adequacy, and fair value measurements Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance and condition, highlighting strong loan growth, increased net interest income, and stable credit quality for Q2 2022 - Net income for Q2 2022 was $25.1 million ($0.82/share), up from $22.1 million ($0.72/share) in Q2 2021, primarily due to higher net interest income[150] - Loans receivable grew to $5.66 billion at June 30, 2022, from $5.15 billion at year-end 2021, funded by excess liquidity and deposit growth[153] - Subordinated debentures and borrowings decreased by $78.4 million, mainly due to the redemption of the 2017 Notes[153] Results of Operations Operational results improved in Q2 2022, driven by a $9.5 million increase in net interest income and a 29 basis point net interest margin expansion, despite a shift to credit loss expense Financial Condition The company's financial condition as of June 30, 2022, showed strong loan growth to $5.58 billion and deposit growth to $5.98 billion, alongside stable credit quality Capital Resources and Liquidity The company maintained strong capital and liquidity, with all capital ratios exceeding 'well-capitalized' requirements and significant available borrowing capacity - The Board of Directors increased the quarterly cash dividend to $0.22 per share for Q2 2022, up from $0.12 per share in Q2 2021, signaling confidence in the company's performance[235] - As of June 30, 2022, Hanmi Bank's capital ratios significantly exceeded the minimums required to be considered 'well capitalized'[237] - The Bank has multiple liquidity sources, including $1.47 billion in remaining available borrowing capacity from the FHLB as of June 30, 2022[129] Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk through simulation modeling, projecting net interest income and Economic Value of Equity changes under various rate shock scenarios Interest Rate Sensitivity Analysis (as of June 30, 2022) | Rate Shock | 1-12 Month NII Change | EVE Change | | :--- | :--- | :--- | | +300 bps | +9.19% | +9.16% | | +200 bps | +6.15% | +7.19% | | +100 bps | +3.35% | +4.86% | | -100 bps | -5.10% | -8.17% | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[249] - No material changes were made to the internal control over financial reporting during the second quarter of 2022[250] Part II – Other Information Legal Proceedings The company is involved in ordinary course litigation, which management believes will not materially impact financial condition or results - The company states that any ongoing litigation is part of the ordinary course of business and is not expected to have a material adverse impact[252] Risk Factors No material changes to previously disclosed risk factors were reported for the quarter - No material changes to risk factors were reported for the quarter[253] Unregistered Sales of Equity Securities and Use of Proceeds As of June 30, 2022, 659,972 shares remained available for repurchase under the existing stock repurchase program, with no repurchases made during Q2 2022 - As of June 30, 2022, 659,972 shares remained available for repurchase under the existing stock repurchase program[254] - No shares were repurchased under the publicly announced program during the three months ended June 30, 2022[255] Exhibits This section lists exhibits filed with the Form 10-Q, including employment agreement amendments, CEO/CFO certifications, and Inline XBRL data files