News Column

Hanmi Posts 9.6% Loan Growth and 4.9% Deposit Growth in 2013; Earns $10.0 Million, or $0.31 per Share, in 4Q13 and $39.9 Million, or $1.26 per Share, in 2013

January 27, 2014

LOS ANGELES , Jan. 27, 2014 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (Nasdaq:HAFC), the holding company for Hanmi Bank (the "Bank"), today reported that strong loan and deposit growth contributed to profits in 2013. Fourth quarter net income totaled $10.0 million , or $0.31 per diluted share, compared to $10.3 million , or $0.32 per diluted share, in the third quarter this year, and $14.0 million , or $0.44 per diluted share, in the fourth quarter a year ago, which included a $5.5 million gross benefit from the reversal of a deferred tax asset ("DTA") valuation allowance. For the full year of 2013, net income was $39.9 million , or $1.26 per diluted share, compared to $90.4 million , or $2.87 per diluted share, a year ago, which included the $47.4 million net tax benefit from the DTA valuation allowance reversal. In 2013, pretax income grew 44.1% to $62.0 million from $43.0 million in 2012. During the fourth quarter and full year of 2013, Hanmi incurred costs associated with reviews of strategic transactions in the amounts of $730,000 ( $0.015 per share after tax) and $2.1 million ( $0.042 per share after tax), respectively. Excluding the impact of these costs, earnings per share would have been $0.33 for the fourth quarter and $1.30 for the full year of 2013. "The fourth quarter of 2013 was solidly profitable, highlighted by continued loan growth, with excellent results from our business lending team," said C. G. Kum , President and Chief Executive Officer. "Expanding our capabilities, particularly for commercial and industrial ("C&I") lending and treasury management services, is allowing us to broaden and deepen our relationship with business customers throughout our market, while diversifying our loan portfolio and expanding our ability to generate fee income. "We are also expanding our franchise into new markets with the pending acquisition of Central Bancorp, Inc. ("CBI"). When approved, Hanmi will become the second largest Korean American Bank in the nation," Kum continued. "With strong earnings accretion and significant strategic benefits, this deal is garnering solid support from our stockholders and other stakeholders. This transaction will add significant momentum for us and position us for future growth." Fourth Quarter Results (In thousands, except per share data) As of or for the Three Months Ended December 31 , September 30 , December 31 , 2013 2013 2012 Net income $ 10,027 $ 10,250 $ 13,979 Net income per diluted common share $ 0.31 $ 0.32 $ 0.44 Total assets $ 3,055,539 $ 2,845,137 $ 2,882,520 Loans receivable, net $ 2,177,498 $ 2,102,621 $ 1,986,051 Total deposits $ 2,512,325 $ 2,429,707 $ 2,395,963 Return on average assets 1.37% 1.46% 1.94% Return on average stockholders' equity 9.88% 10.29% 15.02% Net interest margin 3.98% 4.28% 3.86% Efficiency ratio 57.29% 52.98% 57.66% Tangible common equity to tangible assets 13.10% 13.95% 13.09% Tangible common equity per common share $ 12.60 $ 12.49 $ 11.97 Financial Highlights (at or for the period ended December 31, 2013 , compared to September 30, 2013 or December 31, 2012 ) Assets grew 6.0% during 2013 to $3.06 billion , compared to $2.88 billion a year ago. Gross loans increased $74.8 million (3.5%) and $185.5 million (9.1%) over the prior quarter and prior year, respectively. Fourth quarter net income was $10.0 million , or $0.31 per diluted share, compared to $10.3 million , or $0.32 per diluted share, in the third quarter of 2013. Fourth quarter new loan production totaled $181.9 million , consisting mainly of $119.1 million of commercial real estate loans, $37.9 million of C&I loans, and $23.7 million of SBA loans. Including loans approved, but not funded, loan commitments increased 30.2% to $209.3 million from $160.7 million in the third quarter. C&I lending grew 66.3% to $37.9 million in the fourth quarter of 2013, compared to $22.8 million in the preceding quarter. C&I loan commitments increased 75.7% to $63.7 million from $36.3 million in the prior quarter. Deposits were up 4.9% year-over-year, including a 13.6% increase in non-interest bearing deposits. Gains from SBA loan sales for the fourth quarter were $1.9 million and $8.0 million in the full year. A cash dividend of $0.07 per share of common stock, representing a 23% payout ratio for the quarter, was paid on December 23, 2013 . "Despite elevated costs for our strategic review process during the year, we generated strong earnings in both the quarter and the year," said Kum. "Over the past six months, our new management has been reviewing initiatives, both internally and externally, to take Hanmi to the next level. As we enter 2014, we plan to implement initiatives to streamline our operations and to create a cost structure that will further improve our profitability." Announced Acquisition of Central Bancorp, Inc. On December 16, 2013 , Hanmi announced the signing of a definitive agreement to acquire CBI, parent of Texas -based United Central Bank with $1.6 billion in assets as of September 30, 2013 . The acquisition price is $50 million in cash, subject to potential purchase price adjustments. Following the close of the transaction, the combined entity will have approximately $4.3 billion in assets, $2.8 billion in gross loans and $3.8 billion in deposits, and 50 banking offices and 2 loan production offices serving a broad range of communities in California , Texas , Illinois , New York , New Jersey , and Virginia . The transaction is expected to close in the second half of 2014, subject to approval by CBI's stockholders, regulatory approvals and other customary closing conditions. Results of Operations Fourth quarter net interest income, before provision for credit losses, was $27.6 million , down 3.1%, from $28.5 million for the third quarter of 2013, and up 4.4% from $26.4 million for the fourth quarter of 2012. Interest and dividend income decreased 2.2% from the preceding quarter and increased 2.6% from the fourth quarter a year ago, while interest expense increased 5.9% from the preceding quarter and fell 10.0% from the year ago quarter. Full year net interest income before provision for credit losses improved 7.7% to $108.8 million , compared to $101.1 million for the full year of 2012. Net interest margin was 3.98% for the fourth quarter of 2013 and 4.28% for the third quarter of 2013. The decrease in net interest margin mainly reflects the increase in lower yielding assets. In addition, there was no interest reversal of nonaccrual loans in the fourth quarter as opposed to the $490,000 interest reversal in the third quarter. Net interest margin for 2013 was 4.05%, compared to 3.77% in 2012. The increase was due mainly to the elimination of interest payments on trust preferred securities, the decline in the cost of jumbo CDs, and the deployment of low interest-earning cash into higher yielding loans. The following table details the asset yields, liability costs, spread and margin. Three Months Ended Year Ended December 31 , September 30 , December 31 , December 31 , December 31 , 2013 2013 2012 2013 2012 Interest-earning assets 4.46% 4.75% 4.40% 4.56% 4.47% Interest-bearing liabilities 0.78% 0.77% 0.83% 0.80% 1.07% Net interest spread 3.68% 3.98% 3.57% 3.76% 3.40% Net interest margin 3.98% 4.28% 3.86% 4.05% 3.77% Credit quality remains strong, with delinquencies and net charge-offs continuing to abate. Net charge-offs in the fourth quarter of 2013 were $166,000 , compared to $2.2 million in the preceding quarter and $3.2 million in the fourth quarter of 2012. The allowance for loan losses totaled $57.6 million , which is a coverage ratio of 2.58% of gross loans and 222.42% of non-performing loans ("NPLs") as of December 31, 2013 , compared to 3.09% of gross loans and 169.81% of NPLs as of December 31, 2012 . In 2013, net interest income after provision for credit losses increased 14.5% to $108.8 million , compared to $95.1 million , which included a $6.0 million provision for credit losses in 2012. Due to steadily improving credit quality, no provision for credit losses was recorded in 2013. Non-interest income was $7.6 million in the fourth quarter of 2013, compared to $7.3 million in the preceding quarter and $7.5 million in the year ago quarter. In the fourth quarter of 2013, we recognized $1.9 million gains from selling $25.1 million of the guaranteed portion of SBA loans, compared to $994 thousand gains from selling $15.5 million in the preceding quarter. "Demand for SBA loans in the secondary market is robust, sustaining premiums and generating strong contribution to revenues," said Bonnie Lee, Senior Executive Vice President and Chief Operations Officer. In 2013, non-interest income increased 26.6% to $31.4 million from $24.8 million for the like period a year ago, reflecting a significant reduction in losses from selling NPLs, partially offset by lower gains from sales of SBA loans and investment securities. Non-interest expense increased 6.2% to $20.2 million in the fourth quarter of 2013, compared to $19.0 million in the third quarter of 2013, and was up 3.1% from $19.5 million in the fourth quarter a year ago. For 2013, non-interest expense increased 1.8% to $78.2 million , compared to $76.9 million for 2012. Professional fees increased in both the fourth quarter and full year of 2013, mainly reflecting additional professional services required for several strategic transactions pursued during the year. "While operating costs were elevated due to our strategic reviews in the past two years, we are committed to optimizing operations and improving efficiencies throughout the company this year," said Kum. The efficiency ratio was 57.29% in the fourth quarter of 2013, compared to 57.66% in the fourth quarter a year ago. In 2013, efficiency ratio was 55.80% compared to 61.07% in 2012. Excluding the strategic review costs, efficiency ratio would have been meaningfully lower in both the fourth quarters and full year periods in 2013 and 2012. Hanmi recorded a provision for income taxes of $5.0 million in the fourth quarter of 2013, representing an effective tax rate of 33.3%, and 35.6% for the year. The decrease in the annualized tax rate relative to the prior quarter of 36.4% was due mainly to additional tax benefits of the California EZ net interest deduction. Balance Sheet Assets increased 7.4% to $3.06 billion at December 31, 2013 , up from $2.85 billion three months earlier and grew 6.0% from $2.88 billion a year ago. Cash and cash equivalents were $179.4 million , down 7.5% from the third quarter of 2013 and 33.1% from a year ago. The investment portfolio was $530.9 million as of December 31, 2013 , representing a 38.6% increase from the prior quarter. "To better deploy excess liquidity and to lock in attractive market prices and yields, we purchased mostly short-duration GSE amortizing securities, which will offset the interest expense associated with our deposits. In addition, as part of our short-term funding and profitability management plan, we borrowed funds from the Federal Home Loan Bank at an overnight fed funds rate prior to the year end, and plan to pay down these balances in the near future," said Mark Yoon , Executive Vice President and Chief Financial Officer. "The new lending team we brought on board in the third quarter are generating strong loan growth across the portfolio, and particularly in C&I loans. The diversification of our portfolio continues to improve," said Kum. Loans receivable, excluding loans held for sale, increased 3.6% in the quarter and 9.6% year-over-year to $2.18 billion at December 31, 2013 , from $2.10 billion at September 30, 2013 , and $1.99 billion a year ago. There were no loans held for sale at December 31, 2013 , compared to $5.2 million at September 30, 2013 and $8.3 million at December 31, 2012 . Average gross loans, net of deferred loan fees, increased to $2.20 billion for the fourth quarter of 2013, up from $2.19 billion for the preceding quarter and $2.03 billion for the fourth quarter a year ago. Average deposits were $2.47 billion during the fourth quarter, up from $2.37 billion for the preceding quarter and $2.39 billion for the fourth quarter of 2012. The overall mix of funding continued to improve with core deposits increasing. The deposit mix is detailed in the table below. December 31 , September 30 , December 31 , 2013 2013 2012 Demand-noninterest-bearing 32.5% 32.0% 30.1% Savings 4.6% 4.7% 4.8% Money market checking and NOW accounts 22.9% 22.2% 24.0% Time deposits of $100,000 or more 20.2% 20.3% 25.7% Other time deposits 19.8% 20.8% 15.4% Total deposits 100.0% 100.0% 100.0% At December 31, 2013 , stockholders' equity was $401.2 million . Tangible common stockholders' equity was $400.1 million , or 13.10% of tangible assets, compared to $377.0 million , or 13.09% of tangible assets, a year ago. Tangible book value per share was $12.60 , compared to $12.49 three months earlier and $11.97 at December 31, 2012 . Hanmi paid a cash dividend of $0.07 per share, representing an aggregate dividend of $2.2 million , on December 23, 2013 . In addition, volatility in interest rates and the resulting impact on the value of the securities portfolio reduced the accumulated other comprehensive income component of stockholders' equity. Asset Quality NPLs were down 30.6% to $25.9 million at the end of the year, compared to $37.3 million at the end of 2012, reflecting the continuing improvement in the economy and active management of delinquent accounts. Troubled debt restructurings ("TDRs") totaled $30.0 million at December 31, 2013 , and $35.7 million at December 31, 2012 . Of these TDRs, $10.5 million were included in NPLs at December 31, 2013 , compared to $18.8 million in 2012. The following table shows NPLs in each category: December 31, 2013 September 30, 2013 December 31, 2012 % of Total % of Total % of Total Amount NPLs Amount NPLs Amount NPLs (In thousands) Real estate loans: Commercial property Retail $ 2,946 11.4% $ 768 3.4% $ 1,079 2.9% Land -- 0.0% -- 0.0% 2,097 5.6% Other 574 2.2% -- 0.0% -- 0.0% Residential property 1,365 5.3% 1,659 7.3% 1,270 3.4% Commercial & industrial loans: Commercial term loans Unsecured 3,144 12.1% 2,490 10.9% 8,311 22.3% Secured by real estate 6,773 26.2% 5,591 24.5% 8,679 23.3% Commercial lines of credit 423 1.6% 830 3.6% 1,521 4.1% SBA 9,155 35.4% 9,959 43.7% 12,563 33.7% Consumer loans 1,497 5.8% 1,479 6.5% 1,759 4.7% Total non-performing loans $ 25,877 100.0% $ 22,776 100.0% $ 37,279 100.0% Compared to a year ago, asset quality improved in all major aspects. There were no sales of problem loans in the fourth quarter of 2013, and losses associated with our loan sales strategy were just $557,000 in 2013, compared to $9.5 million in 2012. Classified loans were $80.3 million , or 3.6% of gross loans, at December 31, 2013 , down from $83.7 million , or 3.9%, at September 30, 2013 , and from $100.4 million , or 4.9%, a year ago. Conference Call Management will host a conference call today, January 27, 2014 , at 9:30 a.m. Pacific Time ( 12:30 p.m. ET ) to discuss these results. This call will also be broadcast live via the internet. Investment professionals and all current and prospective stockholders are invited to access the live call by dialing 1-480-629-9645 before 9:30 a.m. Pacific Time , using access code HANMI. To listen to the call online, either live or archived, visit the Investor Relations page of Hanmi's website at www.hanmi.com . About Hanmi Financial Corporation Headquartered in Los Angeles , Hanmi Bank , a wholly-owned subsidiary of Hanmi Financial Corporation , provides services to the multi-ethnic communities of California , with 27 full-service offices in Los Angeles , Orange , San Bernardino , San Francisco , Santa Clara and San Diego counties, and loan production offices in Texas and Washington State . Hanmi Bank specializes in commercial, SBA and trade finance lending, and is a recognized community leader. Hanmi Bank's mission is to provide a full range of quality products and premier services to its customers and to maximize stockholder value. 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. 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. 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 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 plans, strategic alternatives for a possible business combination, merger or sale transaction, including our acquisition of Central Bancorp, Inc. , and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of potential future supervisory action against us or Hanmi Bank ; general economic and business conditions internationally, nationally and in those areas in which we operate; volatility and deterioration in the credit and equity markets; changes in consumer spending, borrowing and savings habits; availability of capital from private and government sources; demographic changes; competition for loans and deposits and failure to attract or retain loans and deposits; fluctuations in interest rates and a decline in the level of our interest rate spread; risks of natural disasters related to our real estate portfolio; risks associated with Small Business Administration loans; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability of Hanmi Bank to make distributions to Hanmi Financial , which is restricted by certain factors, including Hanmi Bank's retained earnings, net income, prior distributions made, and certain other financial tests; ability to identify a suitable strategic partner or to consummate a strategic transaction; ability of the parties to obtain required regulatory approvals and satisfy other closing conditions with respect to our acquisition of Central Bancorp, Inc. ; adequacy of our allowance for loan losses; credit quality and the effect of credit quality on our provision for credit losses and allowance for loan losses; changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements; our ability to control expenses; and changes in securities markets. In addition, we set forth certain risks in our reports filed with the U.S. Securities and Exchange Commission ("SEC"), including, in Item 1A of our Form 10-K for the year ended December 31, 2012 , our quarterly reports on Form 10-Q, and current and periodic reports that we will file with the SEC 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. Hanmi Financial Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) (In thousands) December 31 , September 30 , Percentage December 31 , Percentage 2013 2013 Change 2012 Change Assets Cash and cash equivalents $ 179,357 $ 193,854 -7.5% $ 268,047 -33.1% Restricted cash -- -- 0.0% 5,350 -100.0% Securities available for sale, at fair value 530,926 383,057 38.6% 451,060 17.7% Loans held for sale, at the lower of cost or fair value -- 5,228 -100.0% 8,306 -100.0% Loans receivable, net of allowance for loan losses 2,177,498 2,102,621 3.6% 1,986,051 9.6% Accrued interest receivable 7,055 6,957 1.4% 7,581 -6.9% Premises and equipment, net 14,221 14,205 0.1% 15,150 -6.1% Other real estate owned, net 756 290 160.7% 774 -2.3% Customers' liability on acceptances 2,018 1,535 31.5% 1,336 51.0% Servicing assets 6,833 6,385 7.0% 5,542 23.3% Other intangible assets, net 1,171 1,212 -3.4% 1,335 -12.3% Investment in federal home loan bank stock, at cost 14,060 14,060 0.0% 17,800 -21.0% Investment in federal reserve bank stock, at cost 11,196 13,200 -15.2% 12,222 -8.4% Income tax asset 63,536 61,747 2.9% 60,028 5.8% Bank-owned life insurance 29,699 29,468 0.8% 29,054 2.2% Prepaid expenses 1,415 1,986 -28.8% 2,084 -32.1% Other assets 15,798 9,332 69.3% 10,800 46.3% Total assets $ 3,055,539 $ 2,845,137 7.4% $ 2,882,520 6.0% Liabilities and Stockholders' Equity Liabilities: Deposits: Noninterest-bearing $ 819,015 $ 778,345 5.2% $ 720,931 13.6% Interest-bearing 1,693,310 1,651,362 2.5% 1,675,032 1.1% Total deposits 2,512,325 2,429,707 3.4% 2,395,963 4.9% Accrued interest payable 3,366 2,705 24.4% 11,775 -71.4% Bank's liability on acceptances 2,018 1,535 31.5% 1,336 51.0% Federal home loan bank advances 127,546 2,645 4722.2% 2,935 4245.7% Junior subordinated debentures -- -- 0.0% 82,406 -100.0% Accrued expenses and other liabilities 9,047 10,589 -14.6% 9,741 -7.1% Total liabilities 2,654,302 2,447,181 8.5% 2,504,156 6.0% Stockholders' equity: Common stock 257 257 0.0% 257 0.0% Additional paid-in capital 552,270 551,881 0.1% 550,066 0.4% Accumulated other comprehensive income (9,380) (4,469) 109.9% 5,418 -273.1% Accumulated deficit (72,052) (79,855) -9.8% (107,519) -33.0% Less treasury stock (69,858) (69,858) 0.0% (69,858) 0.0% Total stockholders' equity 401,237 397,956 0.8% 378,364 6.0% Total liabilities and stockholders' equity $ 3,055,539 $ 2,845,137 7.4% $ 2,882,520 6.0% Hanmi Financial Corporation and Subsidiaries Consolidated Statements of Operations (Unaudited) (In thousands, except share and per share data) Three Months Ended December 31 , September 30 , Percentage December 31 , Percentage 2013 2013 Change 2012 Change Interest and Dividend Income: Interest and fees on loans $ 28,256 $ 29,098 -2.9% $ 27,418 3.1% Taxable interest on investment securities 2,178 2,040 6.8% 2,138 1.9% Tax-exempt interest on investment securities 46 69 -33.3% 95 -51.6% Interest on term federal funds sold -- -- 0.0% 22 -100.0% Interest on federal funds sold -- -- 0.0% 7 -100.0% Interest on interest-bearing deposits in other banks 69 28 146.4% 153 -54.9% Dividends on federal reserve bank stock 177 198 -10.6% 179 -1.1% Dividends on federal home loan bank stock 201 194 3.6% 127 58.3% Total interest and dividend income 30,927 31,627 -2.2% 30,139 2.6% Interest Expense: Interest on deposits 3,302 3,117 5.9% 3,366 -1.9% Interest on federal home loan bank advances 36 36 0.0% 39 -7.7% Interest on junior subordinated debentures -- -- 0.0% 303 -100.0% Total interest expense 3,338 3,153 5.9% 3,708 -10.0% Net interest income before provision for credit losses 27,589 28,474 -3.1% 26,431 4.4% Provision for credit losses -- -- 0.0% -- 0.0% Net interest income after provision for credit losses 27,589 28,474 -3.1% 26,431 4.4% Non-Interest Income: Service charges on deposit accounts 2,645 2,730 -3.1% 3,191 -17.1% Insurance commissions 1,343 1,273 5.5% 1,235 8.7% Trade finance & other service charges and fees 1,073 1,078 -0.5% 1,235 -13.1% Bank-owned life insurance income 232 230 0.9% 238 -2.5% Gain on sales of SBA loans guaranteed portion 1,936 994 94.8% 2,678 -27.7% Net loss on sales of other loans -- -- 0.0% (1,247) -100.0% Net gain on sales of investment securities 116 611 -81.0% 4 2800.0% Other operating income 239 410 -41.7% 136 75.7% Total non-interest income 7,584 7,326 3.5% 7,470 1.5% Non-Interest Expense: Salaries and employee benefits 9,936 9,926 0.1% 9,224 7.7% Occupancy and equipment 2,564 2,634 -2.7% 2,585 -0.8% Deposit insurance premiums and regulatory assessments 376 308 22.1% 1,249 -69.9% Data processing 1,157 1,158 -0.1% 1,179 -1.9% Other real estate owned expense (12) (59) -79.7% (33) -63.6% Professional fees 1,975 907 117.8% 1,744 13.2% Directors and officers liability insurance 221 219 0.9% 298 -25.8% Supplies and communications 600 562 6.8% 567 5.8% Advertising and promotion 1,264 1,140 10.9% 1,243 1.7% Loan-related expense 68 91 -25.3% 75 -9.3% Amortization of other intangible assets 41 41 0.0% 41 0.0% Other operating expenses 1,960 2,039 -3.9% 1,376 42.4% Total non-interest expense 20,150 18,966 6.2% 19,548 3.1% Income before provision for income taxes 15,023 16,834 -10.8% 14,353 4.7% Provision for income taxes 4,996 6,584 -24.1% 374 1235.8% Net income $ 10,027 $ 10,250 -2.2% $ 13,979 -28.3% Earnings per share: Basic $ 0.32 $ 0.32 $ 0.44 Diluted $ 0.31 $ 0.32 $ 0.44 Weighted-average shares outstanding: Basic 31,643,463 31,621,049 31,479,921 Diluted 31,864,845 31,733,004 31,549,580 Common shares outstanding 31,756,550 31,754,115 31,496,540 Hanmi Financial Corporation and Subsidiaries Consolidated Statements of Operations, Continued (Unaudited) (In thousands, except share and per share data) Year Ended December 31 , December 31 , Percentage 2013 2012 Change Interest and Dividend Income: Interest and fees on loans $ 111,992 $ 108,982 2.8% Taxable interest on investment securities 8,434 8,418 0.2% Tax-exempt interest on investment securities 283 394 -28.2% Interest on term federal funds sold -- 706 -100.0% Interest on federal funds sold 6 60 -90.0% Interest on interest-bearing deposits in other banks 209 422 -50.5% Dividends on federal reserve bank stock 754 609 23.8% Dividends on federal home loan bank stock 650 209 211.0% Total Interest and Dividend Income 122,328 119,800 2.1% Interest Expense: Interest on deposits 12,678 15,877 -20.1% Interest on federal home loan bank advances 151 165 -8.5% Interest on junior subordinated debentures 678 2,703 -74.9% Total interest expense 13,507 18,745 -27.9% Net interest income before provision for credit losses 108,821 101,055 7.7% Provision for credit losses -- 6,000 -100.0% Net interest income after provision for credit losses 108,821 95,055 14.5% Non-Interest Income: Service charges on deposit accounts 11,307 12,146 -6.9% Insurance commissions 5,247 4,857 8.0% Trade finance & other service charges and fees 4,475 4,615 -3.0% Bank-owned life insurance income 1,171 1,110 5.5% Gain on sales of SBA loans guaranteed portion 8,000 9,923 -19.4% Net loss on sales of other loans (557) (9,481) -94.1% Net gain on sales of investment securities 1,039 1,396 -25.6% Other-than-temporary impairment loss on investment securities -- (292) -100.0% Other operating income 735 538 36.6% Total non-interest income 31,417 24,812 26.6% Non-Interest Expense: Salaries and employee benefits 38,628 36,931 4.6% Occupancy and equipment 10,309 10,424 -1.1% Deposit insurance premiums and regulatory assessments 1,435 4,431 -67.6% Data processing 4,627 4,941 -6.4% Other real estate owned expense (59) 344 -117.2% Professional fees 7,403 4,694 57.7% Directors and officers liability insurance 879 1,186 -25.9% Supplies and communications 2,287 2,370 -3.5% Advertising and promotion 4,081 3,876 5.3% Loan-related expense 396 527 -24.9% Amortization of other intangible assets 164 198 -17.2% Other operating expenses 8,097 6,939 16.7% Total non-interest expense 78,247 76,861 1.8% Income before provision for income taxes 61,991 43,006 44.1% Provision (benefit) for income taxes 22,085 (47,368) -146.6% Net income $ 39,906 $ 90,374 -55.8% Earnings per share: Basic $ 1.26 $ 2.87 Diluted $ 1.26 $ 2.87 Weighted-average shares outstanding: Basic 31,598,913 31,475,510 Diluted 31,696,520 31,515,582 Common shares outstanding 31,756,550 31,496,540 Hanmi Financial Corporation and Subsidiaries Selected Financial Data (Unaudited) (In thousands) As of or for the Three Months Ended As of or for the Years Ended December 31 , September 30 , December 31 , December 31 , December 31 , 2013 2013 2012 2013 2012 Average balances: Average gross loans, net of deferred loan fees (1) $ 2,198,654 $ 2,186,884 $ 2,026,122 $ 2,156,626 $ 1,993,367 Average investment securities 447,272 414,019 452,491 446,563 443,910 Average interest-earning assets 2,755,182 2,644,844 2,731,473 2,687,799 2,686,425 Average total assets 2,901,097 2,789,741 2,872,897 2,828,641 2,792,352 Average deposits 2,474,262 2,374,847 2,388,725 2,391,248 2,349,082 Average borrowings 8,606 5,587 85,390 27,815 85,760 Average interest-bearing liabilities 1,693,689 1,630,637 1,767,640 1,678,618 1,758,135 Average stockholders' equity 402,738 395,274 370,307 393,734 328,016 Average tangible equity 401,540 394,035 368,945 392,475 326,589 Performance ratios: Return on average assets (2) 1.37% 1.46% 1.94% 1.41% 3.24% Return on average stockholders' equity (2) 9.88% 10.29% 15.02% 10.14% 27.55% Return on average tangible equity (2) 9.91% 10.32% 15.07% 10.17% 27.67% Efficiency ratio 57.29% 52.98% 57.66% 55.80% 61.07% Net interest spread (2), (3) 3.68% 3.98% 3.57% 3.76% 3.40% Net interest margin (2), (3) 3.98% 4.28% 3.86% 4.05% 3.77% Allowance for loan losses: Balance at beginning of period $ 57,639 $ 59,876 $ 66,107 $ 63,305 $ 89,936 Provision charged to operating expense 82 (10) 407 576 7,157 Charge-offs, net of recoveries (166) (2,227) (3,209) (6,326) (33,788) Balance at end of period $ 57,555 $ 57,639 $ 63,305 $ 57,555 $ 63,305 Asset quality ratios: Net loan charge-offs to average gross loans (2) 0.03% 0.41% 0.63% 0.29% 1.70% Allowance for loan losses to gross loans 2.58% 2.67% 3.09% 2.58% 3.09% Allowance for loan losses to non-performing loans 222.42% 253.07% 169.81% 222.42% 169.81% Non-performing assets to total assets 0.87% 0.81% 1.32% 0.87% 1.32% Non-performing loans to gross loans 1.16% 1.05% 1.82% 1.16% 1.82% Non-performing assets to allowance for loan losses 46.27% 40.02% 60.11% 46.27% 60.11% Allowance for off-balance sheet items: Balance at beginning of period $ 1,330 $ 1,320 $ 2,231 $ 1,824 $ 2,981 Provision charged to operating expense (82) 10 (407) (576) (1,157) Balance at end of period $ 1,248 $ 1,330 $ 1,824 $ 1,248 $ 1,824 Non-performing assets: Non-accrual loans $ 25,877 $ 22,776 $ 37,279 Loans 90 days or more past due and still accruing -- -- -- Non-performing loans 25,877 22,776 37,279 Other real estate owned, net 756 290 774 Non-performing assets 26,633 23,066 38,053 Non-performing loans in loans held for sale -- -- 484 Non-performing assets (including loans held for sale) $ 26,633 $ 23,066 $ 38,537 Delinquent loans (30 to 89 days past due and still accruing) $ 4,068 $ 6,756 $ 2,371 Delinquent loans to gross loans 0.18% 0.31% 0.12% (1) Included loans held for sale (2) Annualized (3) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate Hanmi Financial Corporation and Subsidiaries Selected Financial Data, Continued (Unaudited) (In thousands) As of or for the Three Months Ended December 31 , September 30 , December 31 , 2013 2013 2012 Loan portfolio: Real estate loans $ 933,398 $ 887,576 $ 787,094 Residential loans 79,078 82,519 101,778 Commercial and industrial loans 1,189,108 1,155,111 1,123,012 Consumer loans 32,505 34,065 36,676 Gross loans 2,234,089 2,159,271 2,048,560 Deferred loan fees 964 989 796 Gross loans, net of deferred loan fees 2,235,053 2,160,260 2,049,356 Allowance for loan losses (57,555) (57,639) (63,305) Loans receivable, net 2,177,498 2,102,621 1,986,051 Loans held for sale, at the lower of cost or fair value -- 5,228 8,306 Total loans receivable, net $ 2,177,498 $ 2,107,849 $ 1,994,357 Loan mix: Real estate loans 41.8% 41.1% 38.4% Residential loans 3.5% 3.8% 5.0% Commercial and industrial loans 53.2% 53.5% 54.8% Consumer loans 1.5% 1.6% 1.8% Total loans 100.0% 100.0% 100.0% Deposit portfolio: Demand-noninterest-bearing $ 819,015 $ 778,345 $ 720,931 Savings 115,371 113,892 114,302 Money market checking and NOW accounts 574,334 539,130 575,744 Time deposits of $100,000 or more 506,946 493,532 616,187 Other time deposits 496,659 504,808 368,799 Total deposits $ 2,512,325 $ 2,429,707 $ 2,395,963 Deposit mix: Demand-noninterest-bearing 32.5% 32.0% 30.1% Savings 4.6% 4.7% 4.8% Money market checking and NOW accounts 22.9% 22.2% 24.0% Time deposits of $100,000 or more 20.2% 20.3% 25.7% Other time deposits 19.8% 20.8% 15.4% Total deposits 100.0% 100.0% 100.0% Capital ratios: Hanmi Financial Total risk-based capital ratio 17.53% 17.72% 20.65% Tier 1 risk-based capital ratio 16.26% 16.45% 19.37% Tier 1 leverage capital ratio 13.66% 13.68% 14.95% Tangible equity to tangible assets ratio 13.10% 13.95% 13.09% Hanmi Bank Total risk-based capital ratio 16.84% 17.02% 19.85% Tier 1 risk-based capital ratio 15.58% 15.75% 18.58% Tier 1 leverage capital ratio 13.09% 13.10% 14.33% Tangible equity to tangible assets ratio 12.58% 13.38% 15.29% Hanmi Financial Corporation and Subsidiaries Average Balance, Average Yield Earned and Average Rate Paid (Unaudited) (In thousands) Three Months Ended December 31, 2013 September 30, 2013 December 31, 2012 Interest Average Interest Average Interest Average Average Income / Yield / Average Income / Yield / Average Income / Yield / Balance Expense Rate Balance Expense Rate Balance Expense Rate Assets Interest-earning assets: Gross loans, net of deferred loan fees $ 2,198,654 $ 28,256 5.10% $ 2,186,884 $ 29,098 5.28% $ 2,026,122 $ 27,418 5.38% Municipal securities-taxable 34,214 357 4.17% 43,259 442 4.09% 46,203 456 3.95% Municipal securities-tax exempt 7,035 71 4.02% 10,088 106 4.21% 12,731 146 4.59% Obligations of other U.S. government agencies 87,079 424 1.95% 94,350 455 1.93% 82,995 387 1.87% Other debt securities 292,860 1,397 1.91% 238,264 1,143 1.92% 279,591 1,295 1.85% Equity securities 26,084 378 5.80% 28,058 392 5.59% 30,971 306 3.95% Federal funds sold -- -- 0.00% -- -- 0.00% 7,127 7 0.39% Term federal funds sold -- -- 0.00% -- -- 0.00% 6,685 22 1.31% Interest-bearing deposits in other banks 109,256 69 0.25% 43,941 28 0.25% 239,048 153 0.25% Total interest-earning assets 2,755,182 30,952 4.46% 2,644,844 31,664 4.75% 2,731,473 30,190 4.40% Noninterest-earning assets: Cash and cash equivalents 71,768 66,808 73,567 Allowance for loan losses (57,884) (58,991) (65,228) Other assets 132,031 137,080 133,085 Total noninterest-earning assets 145,915 144,897 141,424 Total assets $ 2,901,097 $ 2,789,741 $ 2,872,897 Liabilities and Stockholders' Equity Interest-bearing liabilities: Deposits: Savings $ 114,939 $ 435 1.50% $ 115,058 $ 454 1.57% $ 112,566 $ 477 1.69% Money market checking and NOW accounts 565,993 733 0.51% 546,413 691 0.50% 583,259 772 0.53% Time deposits of $100,000 or more 503,822 920 0.72% 522,664 942 0.72% 623,780 1,312 0.84% Other time deposits 500,329 1,214 0.96% 440,915 1,030 0.93% 362,645 805 0.88% FHLB advances 8,575 36 1.67% 5,587 36 2.56% 2,984 39 5.20% Other borrowings 31 -- 0.00% -- -- 0.00% -- -- 0.00% Junior subordinated debentures -- -- 0.00% -- -- 0.00% 82,406 303 1.46% Total interest-bearing liabilities 1,693,689 3,338 0.78% 1,630,637 3,153 0.77% 1,767,640 3,708 0.83% Noninterest-bearing liabilities: Demand deposits 789,179 749,797 706,475 Other liabilities 15,491 14,033 28,475 Total noninterest-bearing liabilities 804,670 763,830 734,950 Total liabilities 2,498,359 2,394,467 2,502,590 Stockholders' equity 402,738 395,274 370,307 Total liabilities and stockholders' equity $ 2,901,097 $ 2,789,741 $ 2,872,897 Net interest income $ 27,614 $ 28,511 $ 26,482 Cost of deposits 0.53% 0.52% 0.56% Net interest spread 3.68% 3.98% 3.57% Net interest margin 3.98% 4.28% 3.86% Hanmi Financial Corporation and Subsidiaries Average Balance, Average Yield Earned and Average Rate Paid, Continued (Unaudited) (In thousands) Year Ended December 31, 2013 December 31, 2012 Interest Average Interest Average Average Income / Yield / Average Income / Yield / Balance Expense Rate Balance Expense Rate Assets Interest-earning assets: Gross loans, net of deferred loan fees $ 2,156,626 $ 111,992 5.19% $ 1,993,367 $ 108,982 5.47% Municipal securities-taxable 42,387 1,707 4.03% 45,213 1,796 3.97% Municipal securities-tax exempt 10,141 435 4.29% 12,902 606 4.70% Obligations of other U.S. government agencies 90,956 1,733 1.91% 77,053 1,372 1.78% Other debt securities 274,789 4,994 1.82% 277,386 5,250 1.89% Equity securities 28,290 1,404 4.96% 31,356 818 2.61% Federal funds sold 1,555 6 0.39% 14,178 60 0.42% Term federal funds sold -- -- 0.00% 70,478 706 1.00% Interest-bearing deposits in other banks 83,055 209 0.25% 164,492 422 0.26% Total interest-earning assets 2,687,799 122,480 4.56% 2,686,425 120,012 4.47% Noninterest-earning assets: Cash and cash equivalents 67,859 71,123 Allowance for loan losses (60,119) (75,914) Other assets 133,102 110,718 Total noninterest-earning assets 140,842 105,927 Total assets $ 2,828,641 $ 2,792,352 Liabilities and Stockholders' Equity Interest-bearing liabilities: Deposits: Savings $ 114,968 $ 1,812 1.58% $ 110,349 $ 2,152 1.95% Money market checking and NOW accounts 567,860 2,912 0.51% 529,976 3,085 0.58% Time deposits of $100,000 or more 546,588 4,094 0.75% 681,173 7,290 1.07% Other time deposits 421,387 3,860 0.92% 350,877 3,350 0.95% FHLB advances 6,573 151 2.30% 3,354 165 4.92% Other borrowings 8 -- 0.00% -- -- 0.00% Junior subordinated debentures 21,234 678 3.19% 82,406 2,703 3.28% Total interest-bearing liabilities 1,678,618 13,507 0.80% 1,758,135 18,745 1.07% Noninterest-bearing liabilities: Demand deposits 740,445 676,707 Other liabilities 15,844 29,494 Total noninterest-bearing liabilities 756,289 706,201 Total liabilities 2,434,907 2,464,336 Stockholders' equity 393,734 328,016 Total liabilities and stockholders' equity $ 2,828,641 $ 2,792,352 Net interest income $ 108,973 $ 101,267 Cost of deposits 0.53% 0.68% Net interest spread 3.76% 3.40% Net interest margin 4.05% 3.77% 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"). This non-GAAP measure is used by management in the analysis of Hanmi Financial's 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 . 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: Tangible Common Equity to Tangible Assets Ratio (Unaudited) (In thousands, except share and per share data) December 31 , September 30 , December 31 , Hanmi Financial Corporation 2013 2013 2012 Total assets $ 3,055,539 $ 2,845,137 $ 2,882,520 Less other intangible assets (1,171) (1,212) (1,335) Tangible assets $ 3,054,368 $ 2,843,925 $ 2,881,185 Total stockholders' equity $ 401,237 $ 397,956 $ 378,364 Less other intangible assets (1,171) (1,212) (1,335) Tangible stockholders' equity $ 400,066 $ 396,744 $ 377,029 Total stockholders' equity to total assets 13.13% 13.99% 13.13% Tangible common equity to tangible assets 13.10% 13.95% 13.09% Common shares outstanding 31,756,550 31,754,115 31,496,540 Tangible common equity per common share $ 12.60 $ 12.49 $ 11.97 CONTACT: Hanmi Financial Corporation Mark Yoon , CFA CPA CVA EVP & Chief Financial Officer 213-427-5636 Investor Relations The Cereghino Group Becky Reid 206-388-5788 www.stockvalues.com Source: Hanmi Bank


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