Hanmi Financial Corporation · NASDAQ:HAFC
Hanmi Financial — Q3 2023 Earnings Presentation
48 slides from Hanmi Financial's earnings presentation, Nov 6, 2023
Slide 1: 3Q23 Investor Presentation
Los Angeles New York/ New Jersey Virginia Chicago Dallas Houston San Francisco San Diego 3Q23 Investor Presentation November 6, 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements Hanmi Financial Corporation (the “Company”) cautions investors that any statements contained herein that are not historical facts are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, incl
Slide 3: Non-GAAP Financial Information
Non-GAAP Financial Information This presentation contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These non-GAAP measures include tangible common equity to tangible assets, and tangib
Slide 4: Table of Contents
Table of Contents Overview & highlights 5–9 Loan portfolio 10 – 23 Deposit portfolio 24 – 25 Margin, fee income, expenses 26 – 30 Asset quality 31 – 35 Securities & liquidity 36 – 37 Capital management 38 – 39 Environmental Social Governance (ESG) 40 – 43 Appendix 44 – 48 4
Slide 5: Hanmi Franchise at a Glance
Hanmi Franchise at a Glance As of 3Q23 Total Assets 1 2 1 $7.4B 3 Loans 1 $6.0B 1 1 Deposits 22 2 1 $6.3B Branch 7 1 Loan Production Office (LPO) Loan Growth(1) 10.9% Experienced Bankers with Deep Community Ties Second Largest Korean-American Bank in the U.S. TBVPS(2) • Founded in 1982 in Los Angele
Slide 6: Management Team
Management Team Banking Hanmi Name Position Experience Experience Previous Experience (Years) (Years) BBCN Bancorp, Shinhan Bank America, Nara Bonnie Lee President & CEO 37 10 Bank Romolo Santarosa SEVP, Chief Financial Officer 32 8 Opus Bank, First California Financial Group Anthony Kim SEVP, Chief
Slide 7: The Hanmi Timeline
The Hanmi Timeline For 40 years, we have been dedicated to helping our stakeholders bank on their dreams. 2022 2007 2017 - Assets surpassed $7 billion - Completed $70 million secondary - Celebrated 40th Anniversary common stock offering - Assets surpassed $5 billion - Nasdaq Closing Bell Ceremony 19
Slide 8: Why Hanmi?
Why Hanmi? • Strong average deposit growth • Strong average loan growth reflecting an reflecting a 10% CAGR since 2013 11% CAGR since 2013 • Average noninterest-bearing deposit • Significant progress reducing CRE at $2.2 billion, represents 36% of concentration from 85% of the total portfolio, avera
Slide 9: 3Q23 Highlights
3Q23 Highlights Net Income Diluted EPS ROAA ROAE NIM Efficiency Ratio TBVPS(1) $18.8M $0.62 1.00% 9.88% 3.03% 51.82% $21.45 • 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 prior quarter Net interest income was $54.9 mill
Slide 10: Loan Production
Loan Production Loan production of $336.3 million for 3Q23 reflected balanced contribution from nearly all business lines and meaningful increases in the weighted average interest rate on new production. 90000% 7.80% 0.0021 7.19% 7.39% 6.85% 80000% Weighted average 5.55% interest rate on new product
Slide 11: Average Loan Trend
Average Loan Trend Strong average loan growth reflecting an 11% CAGR since 2013. ($ in millions) $5,934 $5,597 $4,685 $4,795 $4,456 $4,508 $4,039 $3,423 $2,902 $2,441 $2,157 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD Average Loans Receivable 11
Slide 12: Successful Portfolio Diversification Strategy
Successful Portfolio Diversification Strategy Significant progress reducing CRE concentration from 85% of total portfolio to 63%. Loan Composition Loan Composition (as of December 31, 2013) (as of September 30, 2023) Equipment Finance – 10% (3) (1) (3) C&I – RRE – C&I – 12% 5% 10% (2) CRE – 63% (1)
Slide 13: Loan Portfolio
Loan Portfolio $6.02 Billion Loan Portfolio (as of September 30, 2023) Equipment Commercial Real Estate (CRE)(1,2) Portfolio CRE(2) Investor (non-owner) Finance Outstanding ($ in millions) $3,773 - 10% # of Loans 887 3Q23 Average Yield 5.39% Weighted Average Loan-to-Value Ratio(4) 50.4% Weighted Ave
Slide 14: Loan Portfolio Diversification
Loan Portfolio Diversification Loan portfolio is well diversified across collateral types and industry types; CRE represents 63% of the total portfolio and C&I represents 12%. (1) (2) CRE Portfolio C&I Portfolio $3.77B $729M Construction 2% Mixed Use – 3% Other – 6% Gas Station – Manufacturing 6% Re
Slide 15: CRE Portfolio Geographical Exposure
CRE Portfolio Geographical Exposure ($ in millions) Multifamily by State Construction by State $388 $85 CRE Composition by State Illinois – Other – $14 $3,773 4% $16 4% Other – New York – $7 $79 7% 20% New York – $18 22% Illinois – $85 2% Other – Texas - California – California – $65 $513 17% $214 $
Slide 16: Loan Portfolio Distribution
Loan Portfolio Distribution CRE ($ in millions) C&I ($ in millions) Owner Non-owner (1) Term (2) Lines of Credit (2) Multifamily Construction Occupied Occupied Total Balance $375 $354 Total Balance $728 $2,572 $388 $85 Average $0.38 $0.64 Average $0.96 $2.90 $2.46 $9.42 Median $0.05 $0.05 Median $0.
Slide 17: Loan Portfolio Maturities
Loan Portfolio Maturities ($ in millions) <1 Year 1-3 Years >3 Years Total Real estate loans Retail $ 106.9 $ 309.4 $ 681.4 $ 1,097.7 Hospitality 112.7 221.2 371.8 705.7 Office 47.1 224.2 304.0 575.3 Other 115.8 455.9 737.8 1,309.5 Commercial Property 382.5 1,210.7 2,095.0 3,688.2 Construction 54.4
Slide 18: USKC Loans & Deposits
USKC(1) Loans & Deposits USKC portfolio represented $719.6 million in loans, or 12% of the loan portfolio and $794.4 million in deposits, or 13% of the deposit portfolio. USKC CRE portfolio had a weighted average debt coverage ratio (2) of 1.91x and weighted average loan-to- value(2) of 60.6%. USKC
Slide 19: Office Loan Portfolio
Office Loan Portfolio The CRE office portfolio(1) was $575.3 million at September 30, 2023, representing 10% of the total loan portfolio. • Average balance and median Portfolio by State Rate Distribution balance of the portfolio were $4.6 million and $1.0 million, respectively • Weighted average deb
Slide 20: Hospitality Segment
Hospitality Segment Hospitality segment represented $705.7 million or 12% of the loan portfolio at September 30, 2023. Convention Center – 3% Airport – • Average balance and median balance of the portfolio (excluding 7% construction) were $3.6 million and $0.9 million, respectively Resort – 6% • Wei
Slide 21: Retail Segment
Retail Segment Retail segment represented $1.1 billion or 18% of the loan portfolio at September 30, 2023. Illinois • Average balance and median balance of the portfolio were $1.4 2% million and $0.7 million, respectively Other Georgia 10% 3% • Weighted average debt coverage ratio(1) of the segment
Slide 22: Residential Real Estate Portfolio
Residential Real Estate Portfolio The RRE(1) portfolio was $926.3 million at September 30, 2023, representing 15% of the total loan portfolio. Our conservative underwriting policy focuses on high-quality mortgage originations with maximum Loan-to-Value (LTV) between 60.0% and 70.0%, maximum Debt-to-
Slide 23: Equipment Finance Portfolio
Equipment Finance Portfolio Equipment finance portfolio represented $592.7 million or 10% of the loan portfolio at September 30, 2023. Portfolio by Industry Portfolio by Equipment Portfolio by State Wholesale Trade, 4% Trucks 39% Other, 20% Transportation, Machine Tools 8% 30% Earth Moving 7% 6% Tra
Slide 24: Average Deposit Trend
Average Deposit Trend Strong deposit growth reflecting a 10% CAGR since 2013. Average noninterest-bearing deposits have grown by 12% CAGR since 2013, and now represents 36% of total deposits. $6,188 ($ in millions) $5,950 $5,560 $4,946 $4,691 $4,461 $4,160 55% 64% $3,503 $3,608 59% $2,872 66% 71% 73
Slide 25: Deposit Base
Deposit Base Noninterest-bearing demand deposits represented 35% of total deposits at September 30, 2023. Estimated uninsured deposit liabilities were 37% of the total deposit liabilities. Brokered deposits remained low at 1% of the deposit base. Deposits ($ in millions) Deposits (as of 3Q23) ($ in
Slide 26: Net Interest Income | Net Interest Margin
Net Interest Income | Net Interest Margin Net interest income for the third quarter was $54.9 million and net interest margin (taxable equivalent) was 3.03%, both down from the previous quarter because of higher deposit interest expense. 0.07% 0.03% 3.66% 3.67% 0.05% 3.28% 3.11% 3.03% -0.23% 3.11% 3
Slide 27: Net Interest Income Sensitivity
Net Interest Income Sensitivity 22% of the loan portfolio reprices within 1-3 months. Loans – Months to Reset / Maturity(1) . ($ in millions) Fed Funds Rate & Cost of CDs $1,926.0 Fed 4.50% 5.00% 5.25% 5.50% Funds Cost of 3.25% Rate(3) CDs(2) $444.4 3.31% 3.70% 3.95% 0.97% 2.17% $1,421.7 3Q22 4Q22 1
Slide 28: Noninterest Income
Noninterest Income Noninterest income for the third quarter was $11.2 million, up 42% from the previous quarter, which primarily reflected $4.0 million gain on the sale-and-leaseback of a branch property. Noninterest Income ($ in millions) 3Q23 Service Charges and Fees ($ in millions) Service charge
Slide 29: Noninterest Expense
Noninterest Expense Continued focus on disciplined expense management. $50 2.00% 1.88% 1.85% 1.87% Noninterest 1.81% 1.83% expense / Average • Noninterest expense was $34.2 million in assets the third quarter, down 0.1% from the prior quarter $33.8 $32.8 $34.3 $34.2 $33.3 $4.5 $3.9 • Salaries and em
Slide 30: Pretax, Pre-Provision Income (PTPP)
Pretax, Pre-Provision Income (PTPP)(1) 2.17% 2.09% 1.84% 1.70% PTPP / 1.58% Average assets(1) • Pretax, pre-provision income was $31.8 million for the third 1.49% (1) quarter, up 9.5% from the prior quarter and down 17.8% from the same quarter last year $38.7 $38.2 $33.4 • PTPP over average assets f
Slide 31: Asset Quality – Delinquent & Criticized Loans
Asset Quality – Delinquent & Criticized Loans Asset quality remains strong. Delinquent Loans(1) ($ in millions) Criticized Loans ($ in millions) 2.94% 2.10% Criticized 0.26% 1.87% 1.82% loans / 0.23% Delinquent loans 1.40% Total loans 0.16% / Total loans 0.13% 0.09% $170.7 $125.2 $15.4 $111.6 $109.6
Slide 32: Asset Quality – Nonperforming Assets & Nonaccrual Loans
Asset Quality – Nonperforming Assets & Nonaccrual Loans 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, primarily due to $6.1 million of charge-offs on $11.0 million of previously identified classified loans. Nonperfo
Slide 33: Asset Quality – Gross & Net Loan Charge-offs
Asset Quality – Gross & Net Loan Charge-offs Net charge-offs for the third quarter represented 0.60% of average loans on an annualized basis. Gross Charge-offs ($ in millions) Net Charge-offs ($ in millions) 0.60% $9.4 Net Charge- offs / 0.08% 0.10% 0.12% Average loans 0.02% $8.9 $6.6 $6.4 $2.7 $2.1
Slide 34: ACL Trends
ACL Trends Allowance for credit losses was $67.3 million as of September 30, 2023, generating an allowance for credit losses to loans of 1.12% compared with 1.19% at the end of the prior quarter. Allowance for Credit Losses ($ in millions) Credit Loss Expense (Recovery) ($ in millions) $100 1.50% $6
Slide 35: ACL Analysis by Loan Type
ACL Analysis by Loan Type ($ in millions) September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Allowance Loans Allowance Loans Allowance Loans Allowance Loans Allowance Loans CRE $ 38.9 $ 3,773.0 $ 38.4 $ 3,738.3 $ 39.2 $ 3,784.2 $ 40.6 $ 3,833.4 $ 42.7 $ 3,853.9 C&I
Slide 36: Securities Portfolio
Securities Portfolio The $957 million securities portfolio (all AFS, no HTM) represented 13% of assets at September 30, 2023, and had a weighted average modified duration of 4.6 years with $140 million in an unrealized loss position. (1) Available for Sale US Agy Residential MBS - Maturity Unrealize
Slide 37: Liquidity
Liquidity The Bank and the Company have ample liquidity resources at September 30, 2023. Liquidity Position ($ in millions) Balance % of Assets Liquidity Ratios Cash & cash equivalents $ 289 3.9% Securities (unpledged) 765 10.5% Liquid Assets to Total Assets Liquid Assets to Deposits Loans held for
Slide 38: Capital Management
Capital Management Tangible book value per share (TBVPS)(1) decreased to $21.45 from $21.56 at the end of the prior quarter. The decline reflects the $14.8 million increase in the unrealized after-tax loss on AFS and a $1.9 million share repurchase offset by $11.1 million of net income, net of cash
Slide 39: Regulatory Capital
Regulatory Capital The Company exceeds regulatory minimums and the Bank remains well capitalized at September 30, 2023. Company Bank CET1 CET1 4.50% 2.50% 7.00% 6.50% Capital Capital CET1 CET1 11.95% 13.42% Capital Capital 10.38% 11.86% Tier 1 Tier 1 6.00% 2.50% 8.50% 8.00% Capital Capital Tier 1 Ti
Slide 40: The Hanmi Story & Commitment to ESG
The Hanmi Story & Commitment to ESG Established in 1982 in Los Angeles, Hanmi Bank was originally founded to serve the underserved immigrant community in Koreatown. From our humble beginnings as the first Korean-American bank, Hanmi Bank has grown to embrace and support the dreams of all Americans.
Slide 41: (Environmental)SG
(Environmental)SG The board recognizes that sustainability broadly encompasses corporate activities that enhance the long-term value of the Company. Sustainability In 2021, Hanmi Financial Donated 40 solar panels to Corporation moved its the Koreatown Senior and headquarters to the Wilshire Communit
Slide 42: E(Social)G
E(Social)G As a community bank, we are an equal opportunity employer and we are proud to work with our communities to build a stronger future for all of our stakeholders. Fostering Human Capital Serving Our Communities $7.5M Long-term commitment to a Community 68% 91% 60% Reinvestment Act fund Femal
Slide 43: ES(Governance)
ES(Governance) Governance and management of environmental and social impact create long-term value for our stakeholders. Oversight DiverseOur Board Board Members Hanmi is committed to sound corporate governance principles and The NCG Committee believes the Board should encompass a maintains formal C
Slide 44: Appendix
Appendix A Hanmi Financial Corporation: 44
Slide 45: 3Q23 Financial Summary
3Q23 Financial Summary ($ in millions, except EPS) Change (1) September 30, 2023 June 30, 2023 September 30, 2022 Q/Q Y/Y Income Statement Summary Net interest income $ 54.9 $ 55.4 $ 63.1 -1.0% -13.0% Noninterest income 11.2 7.9 8.9 41.5% 26.0% Operating revenue 66.1 63.4 72.0 4.3% -8.2% Noninterest
Slide 46: Pretax, Pre-Provision Income (PTPP) Schedule
Pretax, Pre-Provision Income (PTPP) Schedule ($ in millions) September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Average assets $ 7,434.7 $ 7,382.0 $ 7,367.2 $ 7,252.2 $ 7,095.4 Net interest revenue $ 54.9 $ 55.4 $ 57.9 $ 64.6 $ 63.1 Noninterest income 11.2 7.9 8.3 7
Slide 47: Non-GAAP Reconciliation: Tangible Common Equity to Tangible Asset Ratio
Non-GAAP Reconciliation: Tangible Common Equity to Tangible Asset Ratio ($ in thousands, except per share data) 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 goo
Slide 48: Non-GAAP Reconciliation: Pro Forma Regulatory Capital
Non-GAAP Reconciliation: Pro Forma Regulatory Capital ($ in thousands) Company Bank Common Total Common Total Equity Tier 1 Tier 1 Risk-based Equity Tier 1 Tier 1 Risk-based Regulatory capital $ 740,411 $ 761,968 $ 933,915 $ 831,428 $ 831,428 $ 893,375 Unrealized losses on AFS securities (99,422) (9