ITEM 2.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following is managements discussion and analysis of the major factors that influenced our results of operations and financial
condition as of and for the three months ended March 31, 2013. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012 (the 2012 Annual Report on Form 10-K) and with
the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 (this Report).
FORWARD-LOOKING STATEMENTS
Some of the statements under
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
and elsewhere in this Report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements in this Report other than statements of historical fact are forward looking statements for purposes of federal
and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure
plans, capital and financing needs, plan and availability, plans and objectives of management for future operations, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. 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 to support our operations;
|
|
|
|
a significant number of customers failing to perform under their loans or other extensions of credit;
|
|
|
|
fluctuations in interest rates and a decline in the level of our interest rate spread;
|
|
|
|
failure to attract or retain deposits and restrictions on taking brokered deposits;
|
|
|
|
sources of liquidity available to us and to Hanmi Bank becoming limited or our potential inability to access sufficient sources of liquidity when
needed or the requirement that we obtain government waivers to do so;
|
|
|
|
adverse changes in domestic or global financial markets, economic conditions or business conditions;
|
|
|
|
regulatory restrictions on Hanmi Banks ability to pay dividends to us and on our ability to make payments on our obligations;
|
|
|
|
significant reliance on loans secured by real estate and the associated vulnerability to downturns in the local real estate market, natural disasters
and other variables impacting the value of real estate;
|
|
|
|
our use of appraisals in deciding whether to make loans secured by real property, which does not ensure that the value of the real property collateral
will be sufficient to pay our loans;
|
|
|
|
failure to attract or retain our key employees;
|
|
|
|
credit quality and the effect of credit quality on our provision for credit losses and allowance for loan losses;
|
|
|
|
volatility and disruption in financial, credit and securities markets, and the price of our common stock;
|
|
|
|
deterioration in financial markets that may result in impairment charges relating to our securities portfolio;
|
|
|
|
competition and demographic changes in our primary market areas;
|
|
|
|
global hostilities, acts of war or terrorism, including but not limited to, conflict between North Korea and South Korea;
|
|
|
|
the effects of litigation against us;
|
|
|
|
significant government regulations, legislation and potential changes thereto, including as a result of the Dodd-Frank Act; and
|
|
|
|
other risks described herein and in the other reports we file with the Securities and Exchange Commission;
|
For a discussion of some of the other factors that might cause such a difference, see the discussion contained in this Report under the
heading Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. Also see Item 1A. Risk Factors, Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations-Interest Rate Risk Management and Capital Resources and Liquidity in our 2012 Annual Report on Form 10-K, as well as other factors we identify from time to time in our periodic reports, including our Quarterly
Reports on Form 10-Q, filed pursuant to the Exchange Act. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date, on which such statements were made, except as required by
law.
33
CRITICAL ACCOUNTING POLICIES
We have established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to
Consolidated Financial Statements in our 2012 Annual Report on Form 10-K. Certain accounting policies require us to make significant estimates and assumptions that have a material impact on the carrying value of certain assets and liabilities,
and we consider these critical accounting policies. For a description of these critical accounting policies, see Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting
Policies in our 2012 Annual Report on Form 10-K. We use estimates and assumptions based on historical experience and other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these
estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods. Management has discussed the development and selection
of these critical accounting policies with the Audit Committee of Hanmi Financials Board of Directors.
34
SELECTED FINANCIAL DATA
The following tables set forth certain selected financial data for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
As of and For the
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In Thousands, Except Per Share Data)
|
|
AVERAGE BALANCES:
|
|
|
|
|
|
|
|
|
Average Gross Loans, Net
(1)
|
|
$
|
2,073,514
|
|
|
$
|
1,985,071
|
|
Average Investment Securities
|
|
|
443,073
|
|
|
|
426,384
|
|
Average Interest-Earning Assets
|
|
|
2,693,424
|
|
|
|
2,676,643
|
|
Average Total Assets
|
|
|
2,829,927
|
|
|
|
2,742,006
|
|
Average Deposits
|
|
|
2,348,799
|
|
|
|
2,337,302
|
|
Average Borrowings
|
|
|
79,110
|
|
|
|
85,665
|
|
Average Interest-Bearing Liabilities
|
|
|
1,727,272
|
|
|
|
1,777,208
|
|
Average Stockholders Equity
|
|
|
383,003
|
|
|
|
289,132
|
|
PER SHARE DATA:
|
|
|
|
|
|
|
|
|
Earnings Per ShareBasic
|
|
$
|
0.32
|
|
|
$
|
0.23
|
|
Earnings Per ShareDiluted
|
|
$
|
0.32
|
|
|
$
|
0.23
|
|
Common Shares Outstanding
|
|
|
31,588,767
|
|
|
|
31,489,201
|
|
Book Value Per Share
(2)
|
|
$
|
12.32
|
|
|
$
|
9.33
|
|
PERFORMANCE RATIOS:
|
|
|
|
|
|
|
|
|
Return on Average Assets
(3) (4)
|
|
|
1.45
|
%
|
|
|
1.08
|
%
|
Return on Average Stockholders Equity
(3) (5)
|
|
|
10.71
|
%
|
|
|
10.21
|
%
|
Efficiency Ratio
(6)
|
|
|
56.44
|
%
|
|
|
66.56
|
%
|
Net Interest Spread
(7)
|
|
|
3.54
|
%
|
|
|
3.26
|
%
|
Net Interest Margin
(8)
|
|
|
3.86
|
%
|
|
|
3.69
|
%
|
Average Stockholders Equity to Average Total Assets
|
|
|
13.53
|
%
|
|
|
10.54
|
%
|
SELECTED CAPITAL RATIOS:
(9)
|
|
|
|
|
|
|
|
|
Total Risk-Based Capital Ratio:
|
|
|
|
|
|
|
|
|
Hanmi Financial
|
|
|
19.45
|
%
|
|
|
18.74
|
%
|
Hanmi Bank
|
|
|
18.69
|
%
|
|
|
17.74
|
%
|
Tier 1 Risk-Based Capital Ratio:
|
|
|
|
|
|
|
|
|
Hanmi Financial
|
|
|
18.17
|
%
|
|
|
17.46
|
%
|
Hanmi Bank
|
|
|
17.42
|
%
|
|
|
16.45
|
%
|
Tier 1 Leverage Ratio:
|
|
|
|
|
|
|
|
|
Hanmi Financial
|
|
|
14.68
|
%
|
|
|
13.44
|
%
|
Hanmi Bank
|
|
|
14.07
|
%
|
|
|
12.67
|
%
|
ASSET QUALITY RATIOS:
|
|
|
|
|
|
|
|
|
Non-Performing Loans to Gross Loans
(10)
|
|
|
1.55
|
%
|
|
|
2.54
|
%
|
Non-Performing Assets to Total Assets
(11)
|
|
|
1.21
|
%
|
|
|
1.86
|
%
|
Net Loan Charge-Offs to Average Gross Loans
(12)
|
|
|
0.45
|
%
|
|
|
2.27
|
%
|
Allowance for Loan Losses to Gross Loans
|
|
|
2.88
|
%
|
|
|
4.10
|
%
|
Allowance for Loan Losses to Total Non-Performing Loans
|
|
|
186.03
|
%
|
|
|
161.41
|
%
|
(1)
|
Loans are net of deferred fees and related direct costs
|
(2)
|
Total stockholders equity divided by common shares outstanding
|
(3)
|
Calculation based on annualized net income
|
(4)
|
Net income divided by average total assets
|
(5)
|
Net income divided by average stockholders equity
|
(6)
|
Total non-interest expenses divided by the sum of net interest income before provision for credit losses and total non-interest income
|
(7)
|
Average yield earned on interest-earning assets less average rate paid on interest-bearing liabilities. Computed on a tax-equivalent basis using an effective
marginal rate of 35 percent
|
(8)
|
Net interest income before provision for credit losses divided by average interest-earning assets. Computed on a tax-equivalent basis using an effective marginal
rate of 35 percent
|
(9)
|
The required ratios for a well-capitalized institution, as defined by regulations of the Board of Governors of the Federal Reserve System, are 10 percent
for the Total Risk-Based Capital Ratio (total capital divided by total risk-weighted assets); 6 percent for the Tier 1 Risk-Based Capital Ratio (Tier 1 capital divided by total risk-weighted assets); and 5 percent for the Tier 1 Leverage Ratio (Tier
1 capital divided by average total assets)
|
(10)
|
Non-performing loans consist of non-accrual loans and loans past due 90 days or more and still accruing interest
|
(11)
|
Non-performing assets consist of non-performing loans (see footnote (10) above) and other real estate owned
|
(12)
|
Calculation based on annualized net loan charge-offs
|
35
Non-GAAP Financial Measures
Tangible Stockholders Equity to Tangible Assets Ratio
The ratio of
tangible stockholders equity to tangible assets is supplemental financial information determined by a method other than in accordance with GAAP. This non-GAAP measure is used by management in the analysis of Hanmi Banks capital strength.
Tangible equity is calculated by subtracting goodwill and other intangible assets from total stockholders equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from total stockholders
equity when assessing the capital adequacy of a financial institution. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper
understanding of the capital strength of Hanmi Financial and the Bank. This disclosure should not be viewed as a substitution for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may
be presented by other companies.
The following table reconciles this non-GAAP performance measure to the GAAP performance
measure for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In Thousands)
|
|
HANMI FINANCIAL CORPORATION
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,792,423
|
|
|
$
|
2,771,471
|
|
Less Other Intangible Assets
|
|
|
(1,294
|
)
|
|
|
(1,462
|
)
|
|
|
|
|
|
|
|
|
|
Tangible Assets
|
|
$
|
2,791,129
|
|
|
$
|
2,770,009
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
$
|
389,105
|
|
|
$
|
293,718
|
|
Less Other Intangible Assets
|
|
|
(1,294
|
)
|
|
|
(1,462
|
)
|
|
|
|
|
|
|
|
|
|
Tangible Stockholders Equity
|
|
$
|
387,811
|
|
|
$
|
292,256
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity to Total Assets Ratio
|
|
|
13.93
|
%
|
|
|
10.60
|
%
|
Tangible Common Equity to Tangible Assets Ratio
|
|
|
13.89
|
%
|
|
|
10.55
|
%
|
Common Shares Outstanding
|
|
|
31,588,767
|
|
|
|
31,489,201
|
|
Tangible Common Equity Per Common Share
|
|
$
|
12.28
|
|
|
$
|
9.28
|
|
|
|
|
|
As of March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In Thousands)
|
|
HANMI BANK
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,786,691
|
|
|
$
|
2,766,780
|
|
Less Other Intangible Assets
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Tangible Assets
|
|
$
|
2,786,691
|
|
|
$
|
2,766,777
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
$
|
420,755
|
|
|
$
|
351,677
|
|
Less Other Intangible Assets
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Tangible Stockholders Equity
|
|
$
|
420,755
|
|
|
$
|
351,674
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity to Total Assets Ratio
|
|
|
15.10
|
%
|
|
|
12.71
|
%
|
Tangible Common Equity to Tangible Assets Ratio
|
|
|
15.10
|
%
|
|
|
12.71
|
%
|
36
EXECUTIVE OVERVIEW
For the first quarter ended March 31, 2013, we recognized consolidated net income of $10.1 million, or $0.32 per diluted share, compared to consolidated net income of $7.3 million, or $0.23 per
diluted share, for the first quarter ended March 31, 2012.
|
|
|
Net interest margin was 3.86% in the first quarter of 2013, compared to 3.69% in the first quarter of 2012. Yields on earning assets fell 13 basis
points, while cost of deposits continued to improve by 30 basis points.
|
|
|
|
New loan production in the first quarter of 2013 totaled $178.6 million.
|
|
|
|
Asset quality improved during the first quarter of 2013, with lower levels of non-performing assets, which were 1.21% of total assets, and with
continuing improvements in net charge-offs, which totaled $2.3 million, or 0.45% of average gross loans.
|
|
|
|
Operating efficiency improved to 56.44% during the first quarter of 2013, down from 57.66% during the fourth quarter of 2012, and 66.56% during the
first quarter of 2012, reflecting higher revenues and lower overall operating costs.
|
|
|
|
The redemption of $30.9 million of TPS was completed on March 15, 2013 and the remaining $51.5 million of TPS was fully paid by the end of April
2013.
|
Outlook for fiscal 2013
With strong asset quality and the lifting of bank regulatory enforcement requirements, we believe that we are well positioned to take on
the following strategic goals in 2013.
First, our primary focus is to strengthen our operating efficiency through strategic
cost management and active cross-selling, while deploying our surplus cash through quality loan production. This will be our platform for organic growth and profitability in this new banking era.
Second, we want to increase our marketing and sales competitiveness by retaining, attracting and rewarding talented employees, with a
strong focus on relationship-based banking, further enabling us to offer value-added services and products to our customers.
Third, given that our market will continue to evolve and be highly competitive, we want to patiently explore various strategic options to
select the right direction that will create the highest stockholders value.
RESULTS OF OPERATIONS
Net Interest Income
Our primary source of revenue is net interest income, which is the difference between interest and fees derived from earning assets, and interest paid on liabilities obtained to fund those
assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on
assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on our loans are affected principally by changes to interest rates, the demand for such loans, the supply of money available for lending purposes, and
other competitive factors. Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies,
governmental budgetary matters, and the actions of the Federal Reserve Board.
37
The following table shows the average balances of assets, liabilities and stockholders
equity; the amount of interest income and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin for the periods indicated.
All average balances are daily average balances.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
|
|
|
|
|
Interest
|
|
|
Average
|
|
|
|
|
|
Interest
|
|
|
Average
|
|
|
|
Average
|
|
|
Income /
|
|
|
Yield /
|
|
|
Average
|
|
|
Income /
|
|
|
Yield /
|
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
|
(In Thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Loans, Net of Deferred Loan Fees
(1)
|
|
$
|
2,073,514
|
|
|
$
|
26,799
|
|
|
|
5.24
|
%
|
|
$
|
1,985,071
|
|
|
$
|
27,542
|
|
|
|
5.58
|
%
|
Municipal SecuritiesTaxable
|
|
|
46,111
|
|
|
|
454
|
|
|
|
3.94
|
%
|
|
|
44,888
|
|
|
|
446
|
|
|
|
3.97
|
%
|
Municipal SecuritiesTax Exempt
(2)
|
|
|
12,803
|
|
|
|
146
|
|
|
|
4.57
|
%
|
|
|
13,283
|
|
|
|
157
|
|
|
|
4.73
|
%
|
Obligations of Other U.S. Government Agencies
|
|
|
88,982
|
|
|
|
422
|
|
|
|
1.90
|
%
|
|
|
73,446
|
|
|
|
325
|
|
|
|
1.77
|
%
|
Other Debt Securities
|
|
|
295,177
|
|
|
|
1,240
|
|
|
|
1.68
|
%
|
|
|
294,767
|
|
|
|
1,327
|
|
|
|
1.80
|
%
|
Equity Securities
|
|
|
30,336
|
|
|
|
291
|
|
|
|
3.84
|
%
|
|
|
31,255
|
|
|
|
157
|
|
|
|
2.01
|
%
|
Federal Funds Sold
|
|
|
5,963
|
|
|
|
6
|
|
|
|
0.41
|
%
|
|
|
1,852
|
|
|
|
2
|
|
|
|
0.43
|
%
|
Term Federal Funds Sold
|
|
|
|
|
|
|
|
|
|
|
0.00
|
%
|
|
|
126,484
|
|
|
|
325
|
|
|
|
1.03
|
%
|
Interest-Bearing Deposits in Other Banks
|
|
|
140,538
|
|
|
|
88
|
|
|
|
0.25
|
%
|
|
|
105,597
|
|
|
|
68
|
|
|
|
0.26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest-Earning Assets
|
|
|
2,693,424
|
|
|
|
29,446
|
|
|
|
4.43
|
%
|
|
|
2,676,643
|
|
|
|
30,349
|
|
|
|
4.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
66,166
|
|
|
|
|
|
|
|
|
|
|
|
69,152
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
(62,639
|
)
|
|
|
|
|
|
|
|
|
|
|
(88,024
|
)
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
132,976
|
|
|
|
|
|
|
|
|
|
|
|
84,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Noninterest-Earning Assets
|
|
|
136,503
|
|
|
|
|
|
|
|
|
|
|
|
65,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
2,829,927
|
|
|
|
|
|
|
|
|
|
|
$
|
2,742,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
114,182
|
|
|
$
|
458
|
|
|
|
1.63
|
%
|
|
$
|
105,676
|
|
|
$
|
583
|
|
|
|
2.22
|
%
|
Money Market Checking and NOW Accounts
|
|
|
567,977
|
|
|
|
720
|
|
|
|
0.51
|
%
|
|
|
465,664
|
|
|
|
676
|
|
|
|
0.58
|
%
|
Time Deposits of $100,000 or More
|
|
|
595,205
|
|
|
|
1,175
|
|
|
|
0.80
|
%
|
|
|
782,562
|
|
|
|
2,748
|
|
|
|
1.41
|
%
|
Other Time Deposits
|
|
|
370,798
|
|
|
|
806
|
|
|
|
0.88
|
%
|
|
|
337,641
|
|
|
|
912
|
|
|
|
1.09
|
%
|
FHLB Advances
|
|
|
2,890
|
|
|
|
38
|
|
|
|
5.33
|
%
|
|
|
3,259
|
|
|
|
43
|
|
|
|
5.31
|
%
|
Junior Subordinated Debentures
|
|
|
76,220
|
|
|
|
594
|
|
|
|
3.16
|
%
|
|
|
82,406
|
|
|
|
799
|
|
|
|
3.90
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest-Bearing Liabilities
|
|
|
1,727,272
|
|
|
|
3,791
|
|
|
|
0.89
|
%
|
|
|
1,777,208
|
|
|
|
5,761
|
|
|
|
1.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposits
|
|
|
700,637
|
|
|
|
|
|
|
|
|
|
|
|
645,759
|
|
|
|
|
|
|
|
|
|
Other Liabilities
|
|
|
19,015
|
|
|
|
|
|
|
|
|
|
|
|
29,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Noninterest-Bearing Liabilities
|
|
|
719,652
|
|
|
|
|
|
|
|
|
|
|
|
675,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
2,446,924
|
|
|
|
|
|
|
|
|
|
|
|
2,452,874
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
383,003
|
|
|
|
|
|
|
|
|
|
|
|
289,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
$
|
2,829,927
|
|
|
|
|
|
|
|
|
|
|
$
|
2,742,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME
|
|
|
$
|
25,655
|
|
|
|
|
|
|
|
|
|
|
$
|
24,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF DEPOSITS
|
|
|
|
0.55
|
%
|
|
|
|
|
|
|
|
|
|
|
0.85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST SPREAD
(3)
|
|
|
|
3.54
|
%
|
|
|
|
|
|
|
|
|
|
|
3.26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST MARGIN
(4)
|
|
|
|
3.86
|
%
|
|
|
|
|
|
|
|
|
|
|
3.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Loans are net of deferred fees and related direct costs, but excluding the allowance for loan losses. Non-accrual loans are included in the average loan balance.
Loan fees have been included in the calculation of interest income. Loan fees were $661,000 and $307,000 for the three months ended March 31, 2013 and 2012, respectively.
|
(2)
|
Computed on a tax-equivalent basis using an effective marginal rate of 35 percent.
|
(3)
|
Represents the average rate earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
|
(4)
|
Represents annualized net interest income as a percentage of average interest-earning assets.
|
38
The table below shows changes in interest income and interest expense and the amounts
attributable to variations in interest rates and volumes for the periods indicated. The variances attributable to simultaneous volume and rate changes have been allocated to the change due to volume and the change due to rate categories in
proportion to the relationship of the absolute dollar amount attributable solely to the change in volume and to the change in rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2013 vs.
|
|
|
|
Three Months Ended March 31, 2012
|
|
|
|
Increases (Decreases) Due to Change In
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
Interest and Dividend Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Loans, Net of Deferred Loan Fees
|
|
$
|
1,087
|
|
|
$
|
(1,830
|
)
|
|
$
|
(743
|
)
|
Municipal SecuritiesTaxable
|
|
|
12
|
|
|
|
(4
|
)
|
|
|
8
|
|
Municipal SecuritiesTax Exempt
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
|
(11
|
)
|
Obligations of Other U.S. Government Agencies
|
|
|
73
|
|
|
|
24
|
|
|
|
97
|
|
Other Debt Securities
|
|
|
2
|
|
|
|
(89
|
)
|
|
|
(87
|
)
|
Equity Securities
|
|
|
(5
|
)
|
|
|
139
|
|
|
|
134
|
|
Federal Funds Sold
|
|
|
4
|
|
|
|
(0
|
)
|
|
|
4
|
|
Term Federal Funds Sold
|
|
|
(163
|
)
|
|
|
(162
|
)
|
|
|
(325
|
)
|
Interest-Bearing Deposits in Other Banks
|
|
|
21
|
|
|
|
(1
|
)
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest and Dividend Income
|
|
$
|
1,025
|
|
|
$
|
(1,928
|
)
|
|
$
|
(903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
43
|
|
|
$
|
(168
|
)
|
|
$
|
(125
|
)
|
Money Market Checking and NOW Accounts
|
|
|
132
|
|
|
|
(88
|
)
|
|
|
44
|
|
Time Deposits of $100,000 or More
|
|
|
(561
|
)
|
|
|
(1,012
|
)
|
|
|
(1,573
|
)
|
Other Time Deposits
|
|
|
80
|
|
|
|
(186
|
)
|
|
|
(106
|
)
|
FHLB Advances
|
|
|
(5
|
)
|
|
|
0
|
|
|
|
(5
|
)
|
Junior Subordinated Debentures
|
|
|
(58
|
)
|
|
|
(147
|
)
|
|
|
(205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest Expense
|
|
$
|
(369
|
)
|
|
$
|
(1,601
|
)
|
|
$
|
(1,970
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Net Interest Income
|
|
$
|
1,394
|
|
|
$
|
(327
|
)
|
|
$
|
1,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2013 and 2012, net interest income before credit losses on a
tax-equivalent basis was $25.7 million and $24.6 million, respectively. Interest income decreased 3.0 percent to $29.4 million for the three months ended March 31, 2013 from $30.3 million for the same period in 2012. Interest expense decreased
$2.0 million, or 34.2 percent, to $3.8 million for the three months ended March 31, 2013 compared to $5.8 million for the same period in 2012. The increase in net interest income was primarily attributable to lower deposit costs resulting from
the replacement of high-cost time deposits with low-cost deposit products. The net interest spread and net interest margin for the three months ended March 31, 2013 were 3.54 percent and 3.86 percent, respectively, compared to 3.26 percent and
3.69 percent, respectively, for the three months ended March 31, 2012.
Average gross loans increased by $88.4 million,
or 4.5 percent, to $2.07 billion for the three months ended March 31, 2013 from $1.99 billion for the same period in 2012. Average investment securities increased by $16.7 million, or 3.9 percent, to $443.1 million for the three months ended
March 31, 2013 from $426.4 million for the same period in 2012. Average interest-earning assets increased by $16.8 million, or 0.6 percent, to $2.69 billion for the three months ended March 31, 2013 from $2.68 billion for the same period
in 2012. The increase in average interest-earning assets was mainly due to an increase in new loan production. The average balance of our interest bearing liabilities decreased $49.9 million to $1.73 billion for the three months ended March 31,
2013, compared to $1.78 billion for the same period in 2012. The decrease is attributable to the Companys strategy of lowering overall cost of funds by allowing higher cost deposits to run off (i.e., not renew) when they mature. Total
cost of interest bearing liabilities decreased to 0.89 percent for the three months ended March 31, 2013 from 1.30 percent for the same period in 2012. The decline in cost of funds resulted from an improved deposits mix and reduced
interest rates on deposits during the first three months of 2013, and the reduction of higher cost time and money market deposits in 2012.
The average yield on interest-earning assets decreased by 13 basis points to 4.43 percent for the three months ended March 31, 2013, from 4.56 percent for the same period in 2012, due primarily to
lower yields on loans and interest-earning cash. Yield on average total investment securities and other earning assets increased to 1.71 percent for the three months ended March 31, 2013 from 1.62 percent for the same period in 2012. The
increase was due mainly to the increase in dividends from Federal Home Loan Bank stock. The average yield on loans decreased to 5.24 percent for the three months ended March 31, 2013 from 5.58 percent for the same period in 2012. The decrease
in loan yields was attributable to new loans originated at lower yields due to low loan rates and high competition in the market. The average cost on interest-bearing liabilities decreased by 41 basis points to 0.89 percent for the three months
ended March 31, 2013 from 1.30 percent for the same period in 2012. This decrease was due primarily to a continued shift in funding sources toward lower-cost funds through disciplined deposit pricing while reducing wholesale funds and rate
sensitive deposits. There were no brokered deposits for the three months ended March 31, 2013 and 2012.
39
Provision for Credit Losses
For the three months ended March 31, 2013 and 2012, the provisions for credit losses were zero and $2.0 million, respectively. Net
charge-offs decreased by $9.0 million, or 79.5 percent, to $2.3 million for the three months ended March 31, 2013 from $11.3 million for the same period in 2012. Non-performing loans decreased to $32.9 million at March 31, 2013 from $50.2
million at March 31, 2012, representing 1.55 percent and 2.54 percent of gross loans, respectively. See Financial ConditionNon-Performing Assets and Financial ConditionAllowance for Loan Losses and
Allowance for Off-Balance Sheet Items for further details.
Non-Interest Income
The following table sets forth the various components of non-interest income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Increase (Decrease)
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
Percentage
|
|
|
|
(In Thousands)
|
|
Service Charges on Deposit Accounts
|
|
$
|
3,048
|
|
|
$
|
3,168
|
|
|
$
|
(120
|
)
|
|
|
-3.79
|
%
|
Insurance Commissions
|
|
|
1,213
|
|
|
|
1,236
|
|
|
|
(23
|
)
|
|
|
-1.86
|
%
|
Remittance Fees
|
|
|
497
|
|
|
|
454
|
|
|
|
43
|
|
|
|
9.47
|
%
|
Trade Finance Fees
|
|
|
277
|
|
|
|
292
|
|
|
|
(15
|
)
|
|
|
-5.14
|
%
|
Other Service Charges and Fees
|
|
|
398
|
|
|
|
364
|
|
|
|
34
|
|
|
|
9.34
|
%
|
Bank-Owned Life Insurance Income
|
|
|
230
|
|
|
|
399
|
|
|
|
(169
|
)
|
|
|
-42.36
|
%
|
Gain on Sales of SBA Loans Guaranteed Portion
|
|
|
2,692
|
|
|
|
|
|
|
|
2,692
|
|
|
|
0.00
|
%
|
Net Loss on Sales of Other Loans
|
|
|
(97
|
)
|
|
|
(2,393
|
)
|
|
|
2,296
|
|
|
|
-95.95
|
%
|
Net Gain on Sales of Investment Securities
|
|
|
9
|
|
|
|
1
|
|
|
|
8
|
|
|
|
800.00
|
%
|
Other Operating Income
|
|
|
90
|
|
|
|
112
|
|
|
|
(22
|
)
|
|
|
-19.64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Interest Income
|
|
$
|
8,357
|
|
|
$
|
3,633
|
|
|
$
|
4,724
|
|
|
|
130.03
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income increased to $8.4 million for the three months ended March 31, 2013, compared to
$3.6 million for the same period in 2012. Non-interest income as a percentage of average assets was 1.18 percent for the three months ended March 31, 2013, up from 0.53 percent of average assets for the same period in 2012.
One of our largest sources of non-interest income for the three months ended March 31, 2013 was a net gain from selling the
guaranteed portions of SBA loans, which totaled $2.7 million, or 32.2 percent of total non-interest income, compared to none for the same period in 2012. The Company sold $27.2 million of the guaranteed portions of SBA loans during the three
months ended March 31, 2013 realizing a gain of $2.7 million.
Net loss on sales of other loans, which includes the
valuation adjustment to loans held for sale, decreased to $97,000 for the three months ended March 31, 2013 from $2.4 million for the same period in 2012. The sale of other loans decreased significantly to $1.6 million for the three months
ended March 31, 2013 from $28.7 million for the three months ended March 31, 2012. The decrease in net loss on sales of other loans was a direct result of our managements effort to reduce problem and non-performing assets.
40
Non-Interest Expense
The following table sets forth the breakdown of non-interest expense for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Increase (Decrease)
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
Percentage
|
|
|
|
(In Thousands)
|
|
Salaries and Employee Benefits
|
|
$
|
9,351
|
|
|
$
|
9,110
|
|
|
$
|
241
|
|
|
|
2.65
|
%
|
Occupancy and Equipment
|
|
|
2,556
|
|
|
|
2,595
|
|
|
|
(39
|
)
|
|
|
-1.50
|
%
|
Deposit Insurance Premiums and Regulatory Assessments
|
|
|
234
|
|
|
|
1,401
|
|
|
|
(1,167
|
)
|
|
|
-83.30
|
%
|
Data Processing
|
|
|
1,170
|
|
|
|
1,253
|
|
|
|
(83
|
)
|
|
|
-6.62
|
%
|
Other Real Estate Owned Expense
|
|
|
32
|
|
|
|
(44
|
)
|
|
|
76
|
|
|
|
-172.73
|
%
|
Professional Fees
|
|
|
2,156
|
|
|
|
749
|
|
|
|
1,407
|
|
|
|
187.85
|
%
|
Directors and Officers Liability Insurance
|
|
|
220
|
|
|
|
297
|
|
|
|
(77
|
)
|
|
|
-25.93
|
%
|
Supplies and Communications
|
|
|
495
|
|
|
|
558
|
|
|
|
(63
|
)
|
|
|
-11.29
|
%
|
Advertising and Promotion
|
|
|
672
|
|
|
|
601
|
|
|
|
71
|
|
|
|
11.81
|
%
|
Loan-Related Expense
|
|
|
146
|
|
|
|
200
|
|
|
|
(54
|
)
|
|
|
-27.00
|
%
|
Amortization of Other Intangible Assets
|
|
|
41
|
|
|
|
71
|
|
|
|
(30
|
)
|
|
|
-42.25
|
%
|
Other Operating Expenses
|
|
|
2,094
|
|
|
|
1,955
|
|
|
|
139
|
|
|
|
7.11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Interest Expense
|
|
$
|
19,167
|
|
|
$
|
18,746
|
|
|
$
|
421
|
|
|
|
2.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense increased to $19.2 million for the three months ended March 31, 2013, compared
to $18.7 million for the same period in 2012. Non-interest expense as a percentage of average assets was 2.71 percent for the three months ended March 31, 2013, down from 2.73 percent of average assets for the same period in 2012.
Salaries and employee benefits increased by $241,000, or 2.7 percent, to $9.4 million for the three months ended March 31, 2013,
compared to $9.1 million for the same period in 2012, due mainly to increased bonus provisions and incentive rewards.
Professional fees increased by $1.4 million, or 187.9 percent, to $2.2 million for the three months ended March 31, 2013, compared
to $749,000 for the same period in 2012, due mainly to costs associated with the strategic options considered in the beginning of the year as well as legal fees incurred in defending lawsuits in the ordinary course of business.
Reflecting improvement in risk rating after the termination of the bank regulatory enforcement actions, deposit insurance premiums and
regulatory assessments decreased by $1.2 million, or 83.3 percent, to $234,000 for the three months ended March 31, 2013 compared to $1.4 million for the same period in 2012.
Provision for Income Taxes
For the three months ended March 31, 2013, income tax expenses of $4.7 million were recognized on pre-tax income of $14.8 million, representing an effective tax rate of 31.7 percent, compared to
income tax expenses of $79,000 on pre-tax income of $7.4 million, representing an effective tax rate of 1.07 percent, for the same period in 2012.
FINANCIAL CONDITION
Investment Portfolio
Investment securities are classified as held-to-maturity or available-for-sale in accordance with GAAP. Those securities that we have the
ability and the intent to hold to maturity are classified as held-to-maturity. All other securities are classified as available-for-sale. There were no trading securities or held-to-maturity securities as of March 31,
2013 and December 31, 2012. Securities classified as held-to-maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts, and available-for-sale securities are stated at fair value. The composition of our
investment portfolio reflects our investment strategy of providing a relatively stable source of interest income while maintaining an appropriate level of liquidity. The investment portfolio also provides a source of liquidity by pledging as
collateral or through repurchase agreement and collateral for certain public funds deposits.
As of March 31, 2013, the
investment portfolio was composed primarily of mortgage-backed securities, U.S. government agency securities, and collateralized mortgage obligations. Investment securities available-for-sale were 100.00 percent of the investment portfolio as of
March 31, 2013 and December 31, 2012. Most of the securities carried fixed interest rates. Other than holdings of U.S. government agency securities, there were no investments in securities of any one issuer exceeding 10 percent of
stockholders equity as of March 31, 2013 and December 31, 2012.
41
As of March 31, 2013, securities available-for-sale were $419.9 million, or 15.0
percent of assets, compared to $451.1 million, or 15.6 percent of assets, as of December 31, 2012. For the three months ended March 31, 2013, our securities available-for-sale decreased by $31.2 million, or 6.9 percent, from $451.1 million
as of December 31, 2012, in the form of sales, calls, prepayments and scheduled amortization.
The following table
summarizes the amortized cost, estimated fair value and unrealized gain (loss) on investment securities as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
December 31, 2012
|
|
|
|
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Gain
|
|
|
Amortized
|
|
|
Fair
|
|
|
Gain
|
|
|
|
Cost
|
|
|
Value
|
|
|
(Loss)
|
|
|
Cost
|
|
|
Value
|
|
|
(Loss)
|
|
|
|
(In Thousands)
|
|
Securities Available-for-Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-Backed Securities
(1)
|
|
$
|
146,889
|
|
|
$
|
149,394
|
|
|
$
|
2,505
|
|
|
$
|
157,185
|
|
|
$
|
160,326
|
|
|
$
|
3,141
|
|
Collateralized Mortgage Obligations
(1)
|
|
|
90,972
|
|
|
|
92,868
|
|
|
|
1,896
|
|
|
|
98,821
|
|
|
|
100,487
|
|
|
|
1,666
|
|
U.S. Government Agency Securities
|
|
|
80,991
|
|
|
|
80,930
|
|
|
|
(61
|
)
|
|
|
92,990
|
|
|
|
93,118
|
|
|
|
128
|
|
Municipal Bonds-Tax Exempt
|
|
|
12,185
|
|
|
|
12,711
|
|
|
|
526
|
|
|
|
12,209
|
|
|
|
12,812
|
|
|
|
603
|
|
Municipal Bonds-Taxable
|
|
|
44,159
|
|
|
|
46,156
|
|
|
|
1,997
|
|
|
|
44,248
|
|
|
|
46,142
|
|
|
|
1,894
|
|
Corporate Bonds
|
|
|
20,473
|
|
|
|
20,372
|
|
|
|
(101
|
)
|
|
|
20,470
|
|
|
|
20,400
|
|
|
|
(70
|
)
|
SBA Loan Pool Securities
|
|
|
14,084
|
|
|
|
13,918
|
|
|
|
(166
|
)
|
|
|
14,104
|
|
|
|
14,026
|
|
|
|
(78
|
)
|
Other Securities
|
|
|
3,025
|
|
|
|
3,030
|
|
|
|
5
|
|
|
|
3,331
|
|
|
|
3,357
|
|
|
|
26
|
|
Equity Securities
|
|
|
354
|
|
|
|
524
|
|
|
|
170
|
|
|
|
354
|
|
|
|
392
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities Available-for-Sale:
|
|
$
|
413,132
|
|
|
$
|
419,903
|
|
|
$
|
6,771
|
|
|
$
|
443,712
|
|
|
$
|
451,060
|
|
|
$
|
7,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Collateralized by residential mortgages and guaranteed by U.S. government sponsored entities.
|
The amortized cost and estimated fair value of investment securities as of March 31, 2013, by contractual maturity, are shown below.
Although mortgage-backed securities and collateralized mortgage obligations have contractual maturities through 2042, expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale
|
|
|
|
Amortized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
(In Thousands)
|
|
Within One Year
|
|
$
|
|
|
|
$
|
|
|
Over One Year Through Five Years
|
|
|
28,245
|
|
|
|
28,281
|
|
Over Five Years Through Ten Years
|
|
|
101,508
|
|
|
|
102,738
|
|
Over Ten Years
|
|
|
45,164
|
|
|
|
46,098
|
|
Mortgage-Backed Securities
|
|
|
146,889
|
|
|
|
149,394
|
|
Collateralized Mortgage Obligations
|
|
|
90,972
|
|
|
|
92,868
|
|
Equity Securities
|
|
|
354
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
413,132
|
|
|
$
|
419,903
|
|
|
|
|
|
|
|
|
|
|
In accordance with FASB ASC 320,
Investments Debt and Equity Securities
, which
amended current other-than-temporary impairment (OTTI) guidance, we periodically evaluate our investments for OTTI. There was no OTTI charged during the first quarter of 2013.
We perform periodic reviews for impairment in accordance with FASB ASC 320. Gross unrealized losses on investment securities
available-for-sale, the estimated fair value of the related securities and the number of securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows
as of March 31, 2013 and December 31, 2012:
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holding Period
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
Investment Securities Available-for-Sale
|
|
Gross
Unrealized
Loss
|
|
|
Estimated
Fair Value
|
|
|
Number
of
Securities
|
|
|
Gross
Unrealized
Loss
|
|
|
Estimated
Fair
Value
|
|
|
Number
of
Securities
|
|
|
Gross
Unrealized
Loss
|
|
|
Estimated
Fair Value
|
|
|
Number
of
Securities
|
|
|
|
(In Thousands, Except Number of Securities)
|
|
March 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-Backed Securities
|
|
$
|
503
|
|
|
$
|
35,523
|
|
|
|
12
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
503
|
|
|
$
|
35,523
|
|
|
|
12
|
|
Collateralized Mortgage Obligations
|
|
|
185
|
|
|
|
18,076
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185
|
|
|
|
18,076
|
|
|
|
7
|
|
U.S. Government Agency Securities
|
|
|
177
|
|
|
|
35,799
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
177
|
|
|
|
35,799
|
|
|
|
12
|
|
Municipal Bonds-Taxable
|
|
|
124
|
|
|
|
4,577
|
|
|
|
4
|
|
|
|
3
|
|
|
|
464
|
|
|
|
1
|
|
|
|
127
|
|
|
|
5,041
|
|
|
|
5
|
|
Corporate Bonds
|
|
|
116
|
|
|
|
4,871
|
|
|
|
1
|
|
|
|
185
|
|
|
|
10,801
|
|
|
|
3
|
|
|
|
301
|
|
|
|
15,672
|
|
|
|
4
|
|
SBA Loan Pool Securities
|
|
|
166
|
|
|
|
13,918
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166
|
|
|
|
13,918
|
|
|
|
4
|
|
Other Securities
|
|
|
1
|
|
|
|
25
|
|
|
|
2
|
|
|
|
52
|
|
|
|
947
|
|
|
|
1
|
|
|
|
53
|
|
|
|
972
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,272
|
|
|
$
|
112,789
|
|
|
|
42
|
|
|
$
|
240
|
|
|
$
|
12,212
|
|
|
|
5
|
|
|
$
|
1,512
|
|
|
$
|
125,001
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-Backed Securities
|
|
$
|
186
|
|
|
$
|
28,354
|
|
|
|
10
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
186
|
|
|
$
|
28,354
|
|
|
|
10
|
|
Collateralized Mortgage Obligations
|
|
|
109
|
|
|
|
14,344
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
|
|
|
|
14,344
|
|
|
|
5
|
|
U.S. Government Agency Securities
|
|
|
94
|
|
|
|
26,894
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
|
|
|
|
26,894
|
|
|
|
9
|
|
Municipal Bonds-Taxable
|
|
|
126
|
|
|
|
4,587
|
|
|
|
4
|
|
|
|
9
|
|
|
|
1,964
|
|
|
|
3
|
|
|
|
135
|
|
|
|
6,551
|
|
|
|
7
|
|
Corporate Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246
|
|
|
|
10,738
|
|
|
|
3
|
|
|
|
246
|
|
|
|
10,738
|
|
|
|
3
|
|
SBA Loan Pool Securities
|
|
|
82
|
|
|
|
11,004
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
11,004
|
|
|
|
3
|
|
Other Securities
|
|
|
1
|
|
|
|
12
|
|
|
|
1
|
|
|
|
46
|
|
|
|
953
|
|
|
|
1
|
|
|
|
47
|
|
|
|
965
|
|
|
|
2
|
|
Equity Securities
|
|
|
40
|
|
|
|
96
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
96
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
638
|
|
|
$
|
85,291
|
|
|
|
33
|
|
|
$
|
301
|
|
|
$
|
13,655
|
|
|
|
7
|
|
|
$
|
939
|
|
|
$
|
98,946
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All individual securities that have been in a continuous unrealized loss position for 12 months or longer
as of March 31, 2013 and December 31, 2012 had investment grade ratings upon purchase. The issuers of these securities have not established any cause for default on these securities and the various rating agencies have reaffirmed these
securities long-term investment grade status as of March 31, 2013. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated.
FASB ASC 320 requires other-than-temporarily impaired investment securities to be written down when fair value is below amortized cost in
circumstances where: (1) an entity has the intent to sell a security; (2) it is more likely than not that an entity will be required to sell the security before recovery of its amortized cost basis; or (3) an entity does not expect to
recover the entire amortized cost basis of the security. If an entity intends to sell a security or if it is more likely than not the entity will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to
the entire difference between the securitys amortized cost basis and its fair value. If an entity does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI
write-down is separated into an amount representing credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in other comprehensive income.
The Company does not intend to sell these securities and it is not more likely than not that we will be required to sell the investments
before the recovery of its amortized cost bases. In addition, the unrealized losses on municipal and corporate bonds are not considered other-than-temporarily impaired as the bonds are rated investment grade and there are no credit quality concerns
with the issuers. Interest payments have been made as scheduled, and management believes this will continue in the future and that the bonds will be repaid in full as scheduled. Therefore, in managements opinion, all securities that have been
in a continuous unrealized loss position for the past 12 months or longer as of March 31, 2013 and December 31, 2012 were not other-than-temporarily impaired, and therefore, no impairment charges as of March 31, 2013 and
December 31, 2012 were warranted.
Investment securities available-for-sale with carrying values of $16.5 million and
$18.2 million as of March 31, 2013 and December 31, 2012, respectively, were pledged to secure FHLB advances, public deposits and for other purposes as required or permitted by law.
43
Loan Portfolio
The following table shows the loan composition by type, excluding loans held for sale, as of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
Increase (Decrease)
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
Percentage
|
|
|
|
(In Thousands)
|
|
Real Estate Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Property
|
|
$
|
831,019
|
|
|
$
|
787,094
|
|
|
$
|
43,925
|
|
|
|
5.6
|
%
|
Residential Property
|
|
|
94,735
|
|
|
|
101,778
|
|
|
|
(7,043
|
)
|
|
|
-6.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Real Estate Loans
|
|
|
925,754
|
|
|
|
888,872
|
|
|
|
36,882
|
|
|
|
4.1
|
%
|
Commercial and Industrial Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Term
|
|
|
921,009
|
|
|
|
884,364
|
|
|
|
36,645
|
|
|
|
4.1
|
%
|
Commercial Lines of Credit
|
|
|
49,608
|
|
|
|
56,121
|
|
|
|
(6,513
|
)
|
|
|
-11.6
|
%
|
SBA Loans
|
|
|
158,687
|
|
|
|
148,306
|
|
|
|
10,381
|
|
|
|
7.0
|
%
|
International Loans
|
|
|
31,448
|
|
|
|
34,221
|
|
|
|
(2,773
|
)
|
|
|
-8.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial and Industrial Loans
|
|
|
1,160,752
|
|
|
|
1,123,012
|
|
|
|
37,740
|
|
|
|
3.4
|
%
|
Consumer Loans
(1)
|
|
|
35,180
|
|
|
|
36,676
|
|
|
|
(1,496
|
)
|
|
|
-4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Loans
|
|
|
2,121,686
|
|
|
|
2,048,560
|
|
|
|
73,126
|
|
|
|
3.6
|
%
|
Allowance for Loans Losses
|
|
|
(61,191
|
)
|
|
|
(63,305
|
)
|
|
|
2,114
|
|
|
|
-3.3
|
%
|
Deferred Loan Fees
|
|
|
661
|
|
|
|
796
|
|
|
|
(135
|
)
|
|
|
-17.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Receivable, Net
|
|
$
|
2,061,156
|
|
|
$
|
1,986,051
|
|
|
$
|
75,105
|
|
|
|
3.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consumer loans include home equity line of credit.
|
As of March 31, 2013 and December 31, 2012, loans receivable (excluding loans held for sale), net of deferred loan costs and allowance for loan losses, totaled $2.06 billion and $1.99 billion,
respectively, representing an increase of $75.1 million, or 3.8 percent. Gross loans increased by $73.1 million, or 3.6 percent, to $2.12 billion as of March 31, 2013, from $2.05 billion as of December 31, 2012. The increase was
attributable to increases in commercial real estate loans by 5.6 percent, commercial term loans by 4.1 percent, and SBA loans by 7.0 percent from the year ended December 31, 2012. The increase was partially offset by declines in residential
property loans by 6.9 percent and commercial lines of credit by 11.6 percent.
During the three months ended March 31,
2013, total loan disbursement consisted of $138.0 million in commercial real estate loans and $40.3 million in commercial and industrial loans. During the three months ended March 31, 2013, we experienced decreases in loans from $26.5 million
of transfers to loans held for sale, $3.0 million of gross charge-offs, $75.5 million of pay-offs and other net amortizations.
As of March 31, 2013, our loan portfolio included the following concentrations of loans to one type of industry that were greater
than 10 percent of gross loans outstanding:
|
|
|
|
|
|
|
|
|
|
|
Balance as of
|
|
|
Percentage of
|
|
Industry
|
|
March 31, 2013
|
|
|
Gross Loans Outstanding
|
|
|
|
(In Thousands)
|
|
|
|
|
Lessor of Non-Residential Buildings
|
|
$
|
492,876
|
|
|
|
23.23
|
%
|
Accommodation/Hospitality
|
|
$
|
363,613
|
|
|
|
17.14
|
%
|
Gasoline Stations
|
|
$
|
288,919
|
|
|
|
13.62
|
%
|
There was no other concentration of loans to any one type of industry exceeding ten percent of gross
loans outstanding.
Non-Performing Assets
Non-performing loans consist of loans on non-accrual status and loans 90 days or more past due and still accruing interest. Non-performing assets consist of non-performing loans and OREO. Loans are placed
on non-accrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due,
unless management believes the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on non-accrual status earlier, depending upon the individual circumstances surrounding
the loans delinquency. When an asset is placed on non-accrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the
ultimate collectability of principal is probable, in which case interest payments are credited to income. Non-accrual assets may be restored to accrual status when principal and interest become current and full repayment is expected. Interest income
is recognized on the accrual basis for impaired loans not meeting the criteria for non-accrual. OREO consists of properties acquired by foreclosure or similar means that management intends to offer for sale.
44
Except for non-performing loans set forth below, management is not aware of any loans as of
March 31, 2013 and December 31, 2012 for which known credit problems of the borrower would cause serious doubts as to the ability of such borrowers to comply with their present loan repayment terms, or any known events that would result in
the loan being designated as non-performing at some future date. Management cannot, however, predict the extent to which a deterioration in general economic conditions, real estate values, increases in general rates of interest, or changes in the
financial condition or business of borrower may adversely affect a borrowers ability to pay.
The following table
provides information with respect to the components of non-performing assets as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
Increase (Decrease)
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
Percentage
|
|
|
|
(In Thousands)
|
|
Non-Performing Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$
|
950
|
|
|
$
|
1,079
|
|
|
|
(129
|
)
|
|
|
-12.0
|
%
|
Land
|
|
|
1,687
|
|
|
|
2,097
|
|
|
|
(410
|
)
|
|
|
-19.6
|
%
|
Residential Property
|
|
|
1,638
|
|
|
|
1,270
|
|
|
|
368
|
|
|
|
29.0
|
%
|
Commercial and Industrial Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
|
|
|
7,253
|
|
|
|
8,311
|
|
|
|
(1,058
|
)
|
|
|
-12.7
|
%
|
Secured By Real Estate
|
|
|
6,353
|
|
|
|
8,679
|
|
|
|
(2,326
|
)
|
|
|
-26.8
|
%
|
Commercial Lines of Credit
|
|
|
1,505
|
|
|
|
1,521
|
|
|
|
(16
|
)
|
|
|
-1.1
|
%
|
SBA Loans
|
|
|
11,852
|
|
|
|
12,563
|
|
|
|
(711
|
)
|
|
|
-5.7
|
%
|
Consumer Loans
|
|
|
1,655
|
|
|
|
1,759
|
|
|
|
(104
|
)
|
|
|
-5.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Accrual Loans
|
|
|
32,893
|
|
|
|
37,279
|
|
|
|
(4,386
|
)
|
|
|
-11.8
|
%
|
Loans 90 Days or More Past Due and Still Accruing (as to Principal of Interest)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Performing Loans
(1) (2)
|
|
|
32,893
|
|
|
|
37,279
|
|
|
|
(4,386
|
)
|
|
|
-11.8
|
%
|
Other Real Estate Owned
|
|
|
900
|
|
|
|
774
|
|
|
|
126
|
|
|
|
16.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Performing Assets
|
|
$
|
33,793
|
|
|
$
|
38,053
|
|
|
$
|
(4,260
|
)
|
|
|
-11.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Performing Loans as a Percentage of Total Gross Loans
|
|
|
1.55
|
%
|
|
|
1.82
|
%
|
|
|
|
|
|
|
|
|
Non-Performing Assets as a Percentage of Total Assets
|
|
|
1.21
|
%
|
|
|
1.32
|
%
|
|
|
|
|
|
|
|
|
Total Debt Restructured Performing Loans
|
|
$
|
14,684
|
|
|
$
|
16,980
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes troubled debt restructured non-performing loans of $17.0 million and $18.8 million as of March 31, 2013 and December 31, 2012, respectively
|
(2)
|
Excludes loans held for sale.
|
Non-accrual loans totaled $32.9 million as of March 31, 2013, compared to $37.3 million as of December 31, 2012, representing an 11.8 percent decrease. Delinquent loans (defined as 30 days or
more past due) were $18.4 million as of March 31, 2013, compared to $16.5 million as of December 31, 2012, representing an 11.7 percent increase. As of March 31, 2013, delinquent loans of $11.9 million were included in non-performing
loans. The $14.1 million of delinquent loans as of December 31, 2012 was included in non-performing loans. During the three months ended March 31, 2013, loans totaling $4.3 million were placed on non-accrual status. The additions to
non-accrual loans were offset by $3.4 million transferred to loans held for sale, $3.0 million in charge-offs, $1.6 million in principal paydowns and payoffs, and $611,000 in SBA guaranteed portions received.
The ratio of non-performing loans to gross loans also decreased to 1.55 percent at March 31, 2013 from 1.82 percent at
December 31, 2012. During the same period, our allowance for loan losses decreased by $2.1 million, or 3.3 percent, to $61.2 million from $63.3 million. Of the $32.9 million non-performing loans, approximately $28.0 million were impaired based
on the definition contained in FASB ASC 310,
Receivables
, which resulted in aggregate impairment reserve of $3.8 million as of March 31, 2013. We calculate our allowance for the collateral-dependent loans as the difference
between the outstanding loan balance and the value of the collateral as determined by recent appraisals less estimated costs to sell. The allowance for collateral-dependent loans varies from loan to loan based on the collateral coverage of the loan
at the time of designation as non-performing. We continue to monitor the collateral coverage, based on recent appraisals, on these loans on a quarterly basis and adjust the allowance accordingly.
As of March 31, 2013, other real estate owned consisted of two properties with a combined carrying value of $1.0 million and a
valuation adjustment of $126,000. For the three months ended March 31, 2013, one property was transferred from loans receivable to other real estate owned at fair value less selling costs of $513,000. As of December 31, 2012, there were
properties located in Illinois and Virginia with a combined carrying value of $774,000 and no valuation adjustment.
45
We evaluate loan impairment in accordance with applicable GAAP. Loans are considered
impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. Impaired loans are measured based on the present value of expected future
cash flows discounted at the loans effective interest rate or, as an expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral dependent, less costs to sell. If the measure of the
impaired loan is less than the recorded investment in the loan, the deficiency will be charged off against the allowance for loan losses or, alternatively, a specific allocation will be established. Additionally, impaired loans are specifically
excluded from the quarterly migration analysis when determining the amount of the allowance for loan losses required for the period.
The following table provides information on impaired loans as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
With No
Related
Allowance
Recorded
|
|
|
With an
Allowance
Recorded
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
|
(In Thousands)
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$
|
2,785
|
|
|
$
|
2,838
|
|
|
$
|
1,835
|
|
|
$
|
950
|
|
|
$
|
42
|
|
|
$
|
2,796
|
|
|
$
|
26
|
|
Land
|
|
|
1,687
|
|
|
|
1,937
|
|
|
|
1,687
|
|
|
|
|
|
|
|
|
|
|
|
1,712
|
|
|
|
40
|
|
Other
|
|
|
526
|
|
|
|
526
|
|
|
|
|
|
|
|
526
|
|
|
|
53
|
|
|
|
527
|
|
|
|
4
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Property
|
|
|
3,049
|
|
|
|
3,104
|
|
|
|
3,049
|
|
|
|
|
|
|
|
|
|
|
|
3,059
|
|
|
|
27
|
|
Commercial and Industrial Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
|
|
|
13,064
|
|
|
|
14,006
|
|
|
|
4,206
|
|
|
|
8,858
|
|
|
|
3,328
|
|
|
|
13,254
|
|
|
|
186
|
|
Secured By Real Estate
|
|
|
17,449
|
|
|
|
18,592
|
|
|
|
15,575
|
|
|
|
1,874
|
|
|
|
425
|
|
|
|
17,513
|
|
|
|
313
|
|
Commercial Lines of Credit
|
|
|
1,505
|
|
|
|
1,702
|
|
|
|
1,505
|
|
|
|
|
|
|
|
|
|
|
|
1,512
|
|
|
|
15
|
|
SBA Loans
|
|
|
6,517
|
|
|
|
10,101
|
|
|
|
4,766
|
|
|
|
1,750
|
|
|
|
578
|
|
|
|
6,473
|
|
|
|
273
|
|
International Loans
|
|
|
1,430
|
|
|
|
1,430
|
|
|
|
859
|
|
|
|
572
|
|
|
|
57
|
|
|
|
1,498
|
|
|
|
|
|
Consumer Loans
|
|
|
1,639
|
|
|
|
1,710
|
|
|
|
391
|
|
|
|
1,248
|
|
|
|
401
|
|
|
|
1,643
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Loans
|
|
$
|
49,651
|
|
|
$
|
55,946
|
|
|
$
|
33,873
|
|
|
$
|
15,778
|
|
|
$
|
4,884
|
|
|
$
|
49,987
|
|
|
$
|
896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$
|
2,930
|
|
|
$
|
3,024
|
|
|
$
|
2,930
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,357
|
|
|
$
|
136
|
|
Land
|
|
|
2,097
|
|
|
|
2,307
|
|
|
|
2,097
|
|
|
|
|
|
|
|
|
|
|
|
2,140
|
|
|
|
179
|
|
Other
|
|
|
527
|
|
|
|
527
|
|
|
|
|
|
|
|
527
|
|
|
|
67
|
|
|
|
835
|
|
|
|
43
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,012
|
|
|
|
207
|
|
Residential Property
|
|
|
3,265
|
|
|
|
3,308
|
|
|
|
1,866
|
|
|
|
1,399
|
|
|
|
94
|
|
|
|
3,268
|
|
|
|
164
|
|
Commercial and Industrial Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
|
|
|
14,532
|
|
|
|
15,515
|
|
|
|
6,826
|
|
|
|
7,706
|
|
|
|
2,144
|
|
|
|
14,160
|
|
|
|
821
|
|
Secured By Real Estate
|
|
|
22,050
|
|
|
|
23,221
|
|
|
|
9,520
|
|
|
|
12,530
|
|
|
|
2,319
|
|
|
|
21,894
|
|
|
|
1,723
|
|
Commercial Lines of Credit
|
|
|
1,521
|
|
|
|
1,704
|
|
|
|
848
|
|
|
|
673
|
|
|
|
230
|
|
|
|
1,688
|
|
|
|
64
|
|
SBA Loans
|
|
|
6,170
|
|
|
|
10,244
|
|
|
|
4,294
|
|
|
|
1,876
|
|
|
|
762
|
|
|
|
7,173
|
|
|
|
1,131
|
|
International Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Loans
|
|
|
1,652
|
|
|
|
1,711
|
|
|
|
449
|
|
|
|
1,203
|
|
|
|
615
|
|
|
|
1,205
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Loans
|
|
$
|
54,744
|
|
|
$
|
61,561
|
|
|
$
|
28,830
|
|
|
$
|
25,914
|
|
|
$
|
6,231
|
|
|
$
|
60,732
|
|
|
$
|
4,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of interest foregone on impaired loans for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended,
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In Thousands)
|
|
Interest Income That Would Have Been Recognized Had Impaired Loans
|
|
|
|
|
|
|
|
|
Performed in Accordance With Their Original Terms
|
|
$
|
1,068
|
|
|
$
|
1,428
|
|
Less: Interest Income Recognized on Impaired Loans
|
|
|
(896
|
)
|
|
|
(1,106
|
)
|
|
|
|
|
|
|
|
|
|
Interest Foregone on Impaired Loans
|
|
$
|
172
|
|
|
$
|
322
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2013, we restructured monthly payments for 4 loans, with a net
carrying value of $1.6 million at the time of modification, which we subsequently classified as troubled debt restructured loans. Temporary payment structure modifications included, but were not limited to, extending the maturity date, reducing the
amount of principal and/or interest due monthly, and/or allowing for interest only monthly payments for six months or less. As of March 31, 2013, troubled debt restructurings on accrual status totaled $14.7 million, all of which were temporary
interest rate and payment reductions and extensions of maturity, and a $928,000 reserve relating to these loans is included in the allowance for loan losses. For the restructured loans on accrual status, we determined that, based on the financial
capabilities of the borrowers at the time of the loan restructuring and the
46
borrowers past performance in the payment of debt service under the previous loan terms, performance and collection under the revised terms is probable. As of March 31, 2013, troubled
debt restructuring on non-accrual status totaled $17.0 million, and a $2.8 million reserve relating to these loans is included in the allowance for loan losses.
As of December 31, 2012, troubled debt restructurings on accrual status totaled $17.0 million, all of which were temporary interest rate and payment reductions, and a $1.5 million reserve relating to
these loans is included in the allowance for loan losses. As of December 31, 2012, troubled debt restructuring on non-accrual status totaled $18.8 million, and a $2.1 million reserve relating to these loans is included in the allowance for loan
losses.
Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
Provisions to the allowance for loan losses are made quarterly to recognize probable loan losses. The quarterly provision is based on the
allowance need, which is determined through analysis involving quantitative calculations based on historic loss rates for general reserves and individual impairment calculations for specific allocations to impaired loans as well as qualitative
adjustments. Risk factor calculations are based on eight-quarters of historic loss analysis with 1.5 to 1 weighting given to the most recent four quarters. As homogenous loans are bulk graded, the risk grade is not factored into the historical loss
analysis.
To determine general reserve requirements, existing loans are divided into 11 general loan pools of risk-rated
loans as well as 3 homogenous loan pools. For risk-rated loans, migration analysis allocates historical losses by loan pool and risk grade to determine risk factors for potential loss inherent in the current outstanding loan portfolio.
Specific reserves are allocated for loans deemed impaired. A loan is impaired when it is probable that a creditor
will be unable to collect all amounts due, including principal and interest, according to the contractual terms and schedules of the loan agreement. The loans identified as impaired are measured using one of the three methods of valuations:
(1) the present value of expected future cash flows discounted at the loans effective interest rate, (2) the fair market value of the collateral if the loan is collateral dependent, or (3) the loans observable market
price.
When determining the appropriate level for allowance for loan losses, management considers qualitative adjustments for
any factors that are likely to cause estimated credit losses associated with the Banks current portfolio to differ from historical loss experience, including, but not limited to, national and local economic and business conditions, volume and
geographic concentrations, and problem loan trends.
To systematically quantify the credit risk impact of trends and changes
within the loan portfolio, a credit risk matrix is utilized. The qualitative factors are considered on a loan pool by loan pool basis subsequent to, and in conjunction with, a loss migration analysis. The credit risk matrix provides various
scenarios with positive or negative impact on the portfolio along with corresponding basis points for qualitative adjustments.
The following
table reflects our allocation of allowance for loan and lease losses by loan category as well as the loans receivable for each loan type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
December 31, 2012
|
|
|
|
Allowance
|
|
|
Loans
|
|
|
Allowance
|
|
|
Loans
|
|
|
|
Amount
|
|
|
Receivable
|
|
|
Amount
|
|
|
Receivable
|
|
|
|
(In Thousands)
|
|
Real Estate Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Property
|
|
$
|
16,996
|
|
|
$
|
831,019
|
|
|
$
|
17,109
|
|
|
$
|
787,094
|
|
Residential Property
|
|
|
836
|
|
|
|
94,735
|
|
|
|
1,071
|
|
|
|
101,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Real Estate Loans
|
|
|
17,832
|
|
|
|
925,754
|
|
|
|
18,180
|
|
|
|
888,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial Loans
|
|
|
39,560
|
|
|
|
1,160,752
|
|
|
|
41,928
|
|
|
|
1,123,012
|
|
Consumer Loans
|
|
|
1,795
|
|
|
|
35,180
|
|
|
|
2,280
|
|
|
|
36,676
|
|
Unallocated
|
|
|
2,004
|
|
|
|
|
|
|
|
917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
61,191
|
|
|
$
|
2,121,686
|
|
|
$
|
63,305
|
|
|
$
|
2,048,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
The following table sets forth certain information regarding our allowance for loan losses
and allowance for off-balance sheet items for the periods presented. Allowance for off-balance sheet items is determined by applying reserve factors according to loan pool and grade as well as actual current commitment usage figures by loan type to
existing contingent liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2012
|
|
|
|
(In Thousands)
|
|
Allowance for Loan Losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
$
|
63,305
|
|
|
$
|
66,107
|
|
|
$
|
89,936
|
|
Actual Charge-Offs
|
|
|
(3,024
|
)
|
|
|
(3,966
|
)
|
|
|
(12,321
|
)
|
Recoveries on Loans Previously Charged Off
|
|
|
714
|
|
|
|
757
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loan Charge-Offs
|
|
|
(2,310
|
)
|
|
|
(3,209
|
)
|
|
|
(11,284
|
)
|
Provision Charged to Operating Expense
|
|
|
196
|
|
|
|
407
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period
|
|
$
|
61,191
|
|
|
$
|
63,305
|
|
|
$
|
81,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Off-Balance Sheet Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
$
|
1,824
|
|
|
$
|
2,231
|
|
|
$
|
2,981
|
|
Provision Charged to Operating Expense
|
|
|
(196
|
)
|
|
|
(407
|
)
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period
|
|
$
|
1,628
|
|
|
$
|
1,824
|
|
|
$
|
2,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loan Charge-Offs to Average Gross Loans
(1)
|
|
|
0.45
|
%
|
|
|
0.63
|
%
|
|
|
2.27
|
%
|
Net Loan Charge-Offs to Gross Loans
(1)
|
|
|
0.44
|
%
|
|
|
0.63
|
%
|
|
|
2.28
|
%
|
Allowance for Loan Losses to Average Gross Loans
|
|
|
2.95
|
%
|
|
|
3.12
|
%
|
|
|
4.08
|
%
|
Allowance for Loan Losses to Gross Loans
|
|
|
2.88
|
%
|
|
|
3.09
|
%
|
|
|
4.10
|
%
|
Net Loan Charge-Offs to Allowance for Loan Losses
(1)
|
|
|
15.10
|
%
|
|
|
20.28
|
%
|
|
|
55.69
|
%
|
Net Loan Charge-Offs to Provision Charged to Operating Expenses
|
|
|
1178.57
|
%
|
|
|
788.45
|
%
|
|
|
470.17
|
%
|
Allowance for Loan Losses to Non-Performing Loans
|
|
|
186.03
|
%
|
|
|
169.81
|
%
|
|
|
161.41
|
%
|
Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Gross Loans During Period
|
|
$
|
2,073,514
|
|
|
$
|
2,026,122
|
|
|
$
|
1,985,071
|
|
Gross Loans at End of Period
|
|
$
|
2,121,686
|
|
|
$
|
2,048,560
|
|
|
$
|
1,976,978
|
|
Non-Performing Loans at End of Period
|
|
$
|
32,893
|
|
|
$
|
37,279
|
|
|
$
|
50,214
|
|
(1)
|
Net loan charge-offs are annualized to calculate the ratios.
|
The allowance for loan losses decreased by $2.1 million, or 3.3 percent, to $61.2 million as of March 31, 2013, compared to $63.3 million as of December 31, 2012. The allowance for loan losses
as a percentage of gross loans decreased to 2.88 percent as of March 31, 2013 from 3.09 percent as of December 31, 2012. The provision for credit losses decreased by $2.0 million to $0 for the three months ended March 31, 2013 from
$2.0 million for the three months ended March 31, 2012. The $196,000 provision for credit losses was offset by the reversal in provision for off-balance items, resulting in a zero provision for credit losses for the three months ended
March 31, 2013. The $2.4 million provision for credit losses was offset by the $400,000 reversal in provision for off-balance items, resulting in a $2.0 million provision for credit losses for the three months ended March 31, 2012.
The decrease in the allowance for loan losses as of March 31, 2013 was due primarily to decreases in historical loss
rates, and classified assets. Due to these factors, general reserves decreased by $4.5 million, or 15.47 percent, to $24.6 million as of March 31, 2013 as compared to $29.1 million at December 31, 2012. However, total qualitative reserves
increased by $2.7 million, or 9.9 percent, to $29.7 million as of March 31, 2013, as compared to $27.0 million as of December 31, 2012, due mainly to an additional qualitative factor related to continued uncertainty in economic conditions.
Total impaired loans, excluding loans held for sale, decreased by $5.1 million, or 9.3 percent, to $49.7 million as of
March 31, 2013 as compared to $54.7 million at December 31, 2012. Accordingly, specific reserve allocations associated with impaired loans decreased by $1.3 million, or 21.6 percent, to $4.9 million as of March 31, 2013 as compared to
$6.2 million as of December 31, 2012.
48
The following table presents a summary of net charge-offs by the loan portfolio.
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In Thousands)
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
Real Estate Loans
|
|
$
|
213
|
|
|
$
|
2,842
|
|
Commercial Term
|
|
|
2,451
|
|
|
|
8,853
|
|
Commercial Lines of Credit
|
|
|
|
|
|
|
1
|
|
SBA Loans
|
|
|
196
|
|
|
|
261
|
|
Consumer Loans
|
|
|
164
|
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
Total Charge-offs
|
|
|
3,024
|
|
|
|
12,321
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
Real Estate Loans
|
|
|
8
|
|
|
|
|
|
Commercial Term
|
|
|
386
|
|
|
|
928
|
|
Commercial Lines of Credit
|
|
|
35
|
|
|
|
11
|
|
SBA Loans
|
|
|
234
|
|
|
|
72
|
|
International Loans
|
|
|
2
|
|
|
|
2
|
|
Consumer Loans
|
|
|
49
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
Total Recoveries
|
|
|
714
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
Net Charge-offs
|
|
$
|
2,310
|
|
|
$
|
11,284
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2013, total charge-offs were $3.0 million, a decrease of $9.3
million, or 75.5 percent, from $12.3 million for the three months ended March 31, 2012. The decreases in the three months ended March 31, 2013 from the three months ended March 31, 2012 were mainly due to decreases in charge-offs of
commercial term loans by $6.4 million and real estate loans by $2.6 million.
The Bank recorded, in other liabilities, an
allowance for off-balance sheet exposure, primarily unfunded loan commitments, of $1.6 million and $1.8 million as of March 31, 2013 and December 31, 2012, respectively. The decrease was primarily due to lower reserve factors based on
historical loss rates. The Bank closely monitors the borrowers repayment capabilities while funding existing commitments to ensure losses are minimized. Based on managements evaluation and analysis of portfolio credit quality and
prevailing economic conditions, we believe these reserves are adequate for losses inherent in the loan portfolio and off-balance sheet exposure as of March 31, 2013 and December 31, 2012.
Deposits
The following table shows the composition of deposits by type as of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
Increase (Decrease)
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
Percentage
|
|
|
|
(In Thousands)
|
|
Demand Noninterest-Bearing
|
|
$
|
709,650
|
|
|
$
|
720,931
|
|
|
$
|
(11,281
|
)
|
|
|
-1.6
|
%
|
Interest-Bearing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
|
115,186
|
|
|
|
114,302
|
|
|
|
884
|
|
|
|
0.8
|
%
|
Money Market Checking and NOW Accounts
|
|
|
579,192
|
|
|
|
575,744
|
|
|
|
3,448
|
|
|
|
0.6
|
%
|
Time Deposits of $100,000 or More
|
|
|
557,180
|
|
|
|
616,187
|
|
|
|
(59,007
|
)
|
|
|
-9.6
|
%
|
Other Time Deposits
|
|
|
371,804
|
|
|
|
368,799
|
|
|
|
3,005
|
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deposits
|
|
$
|
2,333,012
|
|
|
$
|
2,395,963
|
|
|
$
|
(62,951
|
)
|
|
|
-2.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits decreased by $63.0 million, or 2.6 percent, to $2.33 billion as of March 31, 2013
from $2.40 billion as of December 31, 2012. The decrease in total deposits was attributable mainly to a decrease of $59.0 million in time deposits of $100,000 or more, including $28.5 million of CDs raised from Internet listing services.
Core deposits (defined as demand, savings, money market, NOW accounts and other time deposits) slightly decreased by $3.9
million, or 0.2 percent, to $1,776 million at March 31, 2013 from $1,780 million at December 31, 2012. Time deposits of $250,000 or more also decreased by $18.4 million, or 7.7 percent, to $219.8 million from $238.2 million at
December 31, 2012. However, noninterest-bearing demand deposits as a percent of deposits grew to 30.4 percent at March 31, 2013 from 30.1 percent at December 31, 2012. We had no brokered deposits as of March 31, 2013 and
December 31, 2012.
49
Federal Home Loan Bank Advances and Other Borrowings
FHLB advances and other borrowings mostly take the form of advances from the FHLB of San Francisco and overnight federal funds. At
March 31, 2013, advances from the FHLB were $2.8 million, a decrease of $95,000 from $2.9 million at December 31, 2012, with a remaining maturity of 1.13 years at 5.27 percent.
Junior Subordinated Debentures
During the second half of 2004, we issued two junior subordinated notes bearing interest at the three-month London Interbank Offered Rate (LIBOR) plus 2.90 percent totaling $61.8 million and
one junior subordinated note bearing interest at the three-month LIBOR plus 2.63 percent totaling $20.6 million. The outstanding subordinated debentures related to these offerings, the proceeds of which were used to finance the purchase of Pacific
Union Bank, totaled $51.5 million and $82.4 million at March 31, 2013 and December 31, 2012, respectively. In March 2013, Hanmi Financial redeemed its TPS II for $30.9 million and fully paid its remaining TPS I and III in the aggregate
amount of $51.5 million by the end of April 2013.
50
INTEREST RATE RISK MANAGEMENT
Interest rate risk indicates our exposure to market interest rate fluctuations. The movement of interest rates directly and inversely
affects the economic value of fixed-income assets, which is the present value of future cash flow discounted by the current interest rate; under the same conditions, the higher the current interest rate, the higher the denominator of discounting.
Interest rate risk management is intended to decrease or increase the level of our exposure to market interest rates. The level of interest rate risk can be managed through such means as the changing of gap positions and the volume of fixed-income
assets. For successful management of interest rate risk, we use various methods to measure existing and future interest rate risk exposures, giving effect to historical attrition rates of core deposits. In addition to regular reports used in
business operations, repricing gap analysis, stress testing and simulation modeling are the main measurement techniques used to quantify interest rate risk exposure.
The following table shows the status of our gap position as of March 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More Than
|
|
|
More
Than
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
|
|
|
Three
|
|
|
One
|
|
|
|
|
|
|
|
|
|
|
|
|
Than
|
|
|
Months But
|
|
|
Year But
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
Three
|
|
|
Less Then
|
|
|
Less Then
|
|
|
More Then
|
|
|
Interest-
|
|
|
|
|
|
|
Months
|
|
|
One Year
|
|
|
Five Years
|
|
|
Five Years
|
|
|
Sensitive
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Due from Bank
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
69,642
|
|
|
$
|
69,642
|
|
Interest-Bearing Deposits in Other Banks
|
|
|
75,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,657
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate
|
|
|
35,629
|
|
|
|
53,458
|
|
|
|
164,519
|
|
|
|
96,237
|
|
|
|
16,578
|
|
|
|
366,421
|
|
Floating Rate
|
|
|
34,892
|
|
|
|
9,658
|
|
|
|
7,962
|
|
|
|
869
|
|
|
|
101
|
|
|
|
53,482
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate
|
|
|
53,777
|
|
|
|
125,260
|
|
|
|
350,980
|
|
|
|
16,999
|
|
|
|
|
|
|
|
547,016
|
|
Floating Rate
|
|
|
1,037,311
|
|
|
|
109,074
|
|
|
|
407,335
|
|
|
|
1,009
|
|
|
|
|
|
|
|
1,554,729
|
|
Non-Accrual
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,355
|
|
|
|
34,355
|
|
Deferred Loan Fees, Discount, and Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68,901
|
)
|
|
|
(68,901
|
)
|
Federal Home Loan Bank and Federal Reserve Bank Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,236
|
|
|
|
|
|
|
|
28,236
|
|
Other Assets
|
|
|
|
|
|
|
29,284
|
|
|
|
|
|
|
|
4,958
|
|
|
|
97,544
|
|
|
|
131,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
1,237,266
|
|
|
$
|
326,734
|
|
|
$
|
930,796
|
|
|
$
|
148,308
|
|
|
$
|
149,319
|
|
|
$
|
2,792,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Noninterest-Bearing
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
709,650
|
|
|
$
|
709,650
|
|
Savings
|
|
|
7,110
|
|
|
|
22,681
|
|
|
|
58,806
|
|
|
|
26,589
|
|
|
|
|
|
|
|
115,186
|
|
Money Market Checking and NOW Accounts
|
|
|
70,825
|
|
|
|
181,354
|
|
|
|
215,327
|
|
|
|
111,686
|
|
|
|
|
|
|
|
579,192
|
|
Time Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate
|
|
|
236,637
|
|
|
|
497,978
|
|
|
|
194,308
|
|
|
|
2
|
|
|
|
|
|
|
|
928,925
|
|
Floating Rate
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
Federal Home Loan Bank Advances
|
|
|
97
|
|
|
|
297
|
|
|
|
2,446
|
|
|
|
|
|
|
|
|
|
|
|
2,840
|
|
Junior Subordinated Debentures
|
|
|
51,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,478
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,988
|
|
|
|
15,988
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
389,105
|
|
|
|
389,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
$
|
366,206
|
|
|
$
|
702,310
|
|
|
$
|
470,887
|
|
|
$
|
138,277
|
|
|
$
|
1,114,743
|
|
|
$
|
2,792,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repricing Gap
|
|
|
871,060
|
|
|
|
(375,576
|
)
|
|
|
459,909
|
|
|
|
10,031
|
|
|
|
(965,424
|
)
|
|
|
|
|
Cumulative Repricing Gap
|
|
|
871,060
|
|
|
|
495,484
|
|
|
|
955,393
|
|
|
|
965,424
|
|
|
|
|
|
|
|
|
|
Cumulative Repricing Gap as a Percentage of Total Assets
|
|
|
31.19
|
%
|
|
|
17.74
|
%
|
|
|
34.21
|
%
|
|
|
34.57
|
%
|
|
|
0.00
|
%
|
|
|
|
|
Cumulative Repricing Gap as a Percentage of Interest-Earning Assets
|
|
|
33.18
|
%
|
|
|
18.87
|
%
|
|
|
36.39
|
%
|
|
|
36.77
|
%
|
|
|
0.00
|
%
|
|
|
|
|
(1)
|
Includes non-accrual loans in loans held for sale.
|
The repricing gap analysis measures the static timing of repricing risk of assets and liabilities (i.e., a point-in-time analysis measuring the difference between assets maturing or repricing in a period
and liabilities maturing or repricing within the same period). Assets are assigned to maturity and repricing categories based on their expected repayment or repricing dates, and liabilities are assigned based on their repricing or maturity dates.
Core deposits that have no maturity dates (demand deposits, savings, money market checking and NOW accounts) are assigned to categories based on expected decay rates.
As of March 31, 2013, the cumulative repricing gap for the three-month period was at an asset-sensitive position and 33.18 percent of interest-earning assets, which decreased from 34.96 percent as of
December 31, 2012. The decrease was due mainly to a $100.0 million decrease in interest-bearing deposits in other banks, a $14.6 million decrease in floating rate loans, partially offset by $32.5 million and $31.0 million decreases in fixed
rate time deposits and junior subordinated debentures, respectively.
51
The cumulative repricing gap for the twelve-month period was at an asset-sensitive position
and was 18.87 percent of interest-earning assets, which decreased from 22.32 percent as of December 31, 2012. The decrease was due mainly to a $100.0 million decrease in interest-bearing deposits in other banks, a $9.9 million decrease in fixed
rate investment securities and a $10.5 million increase in fixed rate time deposits, partially offset by a $31.0 million decrease in junior subordinated debentures.
The following table summarizes the status of the cumulative gap position as of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than Three Months
|
|
|
Less Than Twelve Months
|
|
|
|
March 31
|
|
|
December 31
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
|
(In Thousands)
|
|
Cumulative Repricing Gap
|
|
$
|
871,060
|
|
|
$
|
926,923
|
|
|
$
|
495,484
|
|
|
$
|
591,748
|
|
Percentage of Total Assets
|
|
|
31.19
|
%
|
|
|
32.16
|
%
|
|
|
17.74
|
%
|
|
|
20.53
|
%
|
Percentage of Interest-Earning Assets
|
|
|
33.18
|
%
|
|
|
34.96
|
%
|
|
|
18.87
|
%
|
|
|
22.32
|
%
|
The spread between interest income on interest-earning assets and interest expense on interest-bearing
liabilities is the principal component of net interest income, and interest rate changes substantially affect our financial performance. We emphasize capital protection through stable earnings rather than maximizing yield. In order to achieve stable
earnings, we prudently manage our assets and liabilities and closely monitor the percentage changes in net interest income and equity value in relation to limits established within our guidelines.
To supplement traditional gap analysis, we perform simulation modeling to estimate the potential effects of interest rate changes. The
following table summarizes one of the stress simulations performed to forecast the impact of changing interest rates on net interest income and the market value of interest-earning assets and interest-bearing liabilities reflected on our balance
sheet (i.e., an instantaneous parallel shift in the yield curve of the magnitude indicated). This sensitivity analysis is compared to policy limits, which specify the maximum tolerance level for net interest income exposure over a one-year horizon,
given the basis point adjustment in interest rates reflected below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate Shock Table
|
|
|
|
Percentage Changes
|
|
|
Change in Amount
|
|
Change in
|
|
Net
|
|
|
Economic
|
|
|
Net
|
|
|
Economic
|
|
Interest
|
|
Interest
|
|
|
Value of
|
|
|
Interest
|
|
|
Value of
|
|
Rate
|
|
Income
|
|
|
Equity
|
|
|
Income
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
|
200%
|
|
|
2.51
|
%
|
|
|
-0.78
|
%
|
|
$
|
2,649
|
|
|
$
|
(3,159
|
)
|
100%
|
|
|
0.65
|
%
|
|
|
0.58
|
%
|
|
$
|
690
|
|
|
$
|
2,355
|
|
-100%
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
-200%
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
(1)
|
The table above only reflects the impact of upward shocks due to the fact that a downward parallel shock of 100 basis points or more is not possible given that some
short-term rates are currently less than one percent.
|
The estimated sensitivity does not necessarily
represent our forecast and the results may not be indicative of actual changes to our net interest income. These estimates are based upon a number of assumptions including: the nature and timing of interest rate levels including yield curve shape,
prepayments on loans and securities, pricing strategies on loans and deposits, and replacement of asset and liability cash flows. While the assumptions used are based on current economic and local market conditions, there is no assurance as to the
predictive nature of these conditions, including how customer preferences or competitor influences might change.
CAPITAL RESOURCES AND
LIQUIDITY
Capital Resources
Historically, our primary source of capital has been the retention of operating earnings. In order to ensure adequate levels of capital, the Board continually assesses projected sources and uses of
capital in conjunction with projected increases in assets and levels of risk. Management considers, among other things, earnings generated from operations, and access to capital from financial markets through the issuance of additional securities,
including common stock or notes, to meet our capital needs.
The primary measure of capital adequacy is based on the ratio of
risk-based capital to risk-weighted assets. At March 31, 2013, the Banks Tier 1 risk-based capital ratio of 17.42 percent, total risk-based capital ratio of 18.69 percent, and Tier 1 leverage capital ratio of 14.07 percent,
placed the Bank in the well capitalized category, which is defined as institutions with Tier 1 risk-based capital ratio equal to or greater than 6.00%, total risk-based capital ratio equal to or greater than 10.00%, and Tier 1
leverage capital ratio equal to or greater than 5.00%.
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Liquidity Hanmi Financial
Currently, management believes that Hanmi Financial, on a stand-alone basis, has adequate liquid assets to meet its operating cash needs
through March 31, 2014. Hanmi Financial redeemed $30.9 million of its TPS on March 15, 2013, and fully paid the remaining $51.5 million of TPS by the end of April 2013.
Liquidity Hanmi Bank
Management believes that the Bank, on a stand-alone basis, has adequate liquid assets to meet its current obligations. The Banks primary funding source will continue to be deposits originating from
its branch platform. The Banks wholesale funds historically consisted of FHLB advances and brokered deposits. As of March 31, 2013, the Bank had FHLB advances of $2.8 million compared to $2.9 million as of December 31, 2012. The Bank
had no brokered deposits at March 31, 2013 and December 31, 2012.
The Banks primary source of borrowings is
the FHLB, from which the Bank is eligible to borrow up to 15 percent of its total assets. As of March 31, 2013, the total borrowing capacity available based on pledged collateral and the remaining available borrowing capacity were $367.4
million and $364.5 million, respectively. The Banks FHLB borrowings as of March 31, 2013 totaled $2.8 million, representing 0.10 percent of total assets.
The amount that the FHLB is willing to advance differs based on the quality and character of qualifying collateral pledged by the Bank,
and the advance rates for qualifying collateral may be adjusted upwards or downwards by the FHLB from time to time. To the extent deposit renewals and deposit growth are not sufficient to fund maturing and withdrawable deposits, repay maturing
borrowings, fund existing and future loans and investment securities and otherwise fund working capital needs and capital expenditures, the Bank may utilize the remaining borrowing capacity from its FHLB borrowing arrangement.
As a means of augmenting its liquidity, the Bank had an available borrowing source of $104.4 million from the Federal Reserve Discount
Window (the Fed Discount Window), to which the Bank pledged loans with a carrying value of $147.4 million, and had no borrowings as of March 31, 2013. Additionally, the Bank is currently in the primary credit program of the Fed
Discount Window. The primary credit is available to depository institutions in sound overall condition to meet short-term (typically overnight), backup funding needs. Generally, the primary credit will be granted on a no-questions-asked,
minimal administered basis with no restrictions. Furthermore, in December 31, 2012, the Bank established a line of credit with Raymond James & Associates, Inc. for reserve repurchase agreements up to a maximum of $100.00 million.
The Bank has Contingency Funding Plans (CFPs) designed to ensure that liquidity sources are sufficient to meet
its ongoing obligations and commitments, particularly in the event of a liquidity contraction. The CFPs are designed to examine and quantify its liquidity under various stress scenarios. Furthermore, the CFPs provide a framework for
management and other critical personnel to follow in the event of a liquidity contraction or in anticipation of such an event. The CFPs address authority for activation and decision making, liquidity options and the responsibilities of key
departments in the event of a liquidity contraction.
OFF-BALANCE SHEET ARRANGEMENTS
For a discussion of off-balance sheet arrangements, see Note 10 Off-Balance Sheet Commitments of Notes to Consolidated
Financial Statements (Unaudited) in this Quarterly Report on Form 10-Q and Item 1. Business Off-Balance Sheet Commitments in our 2012 Annual Report on Form 10-K.
CONTRACTUAL OBLIGATIONS
There have been no material changes to the
contractual obligations described in our 2012 Annual Report on Form 10-K.
RECENTLY ISSUED ACCOUNTING STANDARDS
FASB ASU 2013-02 Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (Topic 220)
was
issued to address concerns raised in the initial issuance of ASU 2011-05,
Presentation of Comprehensive Income
. For items reclassified out of accumulated other comprehensive income into net income in their entirety, entities must
disclose the effect of the reclassification on each affected net income line item. For accumulated other comprehensive income reclassification items that are not reclassified in their entirety into net income, entities must provide a cross reference
to other required U.S. GAAP disclosures. This information may be provided either in the notes or parenthetically on the face of the statement that reports net income as long as all the information is disclosed in a single location. However, an
entity is prohibited from providing this information parenthetically on the face of the statement that reports net income if it has items that are not reclassified in their entirety into net income. The amendments are effective for annual reporting
periods beginning after December 15, 2012 and interim periods within those years. The adoption of FASB ASU 2013-02 did not have a significant impact on our financial condition or result of operations.
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