Key Highlights

  • Diluted EPS was $0.80, up from $0.79 in the second quarter and $0.73 a year earlier, as screened against an estimate of $0.81.
  • Net income was $23.7 million, up 7.4% from a year ago, with a market capitalisation of about $960.93 million as screened.
  • The net interest margin rose to 3.44% from 3.36% in the second quarter and 3.22% a year ago.
  • Criticized loans rose to $134.4 million, or 2.05% of loans, from 1.74% in the second quarter.
  • Hanmi repurchased 151,048 shares at an average of $31.79 and paid a $0.28 dividend.

Hanmi Earnings: Did Margin Expansion Outrun Weaker Credit Signals?

Hanmi Financial (NASDAQ:HAFC) reported third-quarter results on Tuesday, October 27, with net income of $23.7 million, or $0.80 per diluted share. That compares with $0.79 in the second quarter and $0.73 a year earlier. The screen estimate was $0.81.

The release carried no numerical guidance. Management cited margin expansion, deposit growth and expense discipline.

Hanmi is the parent of Hanmi Bank. Nine-month net income was $69.7 million, up 27.2%.

Hanmi Margin: What Lifted Net Interest Income 10.6% From a Year Ago?

Net interest income was $67.6 million, up 5.8% from the second quarter and 10.6% from a year ago. The taxable-equivalent net interest margin widened 8 basis points sequentially and 22 basis points year over year to 3.44%.

Loan yield rose 13 basis points to 6.03%, while the cost of deposits held at 2.25%. Loan payoff fees, accelerated deferred fees and a Federal Home Loan Bank special dividend added to income, partly offset by interest reversals and extra subordinated debt interest. Hanmi estimated that these items added about 4 basis points to the margin.

Noninterest income was $9.0 million, up 8.2% sequentially, helped by SBA loan sale gains of $2.3 million. Noninterest expense was $39.8 million, including a $1.1 million charge tied to the 2031 note redemption. The efficiency ratio improved to 52.02% from 54.07%.

Hanmi Credit Quality: Why Did Criticized Loans Climb to 2.05% of the Book?

Credit loss expense was $4.5 million, up from $1.2 million in the second quarter and $2.1 million a year ago. Net charge-offs were $4.3 million, or 0.27% of loans annualized, against 0.08% in the second quarter. Gross charge-offs included $3.2 million on a $21.2 million commercial real estate loan moved to held for sale.

Criticized loans rose to $134.4 million, or 2.05% of loans, from 1.74%. Classified loans increased $32.4 million to $78.2 million, mainly two New York City rent-controlled multifamily loans totaling $51.4 million that were downgraded.

Nonperforming loans were $8.9 million, or 0.14% of loans, and delinquencies of 30 to 89 days fell to $13.0 million from $32.8 million. The allowance for credit losses was $70.8 million, or 1.08% of loans, unchanged from the second quarter.

Hanmi Balance Sheet and Capital: What Changed After the Note Redemption?

Loans held for investment were $6.57 billion, up 0.5% sequentially, on new production of $543.6 million at 6.61%. Deposits grew 1.4% to $7.06 billion, with a loan-to-deposit ratio of 93.1%.

Hanmi issued $55.0 million of subordinated notes due 2036 at a 6.50% fixed rate for five years. It used the proceeds and $44.5 million of securities sales to redeem $110.0 million of 2031 notes. The common equity Tier 1 ratio was 12.30%.

About 55.6% of earnings went back to shareholders.

What to Watch Next at Hanmi After the Third-Quarter Report?

The next checkpoints are whether the margin holds once the roughly 4 basis points of one-time items fall away, and whether the New York multifamily downgrades turn into charge-offs.