HAFC Hanmi Financial Corporation

Hanmi Financial Corporation (NASDAQ: HAFC) (“we,” “our” or “Hanmi”), the holding company for Hanmi Bank (the “Bank”), reported a fourth-quarter net loss of $35.9 million, or ($0.70) per share, primarily driven by $77 million in credit loss provisions, compared to a net loss of $3.8 million, or ($0.08) per share, in the comparable period a year ago.

For the year ended December 31, 2009, Hanmi reported a net loss of $122.3 million, or ($2.57) per share, mainly due to $196.4 million in credit loss provisions, compared to a net loss of $102.1 million, or ($2.23) per share, for the year ended December 31, 2008. In 2008, there was a non-cash impairment loss on goodwill of $107.4 million, for which there was no comparable loss in 2009.

“Over the past year, we achieved a number of positive changes in what continues to be a very difficult economic environment,” said Jay S. Yoo, Hanmi’s President and Chief Executive Officer. “Most notably, we have made significant progress in strengthening our loan monitoring and loan review departments, maintaining appropriate loan loss reserves in anticipation of asset deterioration, managing our liquidity, and enhancing our net interest margin.”

“Notwithstanding these improvements, our focus during the first half of 2010 will be to fully comply with previously announced regulatory requirements by further strengthening our capital position, improving asset quality, and enhancing liquidity. Our highest priority during the next few months will be to raise sufficient capital, executing our strategic plan to comply with regulatory requirements.

“To enhance liquidity, we will continue our efforts to reduce our illiquid assets as well as further increase our core deposits through product features and upgraded customer service. With the expectation of substantial progress in achieving these goals along with a successful capital raise,” concluded Mr. Yoo, “we will strive to be back in position for organic growth.”

Results of Operations

Net interest income before provision for credit losses increased by $1.9 million, or 7.3 percent, to $28.4 million in the fourth quarter of 2009 as compared with $26.5 million in the prior quarter as the $1.9 million decrease in interest and fees on loans was more than offset by a $4.5 million decrease in total interest expense. For the full year 2009, net interest income before provision for credit losses decreased by $33.2 million, or 24.7 percent, to $101.2 million, as compared with $134.4 million in the prior year.

The average yield on the loan portfolio was 5.54 percent in the fourth quarter of 2009, an increase of four basis points compared to 5.50 percent in the third quarter. Thanks to our proper management of high-cost time deposits that were offered through early 2009 and matured in the fourth quarter, combined with an overall decline of deposit rates in our community, the cost of average interest-bearing deposits was 2.26 percent, a decrease of 44 basis points compared to 2.70 percent in the third quarter. Consistent with this trend, net interest margin was 3.46 percent in the fourth quarter of 2009, an increase of 46 basis points compared to 3.00 percent in the third quarter.

The provision for credit losses in the fourth quarter of 2009 increased by $27.5 million to $77.0 million, compared to $49.5 million in the prior quarter, due mainly to the increase in our historical loss ratios used in the allowance for loan losses migration analysis which was the result of our increase in charge-offs in recent quarters. The charge-offs of impaired loans for the deficiency of collateral in this weakening commercial real estate (“CRE”) market also contributed to the increase. For the full year, the provision for credit losses was $196.4 million compared to $75.7 million in 2008.

Total non-interest income in the fourth quarter of 2009 was $7.8 million as compared with $8.2 million in the third quarter of 2009 and $7.4 million in the fourth quarter of 2008. The decrease in non-interest income from the third quarter is mainly attributable to the overall decrease in service charges in the slowed economy. Consistent with our balance sheet deleveraging strategy, we continued to sell SBA loans and recognized a $354,000 gain in the fourth quarter, as compared with $864,000 in the prior quarter. In the fourth quarter, we also sold investment securities, mainly municipal bonds, for risk management purposes, and recorded a net gain of $665,000. For the full year 2009, total non-interest income was $32.1 million, a decrease of $39,000, or 0.1 percent, from the prior year.

Total non-interest expense in the fourth quarter of 2009 was $22.7 million as compared with $23.7 million in the third quarter, a decrease of $979,000, or 4.1 percent, from the prior quarter. A major contributor to the sequential decrease in fourth-quarter non-interest expense was a decrease of $2.5 million in other real estate owned expenses, partially offset by an increase of $1.0 million in deposit insurance premiums and regulatory assessments. For the full year 2009, total non-interest expense was $90.4 million compared to $194.3 million in 2008. The 2008 expense included a $107.4 million impairment loss on goodwill.

With the aforementioned decreases in non-interest expense and non-interest income and the increase in net interest income before provision for credit losses, the fourth-quarter 2009 efficiency ratio (non-interest expense divided by the sum of net interest income before provision for credit losses and non-interest income) was 62.6 percent, as compared with 68.2 percent in the third quarter and 55.5 percent in the comparable period a year ago.

Balance Sheet and Asset Quality

Reflecting the Bank’s ongoing program to de-leverage the balance sheet, at December 31, 2009, total assets decreased by $294.8 million, or 8.5 percent, to $3.16 billion as compared with $3.46 billion at September 30, 2009, and decreased by $713.1 million, or 18.4 percent, in comparison to $3.88 billion at December 31, 2008.

Gross loans, net of deferred loan fees, decreased by $158.4 million, or 5.3%, to $2.82 billion as of December 31, 2009, compared with $2.98 billion at September 30, 2009, and decreased by $543 million, or 16.2%, as compared with $3.36 billion at December 31, 2008. The bulk of the decrease relative to the prior quarter-end is attributable to the stringent lending policy implementing selective loan renewals in addition to sale of loans and charge-offs.

Total deposits decreased by $242.5 million, or 8.1 percent, to $2.75 billion at December 31, 2009 compared to $2.99 billion at September 30, 2009, and decreased by $320.8 million, or 10.4 percent, compared to $3.07 billion at December 31, 2008. The decrease in total deposits compared to the previous quarter-end reflects a reduction in brokered deposits of $188.4 million and a reduction in Freedom CDs of $114.3 million. FHLB advances also decreased by $6.8 million.

Fourth-quarter charge-offs, net of recoveries, were $57.3 million compared to $29.9 million in the prior quarter and $18.6 million in the fourth quarter of 2008. Fourth-quarter charge-offs include a partial charge-off in the amount of $4.6 million on a construction loan to a senior housing project as a result of a decrease in collateral value; investment property loan charge-offs totaling $13.5 million; and other commercial term loan charge-offs totaling $30.3 million, which includes partial charge-offs from owner-occupied and single-tenant property loans. The remaining charge-offs of approximately $9 million consist of consumer, international, and SBA loans as well as commercial lines of credit. For the full year 2009, charge-offs, net of recoveries, were $122.6 million compared to $46.0 million in 2008.

At December 31, 2009, the allowance for loan losses was $145.0 million, or 5.14 percent of total gross loans (66.19 percent of total non-performing loans), compared to $71.0 million, or 2.11 percent of total gross loans (58.23 percent of total non-performing loans), at December 31, 2008. At September 30, 2009, the allowance for loan losses was $124.8 million, or 4.19 percent of total gross loans (71.53 percent of total non-performing loans). The increase in the allowance for loan losses was mainly due to an increase in quantitative reserves to $90.1 million from $61.1 million at September 30, 2009. The increase in the quantitative allowance was partially offset by a decrease in impaired reserves to $23.1 million from $36.7 million at September 30, 2009 as a result of increased charge-offs. Qualitative allowance slightly increased to $31.6 million from $26.6 million at the end of the third quarter.

Delinquent loans were $186.3 million (6.60 percent of total gross loans) at December 31, 2009, compared to $151.0 million (5.07 percent of total gross loans) at September 30, 2009, and $128.5 million (3.82 percent of total gross loans) at December 31, 2008. Contributing to the increase in delinquent loans were an increase in delinquencies of owner-occupied business property loans as well as an increase in delinquencies of SBA loans. Delinquencies from these two loan categories increased by approximately $18.0 million and $13.5 million, respectively, quarter-over-quarter.

Non-performing loans (“NPL”) at December 31, 2009 were $219.1 million (7.77 percent of total gross loans), compared with $174.4 million at September 30, 2009 (5.85 percent of total gross loans), and $121.9 million (3.62 percent of total gross loans) at December 31, 2008. The majority of the quarter-over-quarter increase in non-performing loans is attributable to an increase of approximately $20.7 million in NPLs from income-producing commercial property loans, and an increase of approximately $17.8 million in NPLs from owner-occupied business property loans. Non-performing SBA loans also increased by approximately $7.5 million compared to the prior quarter. Non-performing loans at December 31, 2009 consisted of 5.7 percent construction loans, 46.9 percent commercial and industrial (“C&I”) loans including owner/user occupied business property loans, 26.9 percent CRE loans, 16.3 percent SBA loans, 3.0 percent consumer loans, and the remaining 1.2 percent consisting of commercial lines of credit and international loans. Of the total NPL of $219.1 million, $74.0 million, or 33.8 percent, is current at December 31, 2009. Of the total NPL of $174.4 million, $51.9 million, or 29.8%, was current at September 30, 2009. Of the current NPL of $74.0 million, $35.7 million was moved to non-accrual status from accrual status due to shortfalls in collateral with negative cash flow; and of the $35.7 million that moved to non-accrual status, $7.9 million was restructured and identified as troubled debt restructured loans.

As of December 31, 2009, total non-performing assets of $245.4 million included other real estate owned assets (“OREO”) of $26.3 million compared with total non-performing assets of $201.6 million with OREO of $27.1 million at September 30, 2009, and total non-performing assets of $122.7 million with OREO of $823,000 at December 31, 2008.

The aggregate net OREO balance has shown a decreasing trend since the second quarter of 2009. The net balance decreased from $34.0 million at June 30, 2009 to $27.1 million at September 30, 2009. The balance further decreased to $26.3 million at December 31, 2009.

Capital Adequacy

The Bank’s capital ratios exceed levels defined as “adequately capitalized” by our regulators. At December 31, 2009, the Bank’s Tier 1 Leverage, Tier 1 Risk-Based Capital and Total Risk-Based Capital Ratio were 6.69 percent, 7.77 percent, and 9.07 percent, respectively, compared to 7.05 percent, 8.40 percent and 9.69 percent, respectively, at September 30, 2009. The Bank’s ratio of tangible shareholders’ equity to total tangible assets for the fourth quarter was 7.13 percent compared to 7.57 percent at September 30, 2009.

About Hanmi Financial Corporation

Headquartered in Los Angeles, Hanmi Bank, a wholly-owned subsidiary of Hanmi Financial Corporation, provides services to the multi-ethnic communities of California, with 27 full-service offices in Los Angeles, Orange, San Bernardino, San Francisco, Santa Clara and San Diego counties, and a loan production office in Washington State. Hanmi Bank specializes in commercial, SBA and trade finance lending, and is a recognized community leader. Hanmi Bank’s mission is to provide a full range of quality products and premier services to its customers and to maximize shareholder value. Additional information is available at www.hanmi.com.

Forward-Looking Statements

This release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of regulatory orders we have entered into and potential future supervisory action against us or Hanmi Bank; general economic and business conditions internationally, nationally and in those areas in which we operate; volatility and deterioration in the credit and equity markets; changes in consumer spending, borrowing and savings habits; availability of capital from private and government sources; demographic changes; competition for loans and deposits and failure to attract or retain loans and deposits; fluctuations in interest rates and a decline in the level of our interest rate spread; risks of natural disasters related to our real estate portfolio; risks associated with Small Business Administration (“SBA”) loans; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability to receive regulatory approval for Hanmi Bank to declare dividends to Hanmi Financial; adequacy of our allowance for loan losses, credit quality and the effect of credit quality on our provision for credit losses and allowance for loan losses; changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements; our ability to successfully integrate acquisitions we may make; our ability to control expenses; and changes in securities markets. In addition, we set forth certain risks in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and current and periodic reports filed with the Securities and Exchange Commission thereafter, which could cause actual results to differ from those projected. You should understand that it is not possible to predict or identify all such risks. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties. We undertake no obligation to update such forward-looking statements except as required by law.

HANMI FINANCIAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in Thousands)  

 

December 31,  

September 30,

  %   December 31,   % 2009 2009 Change 2008 Change

ASSETS

  Cash and Due from Banks $ 55,263 $ 57,727 (4.3 )% $ 83,933 (34.2 )% Interest-Bearing Deposits in Other Banks 98,847 155,607 (36.5 )% 2,014 4,808.0 % Federal Funds Sold   —     —   —     130,000   (100.0 )%   Cash and Cash Equivalents   154,110     213,334   (27.8 )%   215,947   (28.6 )%   Investment Securities 133,289 205,901 (35.3 )% 197,117 (32.4 )%   Loans: Gross Loans, Net of Deferred Loan Fees 2,819,060 2,977,504 (5.3 )% 3,362,111 (16.2 )% Allowance for Loan Losses   (144,996 )   (124,768 ) 16.2 %   (70,986 ) 104.3 %   Loans Receivable, Net   2,674,064     2,852,736   (6.3 )%   3,291,125   (18.7 )%   Due from Customers on Acceptances 994 1,859 (46.5 )% 4,295 (76.9 )% Premises and Equipment, Net 18,657 19,302 (3.3 )% 20,279 (8.0 )% Accrued Interest Receivable 9,492 11,389 (16.7 )% 12,347 (23.1 )% Other Real Estate Owned, Net 26,306 27,140 (3.1 )% 823 3,096.4 % Deferred Income Taxes, Net — 2,464 (100.0 )% 29,456 (100.0 )% Servicing Assets 3,842 3,957 (2.9 )% 3,791 1.3 % Other Intangible Assets, Net 3,382 3,736 (9.5 )% 4,950 (31.7 )% Investment in Federal Home Loan Bank Stock, at Cost 30,697 30,697 — 30,697 — Investment in Federal Reserve Bank Stock, at Cost 7,878 10,053 (21.6 )% 10,228 (23.0 )% Bank-Owned Life Insurance 26,408 26,171 0.9 % 25,476 3.7 % Income Taxes Receivable 60,162 34,908 72.3 % 11,712 413.7 % Other Assets   13,425     13,843   (3.0 )%   17,573   (23.6 )%   TOTAL ASSETS $ 3,162,706   $ 3,457,490   (8.5 )% $ 3,875,816   (18.4 )%  

LIABILITIES AND STOCKHOLDERS’ EQUITY

  Liabilities: Deposits: Noninterest-Bearing $ 556,306 $ 561,548 (0.9 )% $ 536,944 3.6 % Interest-Bearing   2,193,021     2,430,312   (9.8 )%   2,533,136   (13.4 )%   Total Deposits 2,749,327 2,991,860 (8.1 )% 3,070,080 (10.4 )%   Accrued Interest Payable 12,606 19,730 (36.1 )% 18,539 (32.0 )% Bank Acceptances Outstanding 994 1,859 (46.5 )% 4,295 (76.9 )% Federal Home Loan Bank Advances 153,978 160,828 (4.3 )% 422,196 (63.5 )% Other Borrowings 1,747 1,496 16.8 % 787 122.0 % Junior Subordinated Debentures 82,406 82,406 — 82,406 — Accrued Expenses and Other Liabilities   11,904     12,191   (2.4 )%   13,598   (12.5 )%   Total Liabilities 3,012,962 3,270,370 (7.9 )% 3,611,901 (16.6 )%   Stockholders’ Equity   149,744     187,120   (20.0 )%   263,915   (43.3 )%   TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,162,706   $ 3,457,490   (8.5 )% $ 3,875,816   (18.4 )%     HANMI FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in Thousands, Except Per Share Data)

    Three Months Ended   Year Ended Dec. 31,   Sept. 30,   %   Dec. 31,   % Dec. 31,   Dec. 31,   % 2009 2009 Change 2008 Change 2009 2008 Change INTEREST AND DIVIDEND INCOME: Interest and Fees on Loans $ 40,810 $ 42,705 (4.4 )% $ 51,305 (20.5 )% $ 173,318 $ 223,942 (22.6 )% Taxable Interest on Investment Securities

1,414

1,541 (8.2 )% 1,644 (14.0 )% 5,675 9,387 (39.5 )% Tax-Exempt Interest on Investment Securities 432 607 (28.8 )% 646 (33.1 )% 2,303 2,717 (15.2 )% Interest on Term Federal Funds Sold 30 293 (89.8 )% 43 (30.2 )% 1,718 43 3,895.3 % Dividends on Federal Reserve Bank Stock 136 150 (9.3 )% 164 (17.1 )% 592 692 (14.5 )% Interest on Federal Funds Sold and Securities Purchased Under Resale Agreements 65 67 (3.0 )% 29 124.1 % 326 166 96.4 % Interest on Interest-Bearing Deposits in Other Banks 70 68 2.9 % 5 1,300.0 % 151 10 1,410.0 % Dividends on Federal Home Loan Bank Stock   —     64   (100.0 )%   273   (100.0 )%   64     1,226   (94.8 )% Total Interest and Dividend Income   42,957     45,495   (5.6 )%   54,109   (20.6 )%   184,147     238,183   (22.7 )%   INTEREST EXPENSE: Interest on Deposits 13,410 17,365 (22.8 )% 19,654 (31.8 )% 76,246 84,353 (9.6 )% Interest on Federal Home Loan Bank Advances 412 865 (52.4 )% 2,621 (84.3 )% 3,399 14,027 (75.8 )% Interest on Junior Subordinated Debentures 690 747 (7.6 )% 1,293 (46.6 )% 3,271 5,056 (35.3 )% Interest on Other Borrowings   —     —   —     2   (100.0 )%   2     346   (99.4 )% Total Interest Expense   14,512     18,977   (23.5 )%   23,570   (38.4 )%   82,918     103,782   (20.1 )%   NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES 28,445 26,518 7.3 % 30,539 (6.9 )% 101,229 134,401 (24.7 )% — — — Provision for Credit Losses   77,000     49,500   55.6 %   25,450   202.6 %   196,387     75,676   159.5 %   NET INTEREST INCOME (LOSS) AFTER PROVISION FOR CREDIT LOSSES   (48,555 )   (22,982 ) 111.3 %   5,089   (1,054.1 )%   (95,158 )   58,725   (262.0 )%   NON-INTEREST INCOME: Service Charges on Deposit Accounts 4,022 4,275 (5.9 )% 4,559 (11.8 )% 17,054 18,463 (7.6 )% Insurance Commissions 1,062 1,063 (0.1 )% 1,174 (9.5 )% 4,492 5,067 (11.3 )% Remittance Fees 530 511 3.7 % 651 (18.6 )% 2,109 2,194 (3.9 )% Trade Finance Fees 439 512 (14.3 )% 614 (28.5 )% 1,956 3,088 (36.7 )% Other Service Charges and Fees 371 489 (24.1 )% 513 (27.7 )% 1,810 2,365 (23.5 )% Net Gain on Sales of Loans 354 864 (59.0 )% — — 1,220 765 59.5 % Bank-Owned Life Insurance Income 237 234 1.3 % 237 — 932 952 (2.1 )% Gain on Sales of Investment Securities 1,050 — — — — 2,327 618 276.5 % Loss on Sales of Investment Securities (385 ) — — (58 ) 563.8 % (494 ) (541 ) (8.7 )% Other-Than-Temporary Impairment Loss on Investment Securities — — — — — — (2,410 ) (100.0 )% Other Operating Income (Loss)   159     265   (40.0 )%   (286 ) (155.6 )%   704     1,588   (55.7 )% Total Non-Interest Income   7,839     8,213   (4.6 )%   7,404   5.9 %   32,110     32,149   (0.1 )%   NON-INTEREST EXPENSE: Salaries and Employee Benefits 8,442 8,648 (2.4 )% 8,846 (4.6 )% 33,101 42,209 (21.6 )% Occupancy and Equipment 2,733 2,834 (3.6 )% 2,798 (2.3 )% 11,239 11,158 0.7 % Deposit Insurance Premiums and Regulatory Assessments 2,998 2,001 49.8 % 1,615 85.6 % 10,418 3,713 180.6 % Data Processing 1,606 1,608 (0.1 )% 1,069 50.2 % 6,297 5,799 8.6 % Other Real Estate Owned Expense 873 3,372 (74.1 )% 249 250.6 % 5,890 390 1,410.3 % Professional Fees 1,354 1,239 9.3 % 912 48.5 % 4,099 3,539 15.8 % Advertising and Promotion 762 447 70.5 % 904 (15.7 )% 2,402 3,518 (31.7 )% Supplies and Communications 580 603 (3.8 )% 510 13.7 % 2,352 2,518 (6.6 )% Loan-Related Expense 357 192 85.9 % 221 61.5 % 1,947 790 146.5 % Amortization of Other Intangible Assets 354 379 (6.6 )% 454 (22.0 )% 1,568 1,958 (19.9 )% Other Operating Expenses 2,651 2,366 12.0 % 3,478 (23.8 )% 11,041 11,337 (2.6 )% Impairment Loss on Goodwill   —     —   —     —   —     —     107,393   (100.0 )% Total Non-Interest Expense   22,710     23,689   (4.1 )%   21,056   7.9 %   90,354     194,322   (53.5 )%   LOSS BEFORE PROVISION (BENEFIT) FOR INCOME TAXES (63,426 ) (38,458 ) 64.9 % (8,563 ) 640.7 % (153,402 ) (103,448 ) 48.3 % Provision (Benefit) for Income Taxes   (27,545 )   21,207   (229.9 )%   (4,748 ) 480.1 %   (31,125 )   (1,355 ) 2,197.0 %   NET LOSS $ (35,881 ) $ (59,665 ) (39.9 )% $ (3,815 ) 840.5 % $ (122,277 ) $ (102,093 ) 19.8 %   LOSS PER SHARE: Basic $ (0.70 ) $ (1.26 ) (44.4 )% $ (0.08 ) 775.0 % $ (2.57 ) $ (2.23 ) 15.2 % Diluted $ (0.70 ) $ (1.26 ) (44.4 )% $ (0.08 ) 775.0 % $ (2.57 ) $ (2.23 ) 15.2 %   WEIGHTED-AVERAGE SHARES OUTSTANDING: Basic 50,998,103 47,413,141 45,884,462 47,570,361 45,872,541 Diluted 50,998,103 47,413,141 45,884,462 47,570,361 45,872,541   SHARES OUTSTANDING AT PERIOD-END 51,182,390 51,201,390 45,905,549 51,182,390 45,905,549     HANMI FINANCIAL CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA (UNAUDITED) (Dollars in Thousands)   Three Months Ended   Year Ended

December 31,

 

September 30,

 

%

 

December 31,

 

%

December 31,   December 31,   % 2009 2009 Change 2008 Change 2009 2008 Change   AVERAGE BALANCES: Average Gross Loans, Net of Deferred Loan Fees $ 2,924,722 $ 3,078,104 (5.0 )% $ 3,366,601 (13.1 )% $ 3,157,133 $ 3,332,133 (5.3 )% Average Investment Securities 182,635 209,021 (12.6 )% 205,305 (11.0 )% 188,325 271,802 (30.7 )% Average Interest-Earning Assets 3,291,042 3,552,698 (7.4 )% 3,637,232 (9.5 )% 3,611,009 3,653,720 (1.2 )% Average Total Assets 3,356,383 3,672,253 (8.6 )% 3,789,435 (11.4 )% 3,717,179 3,866,856 (3.9 )% Average Deposits 2,914,794 3,100,419 (6.0 )% 2,879,674 1.2 % 3,109,322 2,913,171 6.7 % Average Borrowings 244,704 297,455 (17.7 )% 602,838 (59.4 )% 341,514 591,930 (42.3 )% Average Interest-Bearing Liabilities 2,598,520 2,844,821 (8.7 )% 2,913,723 (10.8 )% 2,909,014 2,874,470 1.2 % Average Stockholders’ Equity 164,767 232,136 (29.0 )% 271,544 (39.3 )% 225,708 323,462 (30.2 )% Average Tangible Equity 161,169 228,169 (29.4 )% 266,333 (39.5 )% 221,537 264,490 (16.2 )%     PERFORMANCE RATIOS (Annualized): Return on Average Assets (4.24 )% (6.45 )% (0.40 )% (3.29 )% (2.64 )% Return on Average Stockholders’ Equity (86.40 )% (101.97 )% (5.59 )% (54.17 )% (31.56 )% Return on Average Tangible Equity (88.33 )% (103.75 )% (5.70 )% (55.19 )% (38.60 )% Efficiency Ratio 62.59 % 68.21 % 55.49 % 67.76 % 116.67 %

Net Interest Spread(1)

2.99 % 2.47 % 2.74 % 2.28 % 2.95 %

Net Interest Margin(1)

3.46 % 3.00 % 3.38 % 2.84 % 3.72 %     ALLOWANCE FOR LOAN LOSSES: Balance at Beginning of Period $ 124,768 $ 105,268 18.5 % $ 63,948 95.1 % $ 70,986 $ 43,611 62.8 % Provision Charged to Operating Expense 77,540 49,375 57.0 % 25,660 202.2 % 196,607 73,345 168.1 % Charge-Offs, Net of Recoveries   (57,312 )   (29,875 ) 91.8 %   (18,622 ) 207.8 %   (122,597 )   (45,970 ) 166.7 % Balance at End of Period $ 144,996   $ 124,768   16.2 % $ 70,986   104.3 % $ 144,996   $ 70,986   104.3 %   Allowance for Loan Losses to Total Gross Loans 5.14 % 4.19 % 2.11 % 5.14 % 2.11 % Allowance for Loan Losses to Total Non-Performing Loans 66.19 % 71.53 % 58.23 % 66.19 % 58.23 %     ALLOWANCE FOR OFF-BALANCE SHEET ITEMS: Balance at Beginning of Period $ 4,416 $ 4,291 2.9 % $ 4,306 2.6 % $ 4,096 $ 1,765 132.1 % Provision Charged to Operating Expense   (540 )   125   (532.0 )%   (210 ) 153.3 %   (220 )   2,331   (109.4 )% Balance at End of Period $ 3,876   $ 4,416   (12.2 )% $ 4,096   (5.4 )% $ 3,876   $ 4,096   (5.4 )%

 

(1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

   

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2008

Change

  NON-PERFORMING ASSETS: Non-Accrual Loans $ 219,000 $ 174,363 25.6 % $ 120,823 81.3 % Loans 90 Days or More Past Due and Still Accruing   67     64   4.7 %   1,075   (93.8 )% Total Non-Performing Loans 219,067 174,427 25.6 % 121,898 79.7 % Other Real Estate Owned, Net   26,306     27,140   (3.1 )%   823   3,096.4 % Total Non-Performing Assets $ 245,373   $ 201,567   21.7 % $ 122,721   99.9 %   Total Non-Performing Loans/Total Gross Loans 7.77 % 5.85 % 3.62 % Total Non-Performing Assets/Total Assets 7.76 % 5.83 % 3.17 % Total Non-Performing Assets/Allowance for Loan Losses 169.2 % 161.6 % 172.9 %   DELINQUENT LOANS $ 186,257   $ 151,047   23.3 % $ 128,469   45.0 %   Delinquent Loans/Total Gross Loans 6.60 % 5.07 % 3.82 %   LOAN PORTFOLIO: Real Estate Loans $ 1,043,097 $ 1,086,735 (4.0 )% $ 1,180,114 (11.6 )% Commercial and Industrial Loans 1,714,212 1,824,042 (6.0 )% 2,099,732 (18.4 )% Consumer Loans   63,303     68,537   (7.6 )%   83,525   (24.2 )% Total Gross Loans 2,820,612 2,979,314 (5.3 )% 3,363,371 (16.1 )% Deferred Loan Fees   (1,552 )   (1,810 ) (14.3 )%   (1,260 ) 23.2 % Gross Loans, Net of Deferred Loan Fees 2,819,060 2,977,504 (5.3 )% 3,362,111 (16.2 )% Allowance for Loan Losses   (144,996 )   (124,768 ) 16.2 %   (70,986 ) 104.3 % Loans Receivable, Net $ 2,674,064   $ 2,852,736   (6.3 )% $ 3,291,125   (18.7 )%   LOAN MIX: Real Estate Loans 37.0 % 36.5 % 35.1 % Commercial and Industrial Loans 60.8 % 61.2 % 62.4 % Consumer Loans   2.2 %   2.3 %   2.5 % Total Gross Loans   100.0 %   100.0 %   100.0 %   DEPOSIT PORTFOLIO: Demand - Noninterest-Bearing $ 556,306 $ 561,548 (0.9 )% $ 536,944 3.6 % Savings 111,172 98,019 13.4 % 81,869 35.8 % Money Market Checking and NOW Accounts 685,858 723,585 (5.2 )% 370,401 85.2 % Time Deposits of $100,000 or More 815,190 845,318 (3.6 )% 849,800 (4.1 )% Other Time Deposits   580,801     763,390   (23.9 )%   1,231,066   (52.8 )% Total Deposits $ 2,749,327   $ 2,991,860   (8.1 )% $ 3,070,080   (10.4 )%   DEPOSIT MIX: Demand - Noninterest-Bearing 20.2 % 18.8 % 17.5 % Savings 4.0 % 3.3 % 2.7 % Money Market Checking and NOW Accounts 24.9 % 24.2 % 12.1 % Time Deposits of $100,000 or More 29.7 % 28.3 % 27.7 % Other Time Deposits   21.2 %   25.4 %   40.0 % Total Deposits   100.0 %   100.0 %   100.0 %   CAPITAL RATIOS (Bank Only): Total Risk-Based 9.07 % 9.69 % 10.71 % Tier 1 Risk-Based 7.77 % 8.40 % 9.44 % Tier 1 Leverage 6.69 % 7.05 % 8.85 %     HANMI FINANCIAL CORPORATION AND SUBSIDIARIES AVERAGE BALANCES, AVERAGE YIELDS EARNED AND AVERAGE RATES PAID (UNAUDITED) (Dollars in Thousands)   Three Months Ended   Year Ended December 31, 2009   September 30, 2009  

December 31, 2008

December 31, 2009   December 31, 2008

AverageBalance

 

Interest Income/Expense

 

Average Yield/Rate

 

AverageBalance

 

Interest Income/Expense

 

Average Yield/Rate

 

AverageBalance

 

Interest Income/Expense

 

Average Yield/Rate

AverageBalance

 

Interest Income/Expense

 

Average Yield/Rate

 

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Average Yield/Rate

INTEREST-EARNING ASSETS   Loans: Real Estate Loans: Commercial Property $ 861,831 $ 11,872 5.47 % $ 887,028 $ 12,051 5.39 % $ 902,367 $ 14,074 6.20 % $ 894,408 $ 49,901 5.58 % $ 841,526 $ 56,968 6.77 % Construction 130,400 1,342 4.08 % 138,340 1,464 4.20 % 186,080 1,881 4.02 % 156,619 5,947 3.80 % 202,879 9,962 4.91 % Residential Property   80,257     997 4.93 %   83,387     1,050 5.00 %   91,366     1,174 5.11 %   85,228     4,329 5.08 %   90,395     4,758 5.26 % Total Real Estate Loans 1,072,488 14,211 5.26 % 1,108,755 14,565 5.21 % 1,179,813 17,129 5.78 % 1,136,255 60,177 5.30 % 1,134,800 71,688 6.32 % Commercial and Industrial Loans 1,787,795 25,472 5.65 % 1,897,321 26,863 5.62 % 2,104,820 32,691 6.18 % 1,947,669 108,346 5.56 % 2,112,421 145,107 6.87 % Consumer Loans   66,074     965 5.79 %   73,670     1,084 5.84 %   83,411     1,353 6.45 %   74,700     4,310 5.77 %   86,787     6,142 7.08 % Total Gross Loans 2,926,357 40,648 5.51 % 3,079,746 42,512 5.48 % 3,368,044 51,173 6.04 % 3,158,624 172,833 5.47 % 3,334,008 222,937 6.69 % Prepayment Penalty Income — 162 — —

193

—

— 132 — — 485 — — 1,005 — Unearned Income on Loans, Net of Costs   (1,635 )   —

—

 

 

  (1,642 )   — —     (1,443 )   — —     (1,491 )   — —     (1,875 )   — —   Gross Loans, Net   2,924,722     40,810 5.54 %   3,078,104     42,705 5.50 %   3,366,601     51,305 6.06 %   3,157,133     173,318 5.49 %   3,332,133     223,942 6.72 %   Investment Securities:

Municipal Bonds(1)

41,653 665 6.39 % 58,179 933 6.41 % 59,718 994 6.66 % 54,448 3,543 6.51 % 63,918 4,180 6.54 % U.S. Government Agency Securities 36,500 437 4.79 % 37,969 431 4.54 % 21,720 201 3.70 % 24,417 1,108 4.54 % 65,440 2,813 4.35 % Mortgage-Backed Securities 77,354 738 3.82 % 82,429 807 3.92 % 79,821 971 4.87 % 77,627 3,320 4.28 % 87,930 4,217 4.77 % Collateralized Mortgage Obligations 14,312 143 4.00 % 17,066 173 4.05 % 37,853 403 4.26 % 21,365 879 4.11 % 43,842 1,865 4.25 % Corporate Bonds 286 — 0.00 % 401 — 0.00 % 1,688 46 10.90 % 271 — 0.00 % 6,671 333 4.59 % Other Securities   12,530     97 3.10 %   12,977     130 4.01 %   4,505     23 2.04 %   10,197     369 3.62 %   4,001     159 4.73 %

Total Investment Securities(1)

  182,635     2,080 4.56 %   209,021     2,474 4.73 %   205,305     2,638 5.14 %   188,325     9,219 4.90 %   271,802     13,567 4.99 %   Other Interest-Earning Assets: Equity Securities 40,605 136 1.34 % 41,741 214 2.05 % 42,551 437 4.11 % 41,399 656 1.58 % 38,516 1,918 4.98 % Federal Funds Sold and Securities Purchased Under Resale Agreements 51,713 65 0.50 % 56,568 67 0.47 % 14,410 29 0.80 % 84,363 326 0.39 % 8,934 166 1.86 % Term Federal Funds Sold 8,500 30 1.41 % 90,239 293 1.30 % 7,609 43 2.26 % 95,822 1,718 1.79 % 1,913 43 2.25 % Interest-Bearing Deposits in Other Banks   82,867     70 0.34 %   77,025     68 0.35 %   756     5 2.65 %   43,967     151 0.34 %   422     10 2.37 % Total Other Interest-Earning Assets   183,685     301 0.66 %   265,573     642 0.97 %   65,326     514 3.15 %   265,551     2,851 1.07 %   49,785     2,137 4.29 %  

TOTAL INTEREST-EARNING ASSETS(1)

$ 3,291,042   $ 43,191 5.21 % $ 3,552,698   $ 45,821 5.12 % $ 3,637,232   $ 54,457 5.96 % $ 3,611,009   $ 185,388 5.13 % $ 3,653,720   $ 239,646 6.56 %   INTEREST-BEARING LIABILITIES   Interest-Bearing Deposits: Savings $ 104,068 $ 711 2.71 % $ 93,404 $ 585 2.48 % $ 83,777 $ 506 2.40 % $ 91,089 $ 2,328 2.56 % $ 89,866 $ 2,093 2.33 % Money Market Checking and NOW Accounts 733,063 3,508 1.90 % 629,124 2,998 1.89 % 506,062 3,963 3.12 % 507,619 9,786 1.93 % 618,779 19,909 3.22 % Time Deposits of $100,000 or More 835,726 4,930 2.34 % 983,341 7,447 3.00 % 754,081 8,162 4.31 % 1,051,994 34,807 3.31 % 1,045,968 43,598 4.17 % Other Time Deposits   680,959     4,261 2.48 %   841,497     6,335 2.99 %   966,965     7,023 2.89 %   916,798     29,325 3.20 %   527,927     18,753 3.55 % Total Interest-Bearing Deposits   2,353,816     13,410 2.26 %   2,547,366     17,365 2.70 %   2,310,885     19,654 3.38 %   2,567,500     76,246 2.97 %   2,282,540     84,353 3.70 %   Borrowings: FHLB Advances 160,754 412 1.02 % 213,583 865 1.61 % 518,058 2,620 2.01 % 257,529 3,399 1.32 % 498,875 14,026 2.81 % Other Borrowings 1,544 — 0.00 % 1,466 — 0.00 % 2,374 3 0.50 % 1,579 2 0.13 % 10,649 347 3.26 % Junior Subordinated Debentures   82,406     690 3.32 %   82,406     747 3.60 %   82,406     1,293 6.24 %   82,406     3,271 3.97 %   82,406     5,056 6.14 % Total Borrowings   244,704     1,102 1.79 %   297,455     1,612 2.15 %   602,838     3,916 2.58 %   341,514     6,672 1.95 %   591,930     19,429 3.28 %   TOTAL INTEREST-BEARING LIABILITIES $ 2,598,520   $ 14,512 2.22 % $ 2,844,821   $ 18,977 2.65 % $ 2,913,723   $ 23,570 3.22 % $ 2,909,014   $ 82,918 2.85 % $ 2,874,470   $ 103,782 3.61 %  

NET INTEREST INCOME(1)

$ 28,679 $ 26,844 $ 30,887 $ 102,470 $ 135,864  

NET INTEREST SPREAD(1)

2.99 % 2.47 % 2.74 % 2.28 % 2.95 %  

NET INTEREST MARGIN(1)

3.46 % 3.00 % 3.38 % 2.84 % 3.72 %  

(1) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.