Hanmi Financial (US:HAFC)2021-05-10 19:41Part I – Financial Information Financial Statements Unaudited consolidated financial statements for Q1 2021, including balance sheets, income, comprehensive income, equity, and cash flow Consolidated Balance Sheets Total assets grew to $6.44 billion driven by increased cash and deposits, while net loans slightly decreased Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2021 (in millions) | December 31, 2020 (in millions) | | :--- | :--- | :--- | | Total Assets | $6,438.4M | $6,201.9M | | Cash and due from banks | $646.4M | $391.8M | | Loans receivable, net | $4,728.8M | $4,789.7M | | Total Liabilities | $5,856.6M | $5,624.8M | | Total deposits | $5,509.8M | $5,275.0M | | Total Stockholders' Equity | $581.8M | $577.0M | Consolidated Statements of Income Net income surged to $16.7 million in Q1 2021, primarily due to reduced credit loss expense and higher noninterest income Consolidated Income Statement Highlights (Unaudited) | Metric | Three Months Ended March 31, 2021 (in millions) | Three Months Ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Net interest income before credit loss expense | $46.0M | $44.0M | | Credit loss expense | $2.1M | $15.7M | | Net Income | $16.7M | $2.4M | | Diluted earnings per share | $0.54 | $0.08 | Consolidated Statements of Comprehensive Income Comprehensive income decreased to $8.3 million in Q1 2021, primarily due to an $8.4 million other comprehensive loss Comprehensive Income (Unaudited) | Item | Three Months Ended March 31, 2021 (in millions) | Three Months Ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Net Income | $16.7M | $2.4M | | Other comprehensive (loss) income, net of tax | ($8.4M) | $8.5M | | Comprehensive Income | $8.3M | $10.8M | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $581.8 million driven by net income, partially offset by unrealized losses and dividends - Declared cash dividends of $0.10 per share, totaling $3.1 million for the quarter16 - Repurchased 55,000 shares of common stock for $0.946 million during the quarter16 Consolidated Statements of Cash Flows Cash and due from banks increased by $254.6 million, primarily from financing activities driven by deposit growth Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2021 (in millions) | | :--- | :--- | | Net cash provided by operating activities | $6.6M | | Net cash provided by investing activities | $17.3M | | Net cash provided by financing activities | $230.7M | | Net increase in cash and due from banks | $254.6M | Notes to Consolidated Financial Statements Detailed disclosures on accounting policies, loan portfolio, securities, deposits, borrowings, and regulatory capital - At March 31, 2021, the company held $256.5 million of Paycheck Protection Program (PPP) loans, included in commercial and industrial loans35 - Loans modified under the CARES Act totaled $116.4 million at March 31, 202135 - The allowance for credit losses decreased to $88.4 million at March 31, 2021, from $90.4 million at December 31, 202041 - Total deposits grew to $5.51 billion, with noninterest-bearing deposits increasing to $2.17 billion, representing 39.5% of total deposits10203 - The company and Hanmi Bank remain 'well capitalized' under regulatory standards, with the Bank's Common Equity Tier 1 (CET1) capital ratio at 14.01% as of March 31, 20219497 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial results, highlighting increased net income, improved credit quality, and stable capital Executive Overview Q1 2021 net income was $16.7 million, driven by lower credit loss expense, with increased cash and deposits - Net income increased primarily due to a $7.4 million qualitative provision for COVID-19 in the prior year period, along with other specific provisions in 2020 that did not recur in 2021154 - Deposits grew to $5.51 billion, up from $5.28 billion at year-end 2020, led by a $275.9 million increase in non-interest bearing demand deposits156 Results of Operations Net interest income increased to $46.0 million, credit loss expense decreased, and noninterest income rose Net Interest Income Analysis | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Interest Income (tax-equiv.) | $46.0M | $44.0M | | Net Interest Margin (tax-equiv.) | 3.09% | 3.36% | | Average Yield on Earning Assets | 3.50% | 4.50% | | Average Cost of Interest-Bearing Liabilities | 0.69% | 1.70% | - Noninterest income increased by $3.6 million YoY, primarily due to a $2.5 million gain on sale of PPP loans and a $0.5 million increase in gain on sale of SBA 7(a) loans169 - Noninterest expense decreased by $1.5 million YoY, mainly from lower salaries and benefits (due to capitalized PPP origination costs) and reduced professional fees171 Financial Condition Financial condition improved with decreased nonperforming assets and strong deposit growth to $5.51 billion Credit Quality Indicators | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Nonperforming Assets | $56.6M | $85.4M | | Nonaccrual Loans | $55.1M | $83.0M | | Nonperforming Assets / Total Assets | 0.88% | 1.38% | | Allowance for Credit Losses / Loans | 1.83% | 1.85% | | Allowance for Credit Losses / Nonaccrual Loans | 160.54% | 108.91% | - Loans modified under the CARES Act declined 25.0% to $116.4 million at March 31, 2021 from $155.6 million at December 31, 2020188 - Net charge-offs were $3.0 million, or 0.25% of average loans (annualized), for Q1 2021, a significant decrease from $27.3 million, or 2.41%, in Q1 2020201202 Capital Resources and Liquidity Strong capital position maintained, exceeding regulatory requirements, with increased dividends and adequate liquidity - The Board increased the quarterly cash dividend to $0.10 per share in Q1 2021 and authorized a further increase to $0.12 per share for Q2 2021, signaling confidence in the company's performance213 Regulatory Capital Ratios (Hanmi Bank) | Ratio | March 31, 2021 | 'Well Capitalized' Minimum | | :--- | :--- | :--- | | Total Risk-Based Capital | 15.26% | 10.00% | | Tier 1 Risk-Based Capital | 14.01% | 8.00% | | Common Equity Tier 1 Capital | 14.01% | 6.50% | | Tier 1 Leverage Capital | 10.99% | 5.00% | Quantitative and Qualitative Disclosures About Market Risk The company is asset-sensitive, projecting a 5.63% increase in net interest income with a 100 bps rate rise Interest Rate Sensitivity Analysis (as of March 31, 2021) | Change in Interest Rate | Estimated % Change in Net Interest Income (1-12 Month Horizon) | Estimated % Change in Economic Value of Equity (EVE) | | :--- | :--- | :--- | | +300 bps | 16.92% | 29.45% | | +200 bps | 11.13% | 21.82% | | +100 bps | 5.63% | 12.97% | | -100 bps | (3.65%) | (23.57%) | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021 - Management concluded that the Company's disclosure controls and procedures are effective as of the end of the quarter224 Part II – Other Information Legal Proceedings Ordinary course litigation is not expected to materially impact the company's financial condition or operations - In the opinion of management, the resolution of any ordinary course litigation would not have a material adverse impact on the company226 Risk Factors No material changes in risk factors from the 2020 Annual Report on Form 10-K are reported - No material changes in risk factors from the 2020 Form 10-K are reported227 Unregistered Sales of Equity Securities and Use of Proceeds Stock repurchase program reinstated in February 2021, with 55,000 shares repurchased in Q1 - The company's stock repurchase program, which was suspended due to the COVID-19 outbreak, was reinstated in February 2021228 Common Stock Repurchases in Q1 2021 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2021 | 0 | N/A | | Feb 2021 | 25,000 | $16.86 | | Mar 2021 | 30,000 | $17.48 | | Total | 55,000 | $17.20 | Defaults Upon Senior Securities No defaults upon senior securities were reported - No defaults upon senior securities were reported230 Mine Safety Disclosures Mine safety disclosures are not applicable - Not applicable231 Other Information No other information was reported - No other information was reported232 Exhibits Exhibits filed include CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL data files234