Hanmi Reports 2024 Third Quarter Results
LOS ANGELES, Oct. 22, 2024 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ:HAFC, or "Hanmi")), the parent company of Hanmi Bank (the "Bank"), today reported financial results for the third quarter of 2024.
Net income for the third quarter of 2024 was $14.9 million, or $0.49 per diluted share, compared with $14.5 million, or $0.48 per diluted share, for the second quarter of 2024. The return on average assets for the third quarter of 2024 was 0.79% and the return on average equity was 7.55%, compared with a return on average assets of 0.77% and the return on average equity of 7.50% for the second quarter of 2024.
CEO Commentary"Our third quarter results were strong, with solid performance across all key operating metrics in the third quarter," said Bonnie Lee, President and Chief Executive Officer of Hanmi. "Net interest margin increased five basis points to 2.74% driven by higher yields on interest-earning assets and lower funding costs. Loans grew by 2% driven by a 27% increase in loan production and total deposits were up led by 5% growth in noninterest-bearing demand deposits. These results reflect the continued success of our relationship banking model and our portfolio diversification strategy."
"During the quarter, we remained focused on our disciplined credit administration practices and are pleased to report that we resolved several criticized and nonaccrual loans and recognized a recovery on a previously charged-off loan. We also proactively moved three loans to the special mention category to monitor them more closely. These loans are current, and we are confident they are well protected."
"Hanmi is well-positioned for a strong close to 2024 with a robust balance sheet, ample liquidity, healthy capital ratios, and a solid loan pipeline. Our team remains committed to delivering the solutions our customers need and results our shareholders expect," concluded Lee.
Third Quarter 2024 Highlights:
Third quarter net income was $14.9 million, or $0.49 per diluted share, compared with $14.5 million, or $0.48 per diluted share for the second quarter of 2024. The increase reflects a $2.0 million, or 9.4%, increase in pretax, preprovision income, propelled by a 2.9% increase in net interest income.
Loans receivable were $6.26 billion at September 30, 2024, up 1.3% from the end of the second quarter of 2024, driven by a 27% increase in loan production to $347.8 million with a weighted average interest rate of 7.92%.
Deposits were $6.40 billion at September 30, 2024, up 1.2% from the end of the second quarter of 2024; noninterest-bearing demand deposits were 32.0% of total deposits. During the quarter, noninterest bearing demand deposits grew 4.7%, while time deposits declined 3.2% from the prior quarter.
Net interest income for the third quarter was $50.1 million, up 2.9% from the second quarter of 2024, driven by strong operational performance. Net interest margin (taxable equivalent) expanded five basis points to 2.74%, as the average yield on loans increased to 6.00%, while the cost of interest-bearing deposits remained unchanged at 4.27%.
Noninterest expense was $35.1 million for the third quarter, down 0.6% from the second quarter of 2024, primarily reflecting the absence of the second quarter $0.3 million branch consolidation charge.
Credit loss expense for the third quarter was $2.3 million, compared with $1.0 million for the prior quarter. The allowance for credit losses increased $1.4 million to $69.2 million at September 30, 2024, or 1.11% of loans. For the third quarter, net loan charge-offs of $0.9 million included a $1.1 million charge-off on a nonaccrual loan transferred to held-for-sale and a $1.7 million recovery of a nonaccrual loan.
Asset quality included several notable actions: nonaccrual loans fell 18.8% to $15.2 million and included pay-offs of $6.8 million while criticized assets increased, with downgrades to special mention of three loans totaling $129.8 million, offset by the move to the held-for-sale nonaccrual loan category of the previously identified $28.3 million completed construction loan, upgrades of $6.1 million, and additional loan pay-offs of $1.3 million. Subsequent to the end of the third quarter, the Bank completed the sale of the nonaccrual loan.
For more information about Hanmi, please see the Q3 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
September 30,
June 30,
March 31,
December 31,
September 30,
Q3-24
Q3-24
2024
2024
2024
2023
2023
vs. Q2-24
vs. Q3-23
Net income
$
14,892
$
14,451
$
15,164
$
18,633
$
18,796
$
441
$
(3,904
)
Net income per diluted common share
$
0.49
$
0.48
$
0.50
$
0.61
$
0.62
$
0.01
$
(0.13
)
Assets
$
7,712,299
$
7,586,347
$
7,512,046
$
7,570,341
$
7,350,140
$
125,952
$
362,159
Loans receivable
$
6,257,744
$
6,176,359
$
6,177,840
$
6,182,434
$
6,020,785
$
81,385
$
236,959
Deposits
$
6,403,221
$
6,329,340
$
6,376,060
$
6,280,574
$
6,260,072
$
73,881
$
143,149
Return on average assets
0.79
%
0.77
%
0.81
%
0.99
%
1.00
%
0.02
-0.21
Return on average stockholders' equity
7.55
%
7.50
%
7.90
%
9.70
%
9.88
%
0.06
-2.33
Net interest margin
2.74
%
2.69
%
2.78
%
2.92
%
3.03
%
0.05
-0.29
Efficiency ratio (1)
59.98
%
62.24
%
62.42
%
58.86
%
51.82
%
-2.26
8.16
Tangible common equity to tangible assets (2)
9.42
%
9.19
%
9.23
%
9.14
%
8.89
%
0.23
0.53
Tangible common equity per common share (2)
$
24.03
$
22.99
$
22.86
$
22.75
$
21.45
1.04
2.58
(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 third quarter was $50.1 million, up 2.9% from $48.6 million for the second quarter of 2024. The increase was primarily due to an increase in loan interest income. The increase in loan interest income was a result of increases in loan yields and average balances. The yield on average loans for the third quarter increased slightly to 6.00% from 5.99% for the second quarter of 2024. Average loans were $6.11 billion for the third quarter of 2024, up 0.4% from $6.09 billion for the second quarter. The cost of interest-bearing deposits was 4.27% for the third quarter of 2024, unchanged from the prior quarter. Average interest-bearing deposits were $4.40 billion for the third quarter, up 0.3%, from $4.38 billion for the prior quarter. Net interest margin (taxable equivalent) for the third quarter was 2.74%, compared with 2.69% for the second quarter of 2024.
For the Three Months Ended (in thousands)
Percentage Change
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Q3-24
Q3-24
Net Interest Income
2024
2024
2024
2023
2023
vs. Q2-24
vs. Q3-23
Interest and fees on loans receivable(1)
$
92,182
$
90,752
$
91,674
$
89,922
$
85,398
1.6
%
7.9
%
Interest on securities
5,523
5,238
4,955
4,583
4,204
5.4
%
31.4
%
Dividends on FHLB stock
356
357
361
341
317
-0.3
%
12.3
%
Interest on deposits in other banks
2,356
2,313
2,604
2,337
4,153
1.9
%
-43.3
%
Total interest and dividend income
$
100,417
$
98,660
$
99,594
$
97,183
$
94,072
1.8
%
6.7
%
Interest on deposits
47,153
46,495
45,638
40,277
36,818
1.4
%
28.1
%
Interest on borrowings
1,561
1,896
1,655
2,112
753
-17.7
%
107.3
%
Interest on subordinated debentures
1,652
1,649
1,646
1,654
1,646
0.2
%
0.4
%
Total interest expense
50,366
50,040
48,939
44,043
39,217
0.7
%
28.4
%
Net interest income
$
50,051
$
48,620
$
50,655
$
53,140
$
54,855
2.9
%
-8.8
%
(1) Includes loans held for sale.
For the Three Months Ended (in thousands)
Percentage Change
Average Earning Assets and
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Q3-24
Q3-24
Interest-bearing Liabilities
2024
2024
2024
2023
2023
vs. Q2-24
vs. Q3-23
Loans receivable (1)
$
6,112,324
$
6,089,440
$
6,137,888
$
6,071,644
$
5,915,423
0.4
%
3.3
%
Securities
986,041
979,671
969,520
961,551
955,473
0.7
%
3.2
%
FHLB stock
16,385
16,385
16,385
16,385
16,385
0.0
%
0.0
%
Interest-bearing deposits in other banks
183,027
180,177
201,724
181,140
317,498
1.6
%
-42.4
%
Average interest-earning assets
$
7,297,777
$
7,265,673
$
7,325,517
$
7,230,720
$
7,204,779
0.4
%
1.3
%
Demand: interest-bearing
$
83,647
$
85,443
$
86,401
$
86,679
$
94,703
-2.1
%
-11.7
%
Money market and savings
1,885,799
1,845,870
1,815,085
1,669,973
1,601,826
2.2
%
17.7
%
Time deposits
2,427,737
2,453,154
2,507,830
2,417,803
2,438,112
-1.0
%
-0.4
%
Average interest-bearing deposits
4,397,183
4,384,467
4,409,316
4,174,455
4,134,641
0.3
%
6.3
%
Borrowings
143,479
169,525
162,418
205,951
120,381
-15.4
%
19.2
%
Subordinated debentures
130,403
130,239
130,088
129,933
129,780
0.1
%
0.5
%
Average interest-bearing liabilities
$
4,671,065
$
4,684,231
$
4,701,822
$
4,510,339
$
4,384,802
-0.3
%
6.5
%
Average Noninterest Bearing Deposits
Demand deposits - noninterest bearing
$
1,908,833
$
1,883,765
$
1,921,189
$
2,025,212
$
2,136,156
1.3
%
-10.6
%
(1) Includes loans held for sale.
For the Three Months Ended
Yield/Rate Change
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Q3-24
Q3-24
Average Yields and Rates
2024
2024
2024
2023
2023
vs. Q2-24
vs. Q3-23
Loans receivable(1)
6.00
%
5.99
%
6.00
%
5.88
%
5.73
%
0.01
0.27
Securities (2)
2.27
%
2.17
%
2.07
%
1.93
%
1.79
%
0.10
0.48
FHLB stock
8.65
%
8.77
%
8.87
%
8.25
%
7.67
%
-0.12
0.98
Interest-bearing deposits in other banks
5.12
%
5.16
%
5.19
%
5.12
%
5.19
%
-0.04
-0.07
Interest-earning assets
5.48
%
5.46
%
5.47
%
5.34
%
5.19
%
0.02
0.29
Interest-bearing deposits
4.27
%
4.27
%
4.16
%
3.83
%
3.53
%
0.00
0.74
Borrowings
4.33
%
4.50
%
4.10
%
4.07
%
2.48
%
-0.17
1.85
Subordinated debentures
5.07
%
5.07
%
5.06
%
5.09
%
5.07
%
0.00
0.00
Interest-bearing liabilities
4.29
%
4.30
%
4.19
%
3.88
%
3.55
%
-0.01
0.74
Net interest margin (taxable equivalent basis)
2.74
%
2.69
%
2.78
%
2.92
%
3.03
%
0.05
-0.29
Cost of deposits
2.97
%
2.98
%
2.90
%
2.58
%
2.33
%
-0.01
0.64
(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 third quarter was $2.3 million, compared with $1.0 million for the second quarter of 2024. Third quarter credit loss expense included a $2.3 million credit loss expense for loan losses. Third quarter net loan charge-offs were $0.9 million, compared with second quarter net loan charge-offs of $1.8 million. Third quarter net loan charge-offs included a $1.1 million charge-off on a nonaccrual loan transferred to held-for-sale and a $1.7 million recovery on a nonaccrual loan.
Noninterest income for the third quarter increased $0.3 million to $8.4 million, or 4.7%, from $8.1 million for the second quarter of 2024. Third quarter noninterest income included a $0.9 million gain from the sale and leaseback of a branch property, while second quarter noninterest income included a $0.3 million death benefit on bank-owned life insurance. Gains on sales of SBA loans were $1.5 million for the third quarter of 2024, compared with $1.6 million for the second quarter of 2024. The volume of SBA loans sold in the third quarter decreased to $23.0 million, from $23.5 million for the second quarter of 2024, while trade premiums were 8.54% for the third quarter of 2024, unchanged from the second quarter. Mortgage loans sold in the third quarter were $20.9 million, with a premium of 2.32%, compared with $19.5 million and 2.00% for the second quarter, resulting in income of $0.3 million for the third quarter, compared with $0.4 million for the prior quarter.
For the Three Months Ended (in thousands)
Percentage Change
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Q3-24
Q3-24
Noninterest Income
2024
2024
2024
2023
2023
vs. Q2-24
vs. Q3-23
Service charges on deposit accounts
$
2,311
$
2,429
$
2,450
$
2,391
$
2,605
-4.9
%
-11.3
%
Trade finance and other service charges and fees
1,254
1,277
1,414
1,245
1,155
-1.8
%
8.6
%
Servicing income
817
796
712
772
838
2.6
%
-2.5
%
Bank-owned life insurance income (expense)
320
638
304
(29
)
280
-49.8
%
14.3
%
All other operating income
1,008
908
928
853
1,178
11.0
%
-14.4
%
Service charges, fees & other
5,710
6,048
5,808
5,232
6,056
-5.6
%
-5.7
%
Gain on sale of SBA loans
1,544
1,644
1,482
1,448
1,172
-6.1
%
31.7
%
Gain on sale of mortgage loans
324
365
443
-
-
-11.2
%
100.0
%
Gain on sale of bank premises
860
-
-
-
4,000
100.0
%
-78.5
%
Total noninterest income
$
8,438
$
8,057
$
7,733
$
6,680
$
11,228
4.7
%
-24.8
%
Noninterest expense for the third quarter decreased by $0.2 million to $35.1 million from $35.3 million for the second quarter of 2024. The decrease reflects primarily the absence of the $0.3 million branch consolidation expense recognized in the second quarter of 2024. The efficiency ratio for the third quarter was 60.0%, compared with 62.2% for the second quarter of 2024.
For the Three Months Ended (in thousands)
Percentage Change
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Q3-24
Q3-24
2024
2024
2024
2023
2023
vs. Q2-24
vs. Q3-23
Noninterest Expense
Salaries and employee benefits
$
20,851
$
20,434
$
21,585
$
20,062
$
20,361
2.0
%
2.4
%
Occupancy and equipment
4,499
4,348
4,537
4,604
4,825
3.5
%
-6.8
%
Data processing
3,839
3,686
3,551
3,487
3,490
4.2
%
10.0
%
Professional fees
1,492
1,749
1,893
1,977
1,568
-14.7
%
-4.8
%
Supplies and communication
538
570
601
613
552
-5.6
%
-2.5
%
Advertising and promotion
631
669
907
990
534
-5.7
%
18.2
%
All other operating expenses
2,875
3,251
3,160
3,252
2,852
-11.6
%
0.8
%
Subtotal
34,725
34,707
36,234
34,985
34,182
0.1
%
1.6
%
Branch consolidation expense
-
301
-
-
-
-100.0
%
0.0
%
Other real estate owned expense
77
6
22
15
16
1183.3
%
381.3
%
Repossessed personal property expense
278
262
189
211
47
6.1
%
491.5
%
Total noninterest expense
$
35,080
$
35,276
$
36,445
$
35,211
$
34,245
-0.6
%
2.4
%
Hanmi recorded a provision for income taxes of $6.2 million for the third quarter of 2024, compared with $6.0 million for the second quarter of 2024, representing an effective tax rate of 29.5% and 29.3%, respectively.
Financial PositionTotal assets at September 30, 2024 increased 1.7%, or $126.0 million, to $7.71 billion from $7.59 billion at June 30, 2024. The sequential quarter increase was due to a $125.3 million increase in loans and loans held-for-sale, and a $31.3 million increase in securities, offset partially by a $25.3 million decrease in cash and due from banks.
Loans receivable, before allowance for credit losses, were $6.26 billion at September 30, 2024, up from $6.18 billion at June 30, 2024.
Loans held-for-sale were $54.3 million at September 30, 2024, up from $10.5 million at June 30, 2024. At the end of the third quarter, loans held-for-sale consisted of $8.8 million of the guaranteed portion of SBA 7(a) loans, $18.3 million of residential mortgage loans and the $27.2 million nonaccrual loan. Subsequent to the end of the third quarter, the Bank completed the sale of this nonaccrual loan.
As of (in thousands)
Percentage Change
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Q3-24
Q3-24
2024
2024
2024
2023
2023
vs. Q2-24
vs. Q3-23
Loan Portfolio
Commercial real estate loans
$
3,932,088
$
3,888,505
$
3,878,677
$
3,889,739
$
3,773,015
1.1
%
4.2
%
Residential/consumer loans
939,285
954,209
970,362
962,661
926,326
-1.6
%
1.4
%
Commercial and industrial loans
879,092
802,372
