• Hanmi Reports 2023 Third Quarter Results

    Source: Nasdaq GlobeNewswire / 24 Oct 2023 15:05:02   America/Chicago

    LOS ANGELES, Oct. 24, 2023 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported financial results for the third quarter of 2023.

    Net income for the third quarter of 2023 was $18.8 million, or $0.62 per diluted share, compared with $20.6 million, or $0.67 per diluted share, for the second quarter of 2023. Return on average assets and return on average equity for the third quarter of 2023 were 1.00% and 9.88% annualized, respectively.

    Net income for the first nine months of 2023 was $61.4 million, or $2.01 per diluted share, compared with $72.9 million, or $2.39 per diluted share, for the first nine months of 2022. For the first nine months of 2023, return on average assets and return on average equity were 1.11% and 11.05% annualized, respectively.

    CEO Commentary

    “Our team successfully navigated another quarter of economic uncertainty and higher interest rates to deliver solid third quarter results that reflect the strength of our franchise and the success of our relationship banking model,” said Bonnie Lee, President and Chief Executive Officer of Hanmi Financial Corporation. “Our focus on our core customers where we obtain and have both a lending and deposit relationship continues to serve us well as evidenced by our strong level of demand deposit accounts, a stable deposit base and solid loan production.

    “While we continue to take a disciplined and selective approach to lending, third quarter loan production increased, reflecting a contribution from nearly all of our business lines, as well as meaningful increases in new loan yields. Importantly, our asset quality remains excellent, which we attribute to the strength of our direct customer relationships and our proactive approach to credit administration.

    “We are entering the fourth quarter with a healthy loan pipeline, stable core deposits, solid credit quality and well-managed expenses. We look forward to opening two new branches in the fourth quarter to capitalize on attractive growth opportunities. We will remain focused on executing on our strategic initiatives to drive disciplined growth and to create value for our shareholders over the long-term.”

    Third Quarter 2023 Highlights:

    • Third quarter net income was $18.8 million, or $0.62 per diluted share, down 8.8% from $20.6 million, or $0.67 per diluted share, for the second quarter of 2023 and reflects primarily higher credit loss expense offset by higher noninterest income.
    • Loans receivable were $6.02 billion at September 30, 2023, up 0.9% sequentially from the end of the second quarter and the end of 2022; loan production for the third quarter was $336.3 million with a weighted average interest rate of 7.80%.
    • Deposits were $6.26 billion at the end of the third quarter, down 0.9% sequentially from the end of the second quarter but up 1.5% from year-end; noninterest-bearing deposits were 34.5% of the deposit portfolio at September 30, 2023.
    • Net interest income was $54.9 million for the third quarter, down 1.0% from the second quarter and net interest margin (taxable equivalent) was 3.03%, down eight basis points from the prior quarter; sequentially, the average yield on loans increased 9 basis points while the cost of interest-bearing deposits increased 28 basis points.
    • Noninterest income for the third quarter was $11.2 million, up 41.5% from the second quarter, primarily reflecting a $4.0 million gain on the sale-and-leaseback of a branch property; noninterest expense for the third quarter was $34.2 million, down 0.1% sequentially and the efficiency ratio for the third quarter was 51.82%.
    • Credit loss expense for the third quarter was $5.2 million compared with a recovery of less than $0.1 million for the prior quarter; net loan charge-offs were $8.9 million and included $6.1 million of charge-offs on $11.0 million of previously identified classified loans for which there were $4.3 million of specific allowances.
    • The allowance for credit losses was $67.3 million at September 30, 2023, or 1.12% of loans at the end of the third quarter.
    • Loans 30 to 89 days past due and still accruing declined to 0.16% of loans and nonperforming assets fell 28.7% to $15.9 million or 0.22% of total assets at September 30, 2023.
    • Hanmi had a ratio of tangible common equity to tangible assets of 8.89% at September 30, 2023 and a preliminary Common equity Tier 1 capital ratio of 11.95% and a Total capital ratio of 15.07%.

    For more information about Hanmi, please see the Q3 2023 News & Events section (and Supplemental Financial Information), which is available on the Bank’s Investor Relations section of the corporate website at www.hanmi.com. Also, please refer to “Non-GAAP Financial Measures” herein for further details of the presentation of certain non-GAAP financial measures.

    Quarterly Highlights
    (Dollars in thousands, except per share data)

     As of or for the Three Months Ended Amount Change
     September 30, June 30, March 31, December 31, September 30, Q3-23 Q3-23
      2023   2023   2023   2022   2022  vs. Q2-23 vs. Q3-22
                  
    Net income$18,796  $20,620  $21,991  $28,479  $27,169  $(1,824) $(8,373)
    Net income per diluted common share$0.62  $0.67  $0.72  $0.93  $0.89  $(0.05) $(0.27)
                  
    Assets$7,350,140  $7,344,924  $7,434,130  $7,378,262  $7,128,511  $5,216  $221,629 
    Loans receivable$6,020,785  $5,965,171  $5,980,458  $5,967,133  $5,800,991  $55,614  $219,794 
    Deposits$6,260,072  $6,315,768  $6,201,038  $6,168,072  $6,201,376  $(55,696) $58,696 
                  
    Return on average assets 1.00%  1.12%  1.21%  1.56%  1.52%  -0.12   -0.52 
    Return on average stockholders’ equity 9.88%  11.14%  12.19%  15.90%  15.58%  -1.26   -5.70 
                  
    Net interest margin 3.03%  3.11%  3.28%  3.67%  3.66%  -0.08   -0.63 
    Efficiency ratio (1) 51.82%  54.11%  49.54%  46.99%  46.22%  -2.29   5.60 
                  
    Tangible common equity to tangible assets (2) 8.89%  8.96%  8.77%  8.50%  8.40%  -0.07   0.49 
    Tangible common equity per common share (2)$21.45  $21.56  $21.30  $20.54  $19.60   -0.12   1.85 
                  
                  
    (1) Noninterest expense divided by net interest income plus noninterest income.
    (2) Refer to “Non-GAAP Financial Measures” for further details.
                  

    Results of Operations
    Net interest income for the third quarter decreased $0.5 million to $54.9 million from $55.4 million for the second quarter of 2023, down 1.0%. The decrease was primarily due to an increase in the cost of interest-bearing deposits, partially offset by an increase in interest-earning asset yields and one additional day in the quarter. The cost of interest-bearing deposits increased 28 basis points to 3.53% for the third quarter of 2023 from 3.25% for the second quarter of 2023. The increase was due to higher market interest rates and a shift in the composition of the portfolio to higher-rate deposits. Average interest-bearing deposits were $4.13 billion for the third quarter, compared with $3.97 billion for the second quarter. Average loans were $5.92 billion for the third quarter, compared with $5.94 billion for the second quarter of 2023. The yield on average loans for the third quarter increased nine basis points to 5.73% from 5.64% for the second quarter. Third quarter loan prepayment fees were less than $0.1 million, compared with $0.2 million for the second quarter. Net interest margin (taxable-equivalent) for the third quarter was 3.03% compared with 3.11% for the second quarter.

     As of or For the Three Months Ended (in thousands) Percentage Change
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-23 Q3-23
    Net Interest Income 2023   2023   2023   2022   2022  vs. Q2-23 vs. Q3-22
                  
    Interest and fees on loans receivable(1)$85,398  $83,567  $80,923  $77,123  $66,976  2.2% 27.5%
    Interest on securities 4,204   4,126   4,025   3,633   3,271  1.9% 28.5%
    Dividends on FHLB stock 317   283   289   289   245  12.0% 29.4%
    Interest on deposits in other banks 4,153   2,794   2,066   1,194   958  48.6% 333.5%
    Total interest and dividend income$94,072  $90,770  $87,303  $82,239  $71,450  3.6% 31.7%
                  
    Interest on deposits 36,818   32,115   25,498   14,900   6,567  14.6% 460.7%
    Interest on borrowings 753   1,633   2,369   1,192   349  -53.9% 115.8%
    Interest on subordinated debentures 1,646   1,600   1,583   1,586   1,448  2.9% 13.7%
    Total interest expense 39,217   35,348   29,450   17,678   8,364  10.9% 368.9%
    Net interest income$54,855  $55,422  $57,853  $64,561  $63,086  -1.0% -13.0%
                  
    (1) Includes loans held for sale.             
                  
     For the Three Months Ended (in thousands) Percentage Change
    Average Earning Assets and Interest-bearing LiabilitiesSep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-23 Q3-23
     2023   2023   2023   2022   2022  vs. Q2-23 vs. Q3-22
    Loans receivable (1)$5,915,423  $5,941,071  $5,944,399  $5,877,298  $5,696,587  -0.4% 3.8%
    Securities 955,473   971,531   980,712   966,299   956,989  -1.7% -0.2%
    FHLB stock 16,385   16,385   16,385   16,385   16,385  0.0% 0.0%
    Interest-bearing deposits in other banks 317,498   230,974   192,902   138,476   181,401  37.5% 75.0%
    Average interest-earning assets$7,204,779  $7,159,961  $7,134,398  $6,998,458  $6,851,362  0.6% 5.2%
                  
    Demand: interest-bearing$94,703  $99,057  $109,391  $119,106  $121,269  -4.4% -21.9%
    Money market and savings 1,601,826   1,463,304   1,453,569   1,781,834   2,079,490  9.5% -23.0%
    Time deposits 2,438,112   2,403,685   2,223,615   1,585,798   1,120,149  1.4% 117.7%
    Average interest-bearing deposits 4,134,641   3,966,046   3,786,575   3,486,738   3,320,908  4.3% 24.5%
    Borrowings 120,381   196,776   268,056   197,554   123,370  -38.8% -2.4%
    Subordinated debentures 129,780   129,631   129,483   129,335   129,176  0.1% 0.5%
    Average interest-bearing liabilities$4,384,802  $4,292,453  $4,184,114  $3,813,627  $3,573,454  2.2% 22.7%
                  
    Average Noninterest Bearing Deposits             
    Demand deposits - noninterest bearing$2,136,156  $2,213,171  $2,324,413  $2,593,948  $2,717,810  -3.5% -21.4%
                  
    (1) Includes loans held for sale.             
     
                  
     For the Three Months Ended Yield/Rate Change
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-23 Q3-23
    Average Yields and Rates 2023   2023   2023   2022   2022  vs. Q2-23 vs. Q3-22
    Loans receivable(1) 5.73%  5.64%  5.51%  5.21%  4.67% 0.09  1.06 
    Securities (2) 1.79%  1.73%  1.67%  1.47%  1.40% 0.06  0.39 
    FHLB stock 7.67%  6.92%  7.16%  7.00%  5.93% 0.75  1.74 
    Interest-bearing deposits in other banks 5.19%  4.85%  4.34%  3.42%  2.09% 0.34  3.10 
    Interest-earning assets 5.19%  5.09%  4.96%  4.67%  4.15% 0.10  1.04 
                  
    Interest-bearing deposits 3.53%  3.25%  2.73%  1.70%  0.78% 0.28  2.75 
    Borrowings 2.48%  3.33%  3.58%  2.55%  1.24% -0.85  1.24 
    Subordinated debentures 5.07%  4.94%  4.89%  4.67%  4.37% 0.13  0.70 
    Interest-bearing liabilities 3.55%  3.30%  2.85%  1.84%  0.93% 0.25  2.62 
                  
    Net interest margin (taxable equivalent basis) 3.03%  3.11%  3.28%  3.67%  3.66% -0.08  -0.63 
                  
    Cost of deposits 2.33%  2.08%  1.69%  0.97%  0.43% 0.25  1.90 
                  
    (1) Includes loans held for sale.             
    (2) Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.
                  

    Credit loss expense for the third quarter was $5.2 million and included a $5.2 million provision for loan losses and a recovery for off-balance sheet items of less than $0.1 million. For the second quarter, credit loss expense was negative $0.1 million and included a $0.5 million provision for loan losses and a $0.6 million recovery for off-balance sheet items.

    Noninterest income for the third quarter increased $3.3 million to $11.2 million from $7.9 million for the second quarter. The increase primarily reflected a $4.0 million gain on the sale-and-leaseback of a branch property, offset by a $0.6 million decline in other operating income. The volume of SBA loans sold in the third quarter increased to $21.0 million from $19.9 million for the second quarter while trade premiums decreased to 6.84% for the third quarter from 7.75% for the second quarter.

      For the Three Months Ended (in thousands)
     Percentage Change
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-23 Q3-23
    Noninterest Income 2023  2023   2023  2022   2022 vs. Q2-23 vs. Q3-22
    Service charges on deposit accounts$2,605 $2,571  $2,579 $2,742  $2,996 1.3% -13.1%
    Trade finance and other service charges and fees 1,155  1,173   1,258  1,115   1,132 -1.5% 2.0%
    Servicing income 838  825   742  725   635 1.6% 32.0%
    Bank-owned life insurance income (expense) 280  271   270  (97)  245 3.3% 14.3%
    All other operating income 1,178  1,811   1,618  1,039   1,656 -35.0% -28.9%
    Service charges, fees & other 6,056  6,651   6,467  5,524   6,664 -8.9% -9.1%
                  
    Gain on sale of SBA loans 1,172  1,212   1,869  1,933   2,250 -3.3% -47.9%
    Net gain (loss) on sales of securities -  (1,871)  -  -   - -100.0% 0.0%
    Legal settlement -  1,943   -  -   - -100.0% 0.0%
    Total noninterest income$11,228 $7,935  $8,336 $7,457  $8,914 41.5% 26.0%
                           

    Noninterest expense for the third quarter was relatively consistent with the prior quarter at $34.2 million. Occupancy and equipment expense increased by $0.3 million and professional fees increased by $0.2 million. These increases were offset by $0.2 million of lower advertising and promotion expense and a $0.3 million decline in other expenses. The efficiency ratio for the third quarter improved to 51.82%, from 54.11% for the prior quarter due to the higher revenue.

      For the Three Months Ended (in thousands)
     Percentage Change
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-23 Q3-23
      2023  2023   2023   2022   2022  vs. Q2-23 vs. Q3-22
    Noninterest Expense             
    Salaries and employee benefits$20,361 $20,365  $20,610  $20,279  $19,365  0.0% 5.1%
    Occupancy and equipment 4,825  4,500   4,412   3,668   4,736  7.2% 1.9%
    Data processing 3,490  3,465   3,253   3,431   3,352  0.7% 4.1%
    Professional fees 1,568  1,376   1,335   1,783   1,249  14.0% 25.5%
    Supplies and communication 552  638   676   683   710  -13.5% -22.3%
    Advertising and promotion 534  748   833   974   1,186  -28.6% -55.0%
    All other operating expenses 2,852  3,243   1,957   3,041   2,698  -12.1% 5.7%
    Subtotal 34,182  34,335   33,076   33,859   33,296  -0.4% 2.7%
                  
    Other real estate owned expense (income) 16  4   (201)  (70)  2  300.0% 700.0%
    Repossessed personal property expense (income) 47  (59)  (84)  55   (23) -225.5% -304.3%
    Total noninterest expense$34,245 $34,280  $32,791  $33,844  $33,275  -0.1% 2.9%
                             

    Hanmi recorded a provision for income taxes of $7.9 million for the third quarter, compared with $8.5 million for the second quarter representing an effective tax rate of 29.6% compared with 29.3% for the second quarter. For the first nine months of 2023, the effective tax rate was 29.5% compared with 28.9% for the same period a year ago.

    Financial Position
    Total assets at September 30, 2023 increased by $5.2 million, to $7.35 billion from $7.34 billion at June 30, 2023. Loans receivable increased by $59.3 million and prepaid expenses and other assets increased by $16.6 million, reflecting the recognition of a $3.5 million right-of-use asset from the sale-leaseback of a branch property, the recognition of additional $3.4 million right-of-use assets related to new and renewed branch premises, a $4.6 million increase in current taxes receivable, and a $5.0 million low-income housing tax credit investment. These increases were partially offset by a $55.9 million decrease in cash and due from banks, and a $19.4 million decrease in securities available for sale.

    Loans receivable, before the allowance for credit losses, were $6.02 billion at quarter-end, up 0.9% from June 30, 2023. Loans held for sale, representing the guaranteed portion of SBA 7(a) loans, were $11.7 million at the end of the third quarter, compared with $7.3 million at the end of the prior quarter.

      As of (in thousands)
     Percentage Change
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-23 Q3-23
      2023   2023   2023   2022   2022  vs. Q2-23 vs. Q3-22
    Loan Portfolio             
    Commercial real estate loans$3,773,015  $3,738,325  $3,784,176  $3,833,397  $3,853,947  0.9% -2.1%
    Residential/consumer loans 926,326   886,984   817,917   734,473   649,591  4.4% 42.6%
    Commercial and industrial loans 728,792   753,456   778,149   804,475   732,030  -3.3% -0.4%
    Equipment finance 592,652   586,406   600,216   594,788   565,423  1.1% 4.8%
    Loans receivable 6,020,785   5,965,171   5,980,458   5,967,133   5,800,991  0.9% 3.8%
    Loans held for sale 11,767   7,293   3,652   8,043   10,044  61.3% 17.2%
    Total$6,032,552  $5,972,464  $5,984,110  $5,975,176  $5,811,035  1.0% 3.8%
                  
                  
      As of
        
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,    
      2023   2023   2023   2022   2022     
    Composition of Loan Portfolio            
    Commercial real estate loans 62.5%  62.6%  63.2%  64.2%  66.3%    
    Residential/consumer loans 15.4%  14.9%  13.7%  12.3%  11.2%    
    Commercial and industrial loans 12.1%  12.6%  13.0%  13.5%  12.6%    
    Equipment finance 9.8%  9.8%  10.0%  9.9%  9.7%    
    Loans receivable 99.8%  99.9%  99.9%  99.9%  99.8%    
    Loans held for sale 0.2%  0.1%  0.1%  0.1%  0.2%    
    Total 100.0%  100.0%  100.0%  100.0%  100.0%    
                  

    New loan production was $336.3 million for the third quarter, at a weighted average rate of 7.80% while $62.1 million of loans paid off during the quarter at an average rate of 7.09%. The higher loan production reflects higher demand balanced across most of our business lines.

    Commercial real estate loan production for the second quarter was $106.2 million. Commercial and industrial loan production was $67.9 million, SBA loan production was $36.1 million, equipment finance production was $71.1 million and residential mortgage loan production was $55.0 million.

     For the Three Months Ended (in thousands)
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
      2023   2023   2023   2022   2022 
    New Loan Production         
    Commercial real estate loans$106,151  $40,989  $75,528  $86,500  $132,870 
    Commercial and industrial loans 67,907   36,322   27,055   137,902   88,015 
    SBA loans 36,109   30,926   34,472   53,209   44,898 
    Equipment finance 71,075   50,905   69,307   89,193   86,092 
    Residential/consumer loans 55,026   100,161   97,201   106,955   140,432 
    subtotal 336,268   259,303   303,563   473,759   492,307 
    Payoffs (62,140)  (120,609)  (124,923)  (121,409)  (139,883)
    Amortization (116,411)  (102,248)  (102,675)  (91,333)  (80,294)
    Loan sales (22,496)  (20,933)  (30,002)  (50,550)  (45,418)
    Net line utilization (70,238)  (28,092)  (30,401)  (43,124)  (78,927)
    Charge-offs & OREO (9,369)  (2,708)  (2,237)  (1,201)  (2,197)
              
    Loans receivable-beginning balance 5,965,171   5,980,458   5,967,133   5,800,991   5,655,403 
    Loans receivable-ending balance$6,020,785  $5,965,171  $5,980,458  $5,967,133  $5,800,991 
              

    Deposits were $6.26 billion at the end of the third quarter, a decline of $55.7 million, or 0.9%, from $6.32 billion at the end of the prior quarter. The decrease was primarily due to a $44.9 million decline in noninterest-bearing demand deposits, a $8.9 million decline in interest-bearing demand deposits and a $4.7 million decline in money market and savings deposits. These declines were offset by an increase in time deposits. Noninterest-bearing demand deposits represented 34.5% of total deposits at quarter-end and the loan-to-deposit ratio was 96.2%.

     As of (in thousands) Percentage Change
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-23 Q3-23
      2023   2023   2023   2022   2022  vs. Q2-23 vs. Q3-22
    Deposit Portfolio             
    Demand: noninterest-bearing$2,161,238  $2,206,078  $2,334,083  $2,539,602  $2,771,498  -2.0% -22.0%
    Demand: interest-bearing 88,133   97,076   104,245   115,573   125,408  -9.2% -29.7%
    Money market and savings 1,576,006   1,580,691   1,382,472   1,556,690   2,056,793  -0.3% -23.4%
    Time deposits 2,434,695   2,431,923   2,380,238   1,956,207   1,247,677  0.1% 95.1%
    Total deposits$6,260,072  $6,315,768  $6,201,038  $6,168,072  $6,201,376  -0.9% 0.9%
                  
              -   
     As of  
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,    
      2023   2023   2023   2022   2022     
    Composition of Deposit Portfolio             
    Demand: noninterest-bearing 34.5%  34.9%  37.6%  41.2%  44.7%    
    Demand: interest-bearing 1.4%  1.5%  1.7%  1.9%  2.0%    
    Money market and savings 25.2%  25.0%  22.3%  25.2%  33.2%    
    Time deposits 38.9%  38.6%  38.4%  31.7%  20.1%    
    Total deposits 100.0%  100.0%  100.0%  100.0%  100.0%    
                  

    Stockholders’ equity at September 30, 2023 was $663.4 million, compared with $668.6 million at June 30, 2023. The decrease was primarily due to a $14.8 million increase in unrealized after-tax losses on securities available for sale due to changes in intermediate-term interest rates during the third quarter. Also, Hanmi repurchased 100,000 shares during the third quarter at an average share price of $19.02. At September 30, 2023, 459,972 shares remain under the Company’s share repurchase program. Offsetting this decrease was $11.1 million of third quarter net income net of dividends paid. Tangible common stockholders’ equity was $652.2 million, or 8.89% of tangible assets, at September 30, 2023, compared with $657.4 million, or 8.96% of tangible assets at the end of the second quarter. Tangible book value per share was $21.45 at September 30, 2023, compared with $21.56 at June 30, 2023. Refer to “Non-GAAP Financial measures” for details.

    Hanmi and the Bank exceeded the minimum regulatory capital requirements and the Bank continues to exceed the minimum for the “well capitalized” category. At September 30, 2023, Hanmi’s preliminary Common equity Tier 1 capital ratio was 11.95% and its Total risk-based capital ratio was 15.07%, compared with 11.90% and 15.11%, respectively, at the end of the second quarter.

     As of Ratio Change
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-23 Q3-23
     2023 2023 2023 2022 2022 vs. Q2-23 vs. Q3-22
    Regulatory Capital ratios (1)             
    Hanmi Financial             
    Total risk-based capital15.07% 15.11% 14.80% 14.49% 14.38% -0.04 0.69
    Tier 1 risk-based capital12.30% 12.25% 11.94% 11.71% 11.55% 0.05 0.75
    Common equity tier 1 capital11.95% 11.90% 11.59% 11.37% 11.21% 0.05 0.74
    Tier 1 leverage capital ratio10.27% 10.22% 10.09% 10.07% 9.99% 0.05 0.28
    Hanmi Bank             
    Total risk-based capital14.42% 14.45% 14.15% 13.86% 13.76% -0.03 0.66
    Tier 1 risk-based capital13.42% 13.39% 13.06% 12.85% 12.73% 0.03 0.69
    Common equity tier 1 capital13.42% 13.39% 13.06% 12.85% 12.73% 0.03 0.69
    Tier 1 leverage capital ratio11.25% 11.21% 11.06% 11.07% 11.02% 0.04 0.23
                  
    (1) Preliminary ratios for September 30, 2023
                  

    Asset Quality
    Loans 30 to 89 days past due and still accruing were 0.16% of loans at the end of the third quarter, compared with 0.23% at the end of the prior quarter.

    Special mention loans were $76.5 million at the end of the third quarter, compared with $44.6 million at June 30, 2023. The $31.9 million increase in special mention loans included new downgrades to special mention of $35.8 million offset by upgrades to pass of $2.1 million, downgrades from special mention of $0.8 million, and payoffs of $1.0 million. Included in new downgrades was a $28.3 million completed construction loan for a memory-care and assisted living facility that had not yet achieved stabilization.

    Classified loans were $33.1 million at September 30, 2023, down from $38.8 million at the end of the prior quarter. The $5.7 million decrease was primarily driven by charge-offs of $8.5 million, amortization, paydowns and payoffs of $2.4 million and other dispositions of $1.4 million, offset by new downgrades to classified of $6.6 million.

    Nonperforming loans were $15.8 million at September 30, 2023, down from $22.2 million at the end of the prior quarter. The decline was primarily due to $8.3 million of charge-offs, including $6.1 million of charge-offs on $11.0 million of previously identified classified loans. As a percentage of the loan portfolio, nonperforming loans were 0.26% at quarter-end, compared with 0.37% at the end of the second quarter.

    Nonperforming assets were $15.9 million at the end of the third quarter, down from $22.3 million at the end of the second quarter. As a percentage of total assets, nonperforming assets were 0.22% at quarter-end, compared with 0.30% at June 30, 2023.

    Gross charge-offs for the third quarter were $9.4 million, compared with $2.7 million for the second quarter. Third quarter gross charge-offs primarily consisted of $6.1 million of commercial and industrial loans, $2.8 million of equipment financing agreements, $0.2 million of SBA loans secured by business assets and $0.2 million of SBA loans secured by real estate. The $6.1 million of commercial and industrial loan charge-offs relate to the previously described classified loans. Recoveries of previously charged-off loans for the third quarter were $0.5 million, compared with $1.0 million for the prior quarter. Recoveries during the third quarter consisted of $0.3 million of equipment financing agreements, $0.1 million in commercial and industrial loans and $0.1 million of SBA loans secured by real estate and business assets.

    As a result, there were net charge-offs of $8.9 million for the third quarter, compared with net charge-offs of $1.7 million for the prior quarter. For the third quarter, net charge-offs represented 0.60% of average loans on an annualized basis, compared with net charge-offs of 0.12% of average loans for the second quarter on an annualized basis.

    The allowance for credit losses was $67.3 million at September 30, 2023, down from $71.0 million at June 30, 2023. The ratio of the allowance for credit losses to loans was 1.12% at the end of the third quarter, down from 1.19% at the end of the second quarter. Specific allowances for loans decreased $4.5 million, principally due to charge-offs, while the allowance for quantitative and qualitative considerations increased $0.8 million.

                  
     As of or for the Three Months Ended (in thousands) Amount Change
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q3-23 Q3-23
      2023   2023   2023   2022   2022  vs. Q2-23 vs. Q3-22
    Asset Quality Data and Ratios             
                  
    Delinquent loans:             
    Loans, 30 to 89 days past due and still accruing$9,545  $13,749  $15,377  $7,492  $4,936  $(4,204) $4,609 
    Delinquent loans to total loans 0.16%  0.23%  0.26%  0.13%  0.09%  -0.07   0.07 
                  
    Criticized loans:             
    Special mention$76,473  $44,632  $64,340  $79,013  $122,952  $31,841  $(46,479)
    Classified 33,134   38,840   47,288   46,192   47,740   (5,706)  (14,606)
    Total criticized loans$109,607  $83,472  $111,628  $125,205  $170,692  $26,135  $(61,085)
                  
    Nonperforming assets:             
    Nonaccrual loans$15,783  $22,178  $20,050  $9,846  $11,592  $(6,395) $4,191 
    Loans 90 days or more past due and still accruing -   -   -   -   -   -   - 
    Nonperforming loans 15,783   22,178   20,050   9,846   11,592   (6,395)  4,191 
    Other real estate owned, net 117   117   117   117   792   -   (675)
    Nonperforming assets*$15,900  $22,295  $20,167  $9,963  $12,384  $(6,395) $3,516 
                  
    Nonperforming assets to assets* 0.22%  0.30%  0.27%  0.14%  0.17%  -0.08   0.05 
    Nonperforming loans to total loans 0.26%  0.37%  0.34%  0.17%  0.20%  -0.11   0.06 
                  
    * Excludes repossessed personal property of $1.3 million, $0.8 million, $0.6 million, $0.5 million, and $0.2 million as of Q3-23, Q2-23, Q1-23, Q4-22, and Q3-22, respectively.
                  
     As of or for the Three Months Ended (in thousands)    
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,    
      2023   2023   2023   2022   2022     
    Allowance for credit losses:             
    Balance at beginning of period$71,024  $72,249  $71,523  $71,584  $73,067     
    Credit loss expense (recovery) on loans 5,167   514   2,181   221   (374)    
    Net loan (charge-offs) recoveries (8,878)  (1,739)  (1,455)  (282)  (1,109)    
    Balance at end of period$67,313  $71,024  $72,249  $71,523  $71,584     
                  
    Net loan charge-offs (recoveries) to average loans (1) 0.60%  0.12%  0.10%  0.02%  0.08%    
    Allowance for credit losses to loans 1.12%  1.19%  1.21%  1.20%  1.23%    
                  
    Allowance for credit losses related to off-balance sheet items:            
    Balance at beginning of period$2,476  $3,067  $3,115  $3,250  $2,313     
    Credit loss expense (recovery) on off-balance sheet items (13)  (591)  (48)  (135)  937     
    Balance at end of period$2,463  $2,476  $3,067  $3,115  $3,250     
                  
    Unused commitments to extend credit$848,886  $791,818  $924,371  $780,543  $746,354     
                  
    (1) Annualized             
                  

    Corporate Developments
    On July 27, 2023, Hanmi’s Board of Directors declared a cash dividend on its common stock for the third quarter of 2023 of $0.25 per share. Hanmi paid the dividend on August 23, 2023, to stockholders of record as of the close of business on August 7, 2023.

    Earnings Conference Call
    Hanmi Bank will host its third quarter 2023 earnings conference call today, October 24, 2023 at 2:00 p.m. PST (5:00 p.m. EST) to discuss these results. This call will also be webcast. To access the call, please dial 1-877-407-9039 before 2:00 p.m. PST, using access code Hanmi Bank. To listen to the call online, either live or archived, please visit Hanmi’s Investor Relations website at www.hanmi.com.

    About Hanmi Financial Corporation
    Headquartered in Los Angeles, California, Hanmi Financial Corporation owns Hanmi Bank, which serves multi-ethnic communities through its network of 35 full-service branches and eight loan production offices in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Washington and Georgia. Hanmi Bank specializes in real estate, commercial, SBA and trade finance lending to small and middle market businesses. Additional information is available at www.hanmi.com.

    Forward-Looking Statements
    This press release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements 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 our anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital and strategic plans, 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 our forward-looking statements to be reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

    Forward-looking 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 statements. These factors include the following:

    • a failure to maintain adequate levels of capital and liquidity to support our operations;
    • the effect of potential future supervisory action against us or Hanmi Bank and our ability to address any issues raised in our regulatory exams;
    • general economic and business conditions internationally, nationally and in those areas in which we operate, including any potential recessionary conditions;
    • volatility and deterioration in the credit and equity markets;
    • changes in consumer spending, borrowing and savings habits;
    • availability of capital from private and government sources;
    • demographic changes;
    • competition for loans and deposits and failure to attract or retain loans and deposits;
    • inflation and fluctuations in interest rates that reduce our margins and yields, the fair value of financial instruments, the level of loan originations or prepayments on loans we have made and make, and the cost we pay to retain and attract deposits and secure other types of funding;
    • our ability to enter new markets successfully and capitalize on growth opportunities;
    • the current or anticipated impact of military conflict, terrorism or other geopolitical events;
    • a potential government shutdown;
    • risks of natural disasters;
    • legal proceedings and litigation brought against us;
    • a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;
    • the failure to maintain current technologies;
    • risks associated with Small Business Administration loans;
    • failure to attract or retain key employees;
    • our ability to access cost-effective funding;
    • changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;
    • fluctuations in real estate values;
    • changes in accounting policies and practices;
    • changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums and changes in the monetary policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
    • the continuing impact of the COVID-19 pandemic on our business and results of operation;
    • the ability of Hanmi Bank to make distributions to Hanmi Financial Corporation, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial tests;
    • strategic transactions we may enter into;
    • the adequacy of our allowance for credit losses;
    • our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses;
    • changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements;
    • our ability to control expenses; and
    • cyber security and fraud risks against our information technology and those of our third-party providers and vendors.

    In addition, we set forth certain risks in our reports filed with the U.S. Securities and Exchange Commission, including, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K that we will file hereafter, which could cause actual results to differ from those projected. We undertake no obligation to update such forward-looking statements except as required by law.

    Investor Contacts:
    Romolo (Ron) Santarosa
    Senior Executive Vice President & Chief Financial Officer
    213-427-5636

    Larry Clark, CFA
    Investor Relations
    Financial Profiles, Inc.
    lclark@finprofiles.com
    310-622-8223

    Hanmi Financial Corporation and Subsidiaries
    Consolidated Balance Sheets (Unaudited)
    (Dollars in thousands)

     September 30, June 30,  Percentage September 30,  Percentage
      2023   2023  ChangeChange  2022  ChangeChange
    Assets           
    Cash and due from banks$289,006  $344,907  $(55,901)-16.2% $275,159  $13,847 5.0%
    Securities available for sale, at fair value 817,242   836,650   (19,408)-2.3%  830,151   (12,909)-1.6%
    Loans held for sale, at the lower of cost or fair value 11,767   7,293   4,474 61.3%  10,044   1,723 17.2%
    Loans receivable, net of allowance for credit losses 5,953,472   5,894,147   59,325 1.0%  5,729,407   224,065 3.9%
    Accrued interest receivable 20,715   18,163   2,552 14.1%  15,356   5,359 34.9%
    Premises and equipment, net 20,707   22,849   (2,142)-9.4%  23,591   (2,884)-12.2%
    Customers’ liability on acceptances 1,386   1,688   (302)-17.9%  200   1,186 593.0%
    Servicing assets 7,156   7,352   (196)-2.7%  7,424   (268)-3.6%
    Goodwill and other intangible assets, net 11,131   11,162   (31)-0.3%  11,267   (136)-1.2%
    Federal Home Loan Bank ("FHLB") stock, at cost 16,385   16,385   - 0.0%  16,385   - 0.0%
    Bank-owned life insurance 56,364   56,085   279 0.5%  55,641   723 1.3%
    Prepaid expenses and other assets 144,809   128,243   16,566 12.9%  153,886   (9,077)-5.9%
    Total assets$ 7,350,140  $ 7,344,924  $ 5,216 0.1% $ 7,128,511  $ 221,629 3.1%
                
    Liabilities and Stockholders’ Equity           
    Liabilities:           
    Deposits:           
    Noninterest-bearing$2,161,238  $2,206,078  $(44,840)-2.0% $2,771,498  $(610,260)-22.0%
    Interest-bearing 4,098,834   4,109,690   (10,856)-0.3%  3,429,878   668,956 19.5%
    Total deposits 6,260,072   6,315,768   (55,696)-0.9%  6,201,376   58,696 0.9%
    Accrued interest payable 50,286   34,621   15,665 45.2%  2,180   48,106 2206.7%
    Bank’s liability on acceptances 1,386   1,688   (302)-17.9%  200   1,186 593.0%
    Borrowings 162,500   125,000   37,500 30.0%  100,000   62,500 62.5%
    Subordinated debentures 129,860   129,708   152 0.1%  129,261   599 0.5%
    Accrued expenses and other liabilities 82,677   69,579   13,098 18.8%  86,601   (3,924)-4.5%
    Total liabilities 6,686,781   6,676,364   10,417 0.2%  6,519,618   167,163 2.6%
                
    Stockholders’ equity:           
    Common stock 34   33   1 0.0%  33   1 3.0%
    Additional paid-in capital 586,169   585,391   778 0.1%  582,695   3,474 0.6%
    Accumulated other comprehensive income (99,422)  (84,639)  (14,783)-17.5%  (96,062)  (3,360)-3.5%
    Retained earnings 308,007   296,901   11,106 3.7%  248,684   59,323 23.9%
    Less treasury stock (131,429)  (129,126)  (2,303)-1.8%  (126,457)  (4,972)-3.9%
    Total stockholders’ equity 663,359   668,560   (5,201)-0.8%  608,893   54,466 8.9%
    Total liabilities and stockholders’ equity$ 7,350,140  $ 7,344,924  $ 5,216 0.1% $ 7,128,511  $ 221,629 3.1%
                

    Hanmi Financial Corporation and Subsidiaries
    Consolidated Statements of Income (Unaudited)
    (Dollars in thousands, except share and per share data)

      Three Months Ended
     September 30, June 30, Percentage September 30, Percentage
      2023  2023  Change  2022 Change
    Interest and dividend income:         
    Interest and fees on loans receivable$85,398 $83,567  2.2% $66,976 27.5%
    Interest on securities 4,204  4,126  1.9%  3,271 28.5%
    Dividends on FHLB stock 317  283  12.0%  245 29.4%
    Interest on deposits in other banks 4,153  2,794  48.6%  958 333.5%
    Total interest and dividend income 94,072  90,770  3.6%  71,450 31.7%
    Interest expense:         
    Interest on deposits 36,818  32,115  14.6%  6,567 460.7%
    Interest on borrowings 753  1,633  -53.9%  349 115.8%
    Interest on subordinated debentures 1,646  1,600  2.9%  1,448 13.7%
    Total interest expense 39,217  35,348  10.9%  8,364 368.9%
    Net interest income before credit loss expense 54,855  55,422  -1.0%  63,086 -13.0%
    Credit loss expense (recovery) 5,154  (77) 6793.5%  563 815.5%
    Net interest income after credit loss expense 49,701  55,499  -10.4%  62,523 -20.5%
    Noninterest income:         
    Service charges on deposit accounts 2,605  2,571  1.3%  2,996 -13.1%
    Trade finance and other service charges and fees 1,155  1,173  -1.5%  1,132 2.0%
    Gain on sale of Small Business Administration ("SBA") loans 1,172  1,212  -3.3%  2,250 -47.9%
    Other operating income 6,296  2,979  111.3%  2,536 148.3%
    Total noninterest income 11,228  7,935  41.5%  8,914 26.0%
    Noninterest expense:         
    Salaries and employee benefits 20,361  20,365  0.0%  19,365 5.1%
    Occupancy and equipment 4,825  4,500  7.2%  4,736 1.9%
    Data processing 3,490  3,465  0.7%  3,352 4.1%
    Professional fees 1,568  1,376  14.0%  1,249 25.5%
    Supplies and communications 552  638  -13.5%  710 -22.3%
    Advertising and promotion 534  748  -28.6%  1,186 -55.0%
    Other operating expenses 2,915  3,188  -8.6%  2,677 8.9%
    Total noninterest expense 34,245  34,280  -0.1%  33,275 2.9%
    Income before tax 26,684  29,154  -8.5%  38,162 -30.1%
    Income tax expense 7,888  8,534  -7.6%  10,993 -28.2%
    Net income$ 18,796  $ 20,620   -8.8% $ 27,169  -30.8%
    Basic earnings per share:$0.62 $0.68    $0.89  
    Diluted earnings per share:$0.62 $0.67    $0.89  
    Weighted-average shares outstanding:         
    Basic 30,251,961  30,324,264     30,314,439  
    Diluted 30,292,872  30,387,041     30,396,762  
    Common shares outstanding 30,410,582  30,485,788     30,484,004  
                  

    Hanmi Financial Corporation and Subsidiaries
    Consolidated Statements of Income (Unaudited)
    (Dollars in thousands, except share and per share data)

     Nine Months Ended 
     September 30, September 30, Percentage 
      2023  2022  Change 
    Interest and dividend income:      
    Interest and fees on loans receivable$249,888 $180,755  38.2% 
    Interest on securities 12,356  8,718  41.7% 
    Dividends on FHLB stock 888  735  20.8% 
    Interest on deposits in other banks 9,012  1,366  559.7% 
    Total interest and dividend income 272,144  191,574  42.1% 
    Interest expense:      
    Interest on deposits 94,431  11,038  755.5% 
    Interest on borrowings 4,755  1,056  350.3% 
    Interest on subordinated debentures 4,828  6,394  -24.5% 
    Total interest expense 104,014  18,488  462.6% 
    Net interest income before credit loss expense 168,130  173,086  -2.9% 
    Credit loss expense (recovery) 7,210  783  -820.8% 
    Net interest income after credit loss expense 160,920  172,303  -6.6% 
    Noninterest income:      
    Service charges on deposit accounts 7,756  8,745  -11.3% 
    Trade finance and other service charges and fees 3,586  3,690  -2.8% 
    Gain on sale of Small Business Administration ("SBA") loans 4,253  7,545  -43.6% 
    Other operating income 11,904  6,763  76.0% 
    Total noninterest income 27,499  26,743  2.8% 
    Noninterest expense:      
    Salaries and employee benefits 61,336  55,861  9.8% 
    Occupancy and equipment 13,737  13,979  -1.7% 
    Data processing 10,208  9,702  5.2% 
    Professional fees 4,278  3,909  9.4% 
    Supplies and communications 1,866  1,956  -4.6% 
    Advertising and promotion 2,114  2,664  -20.6% 
    Other operating expenses 7,777  8,370  -7.1% 
    Total noninterest expense 101,316  96,441  5.1% 
    Income before tax 87,103  102,605  -15.1% 
    Income tax expense 25,695  29,690  -13.5% 
    Net income$ 61,408 $ 72,915  -15.8% 
    Basic earnings per share:$2.01 $2.39    
    Diluted earnings per share:$2.01 $2.39    
    Weighted-average shares outstanding:      
    Basic 30,296,991  30,289,068    
    Diluted 30,338,678  30,369,538    
    Common shares outstanding 30,410,582  30,484,004    
           

    Hanmi Financial Corporation and Subsidiaries
    Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
    (Dollars in thousands)

     Three Months Ended
     September 30, 2023
     June 30, 2023
     September 30, 2022
       InterestAverage
       InterestAverage
       InterestAverage
     Average Income /Yield / Average Income /Yield / Average Income /Yield /
     Balance ExpenseRate Balance ExpenseRate Balance ExpenseRate
    Assets              
    Interest-earning assets:              
    Loans receivable (1)$5,915,423  $85,3985.73% $5,941,071  $83,5675.64% $5,696,587  $66,9764.67%
    Securities (2) 955,473   4,2041.79%  971,531   4,1261.73%  956,989   3,2721.40%
    FHLB stock 16,385   3177.67%  16,385   2836.92%  16,385   2455.93%
    Interest-bearing deposits in other banks 317,498   4,1535.19%  230,974   2,7944.85%  181,401   9572.09%
    Total interest-earning assets 7,204,779   94,0725.19%  7,159,961   90,7705.09%  6,851,362   71,4504.15%
                   
    Noninterest-earning assets:              
    Cash and due from banks 59,994      62,036      66,865    
    Allowance for credit losses (70,173)     (72,098)     (73,338)   
    Other assets 240,145      232,058      250,500    
    Total assets$ 7,434,745      $ 7,381,957      $ 7,095,389     
                   
    Liabilities and Stockholders’ Equity              
    Interest-bearing liabilities:              
    Deposits:              
    Demand: interest-bearing$94,703  $320.13% $99,057  $270.11% $121,269  $320.10%
    Money market and savings 1,601,826   12,4853.09%  1,463,304   9,8872.71%  2,079,490   3,8070.73%
    Time deposits 2,438,112   24,3013.95%  2,403,685   22,2013.70%  1,120,149   2,7280.97%
    Total interest-bearing deposits 4,134,641   36,8183.53%  3,966,046   32,1153.25%  3,320,908   6,5670.78%
    Borrowings 120,381   7532.48%  196,776   1,6333.33%  123,370   3871.24%
    Subordinated debentures 129,780   1,6465.07%  129,631   1,6004.94%  129,176   1,4104.37%
    Total interest-bearing liabilities 4,384,802   39,2173.55%  4,292,453   35,3483.30%  3,573,454   8,3640.93%
                   
    Noninterest-bearing liabilities and equity:             
    Demand deposits: noninterest-bearing 2,136,156      2,213,171      2,717,810    
    Other liabilities 159,127      133,623      112,336    
    Stockholders’ equity 754,660      742,710      691,789    
    Total liabilities and stockholders’ equity$ 7,434,745      $ 7,381,957      $ 7,095,389     
                   
    Net interest income (tax equivalent basis) $ 54,855     $ 55,422     $ 63,086  
                   
    Cost of deposits   2.33%    2.08%    0.43%
    Net interest spread (taxable equivalent basis)  1.64%    1.79%    3.22%
    Net interest margin (taxable equivalent basis)  3.03%    3.11%    3.66%
                   
                   
                   
    (1) Includes average loans held for sale
    (2) Income calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.
     

    Hanmi Financial Corporation and Subsidiaries
    Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
    (Dollars in thousands)

     Nine Months Ended
     September 30, 2023 September 30, 2022
       InterestAverage   InterestAverage
     Average Income /Yield / Average Income /Yield /
     Balance ExpenseRate Balance ExpenseRate
    Assets         
    Interest-earning assets:         
    Loans receivable (1)$5,933,525  $249,8885.63% $5,501,957  $180,7554.39%
    Securities (2) 969,146   12,3561.73%  944,359   8,7181.89%
    FHLB stock 16,385   8887.25%  16,385   7356.00%
    Interest-bearing deposits in other banks 247,581   9,0124.87%  269,772   1,3660.68%
    Total interest-earning assets 7,166,637   272,1445.08%  6,732,473   191,5743.81%
              
    Noninterest-earning assets:         
    Cash and due from banks 62,354      65,911    
    Allowance for credit losses (71,236)     (73,471)   
    Other assets 237,111      245,259    
    Total assets$ 7,394,866     $ 6,970,172    
              
    Liabilities and Stockholders’ Equity         
    Interest-bearing liabilities:         
    Deposits:         
    Demand: interest-bearing$100,997  $880.12% $122,964  $680.07%
    Money market and savings 1,506,776   29,6872.63%  2,108,232   6,5660.42%
    Time deposits 2,355,923   64,6563.67%  984,517   4,4040.60%
    Total interest-bearing deposits 3,963,696   94,4313.19%  3,215,713   11,0380.46%
    Borrowings 194,530   4,7543.27%  131,364   1,1131.13%
    Subordinated debentures 129,632   4,8294.97%  156,817   6,3375.39%
    Total interest-bearing liabilities 4,287,858   104,0143.24%  3,503,894   18,4880.70%
              
    Noninterest-bearing liabilities and equity:         
    Demand deposits: noninterest-bearing 2,223,891      2,689,807    
    Other liabilities 140,070      101,685    
    Stockholders’ equity 743,047      674,786    
    Total liabilities and stockholders’ equity$ 7,394,866     $ 6,970,172    
              
    Net interest income (tax equivalent basis)  $ 168,130    $ 173,086 
              
    Cost of deposits   2.04%    0.25%
    Net interest spread (taxable equivalent basis)   1.84%    3.10%
    Net interest margin (taxable equivalent basis)   3.14%    3.44%
              
              
    (1) Includes average loans held for sale         
    (2) Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.
              

    Non-GAAP Financial Measures

    Tangible Common Equity to Tangible Assets Ratio

    Tangible common equity to tangible assets ratio is supplemental financial information determined by a method other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Management uses this non-GAAP financial measure in the analysis of Hanmi’s capital strength. Tangible common equity represents stockholders’ equity less goodwill and other intangible assets. Banking and financial institution regulators also exclude goodwill and other intangible assets from 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. This financial measure is not a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to other companies’ non-GAAP financial measures.

    The following table reconciles this non-GAAP financial measure to the GAAP financial measure for the periods indicated:

    Tangible Common Equity to Tangible Assets Ratio (Unaudited)
    (In thousands, except share, per share data and ratios)

     September 30, June 30, March 31, December 31, September 30,
    Hanmi Financial Corporation 2023   2023   2023   2022   2022 
                        
    Assets$7,350,140  $7,344,924  $7,434,130  $7,378,262  $7,128,511 
    Less goodwill and other intangible assets (11,131)  (11,162)  (11,193)  (11,225)  (11,267)
    Tangible assets$7,339,009  $7,333,762  $7,422,937  $7,367,037  $7,117,244 
              
    Stockholders’ equity (1)$663,359  $668,560  $662,165  $637,515  $608,893 
    Less goodwill and other intangible assets (11,131)  (11,162)  (11,193)  (11,225)  (11,267)
    Tangible stockholders’ equity (1)$652,228  $657,398  $650,972  $626,290  $597,626 
              
    Stockholders’ equity to assets 9.03%  9.10%  8.91%  8.64%  8.54%
    Tangible common equity to tangible assets (1) 8.89%  8.96%  8.77%  8.50%  8.40%
              
    Common shares outstanding 30,410,582   30,485,788   30,555,287   30,485,621   30,484,004 
    Tangible common equity per common share$21.45  $21.56  $21.30  $20.54  $19.60 
              
              
    (1) There were no preferred shares outstanding at the periods indicated.
              

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