Hanmi Financial
Annual Report 2014

Plain-text annual report

REACHING NEW HEIGHTS HANMI FINANCIAL CORPOR ATION 2014 ANNUAL REPORT 2 0 14 A N N U A L R E P O R T FINANCIAL HIGHLIGHTS (Dollars in thousands, except for per share data) 2014 2013 2012 2011 2010 FOR THE YEAR Net interest income before provision for credit losses $ 122,701 $ 105,633 $ 98,537 Headquartered in Los Angeles, Hanmi Bank, a wholly-owned subsidiary of Hanmi Financial Corporation, provides services to the multi-ethnic communities across California, Texas, Illinois, Virginia, and New Jersey with 46 full-service branches as well as loan production offices in California, Colorado, Texas, Virginia, 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 shareholder value. (Negative provision) provision for credit losses Noninterest income Noninterest expense Income (loss) before provision for income taxes Net income (loss) from continuing operations Net income (loss) AT YEAR END Assets Gross loans Deposits Stockholders’ equity PER SHARE DATA: Earnings (loss) per share—basic Earnings (loss) per share—diluted Cash dividends per share Book value per share FINANCIAL RATIOS: Net interest margin Non-performing Non-PCI loans to gross loans Allowance for loan losses to gross loans Efficiency ratio Return on average assets $ $ $ $ $ $ (6,140) 42,296 98,553 72,584 50,205 49,761 $ $ $ $ $ $ — $ 6,000 27,900 71,017 62,516 39,784 39,857 $ $ $ $ $ 21,413 70,611 43,339 90,157 90,324 $ $ $ $ $ $ $ 99,323 $ 105,874 12,100 $ 122,496 30,889 $ 29,653 89,297 $ 101,112 28,815 28,082 28,147 $ $ $ (88,081) (88,069) (88,009) $ 4,232,443 $ 3,054,379 $ 2,881,409 $ 2,744,824 $ 2,907,148 $ 2,785,261 $ 2,234,089 $ 2,048,560 $ 1,938,740 $ 2,231,072 $ 3,556,746 $ 2,512,325 $ 2,395,963 $ 2,344,910 $ 2,466,721 $ 453,387 $ 400,077 $ 377,253 $ 285,608 $ 173,256 $ $ $ $ 1.57 1.56 0.28 14.21 $ $ $ $ 1.26 1.26 0.14 12.60 $ $ $ $ 2.87 2.87 $ $ 1.38 1.38 $ $ (7.46) (7.46) — $ — $ — 11.98 $ 9.07 $ 9.17 3.88% 0.92% 1.88% 3.94% 1.16% 2.58% 3.68% 1.82% 3.09% 3.61% 2.70% 4.64% 3.48% 6.38% 6.55% 59.73% 53.18% 58.87% 68.58% 74.61% 1.47% 1.41% 3.23% 1.01% (2.94)% Return on average stockholders’ equity 11.79% 10.13% 27.49% 14.00% (63.83)% SELECTED CAPITAL RATIOS: Total capital to risk-weighted assets: Hanmi Financial Hanmi Bank Tier 1 capital to risk-weighted assets: Hanmi Financial Hanmi Bank Tier 1 capital to average assets: Hanmi Financial Hanmi Bank 15.89% 15.18% 14.63% 13.93% 10.91% 10.39% 17.48% 16.79% 16.26% 15.53% 13.62% 13.05% 20.65% 19.85% 19.37% 18.58% 14.95% 14.33% 18.66% 17.57% 17.36% 16.28% 13.34% 12.50% 12.32% 12.22% 10.09% 10.91% 7.90% 8.55% PRE-TA X INCOME (1) Dollars in Thousands 2012: $43,339 2013: $62,516 2014: $72,584 GROSS LOANS Dollars in Thousands 2012: $2,048,560 2013: $2,234,089 2014: $2,785,261 TOTAL DEPOSITS Dollars in Thousands 2012: $2,395,963 2013: $2,512,325 2014: $3,556,746 (1) Excludes income from discontinued operations. 3 H A N M I F I N A N C I A L C O R P O R AT I O N 2 0 14 A N N U A L R E P O R T DEAR FELLOW SHAREHOLDERS Hanmi Financial Corporation (“Hanmi”) reached new heights in 2014. With the successful completion of our acquisition of Central Bancorp, Inc. (“CBI”), the Texas-based parent company of United Central Bank, Hanmi grew to $4.2 billion in assets with a significantly expanded geographic footprint and a diverse customer base. This acquisition transformed Hanmi from a premier Korean American bank serving mostly customers in California to become the first Korean American bank to serve broader Asian American and mainstream communities across 7 states. After the close of the transaction on August 31, 2014, which occurred approximately 60 days earlier than expected, we were able to complete the integration and systems conversion of the combined banking operations. While much progress has been made, Hanmi has only scratched the surface of the tremendous opportunities that lie ahead. Simply stated, our goal is to build upon our rich heritage as a regional community bank and mold Hanmi into the leading nationwide community bank. We will look to achieve this goal by creating a platform for sustainable growth, adhering to our core banking values, while simultane- ously maintaining our culture of excellent customer service. We are quite pleased with our operational performance during the year, which reflects eight months of stand-alone operations of legacy Hanmi and four months of combined operations fol- lowing the completion of the CBI acquisition. For the full year, we reported net income of $49.8 million, or $1.56 per diluted share, representing a 24.8% increase over the prior year. Our expanding profitability in 2014 reflects the initial benefits from the CBI acquisition and continued strong growth of Hanmi’s net loan portfolio, which grew by 25.6% to $2.7 billion during the year. The gross loans for legacy Hanmi alone increased 13% year over year. The 2014 net income included an after-tax bar- gain purchase gain of $14.6 million that served to partially offset the capital impact of the CBI purchase price of $50 million. PLATFORM FOR SUSTAINABLE GROWTH By successfully completing the integration and systems conver- sion as scheduled in early 2015, we have created a platform that will enable the Hanmi franchise to generate sustainable growth well into the future. For Hanmi, expansion is no longer confined to increasing market share within the borders of California. With the completion of the CBI acquisition, we now have a nationwide footprint with 46 full-service branches and 5 loan production offices across seven states including California, Texas, Illinois, Virginia, New Jersey, Colorado and Washington. To explore new market opportunities, we have hired two experienced regional presidents responsible for growth in Texas and Illinois. We believe Hanmi will be a signifi- cant competitive force in all of our markets, which will help drive meaningful growth and earnings expansion for years to come. We have also expanded our addressable market from our core Korean American customer base to embrace new ethnic markets including the South Asian, Chinese and mainstream banking communities. Having opened our first branch in Los Angeles in 1982 with the clear mission of helping Korean immigrants achieve the American dream, we are thrilled to now provide our services to an even broader array of ethnic communities from coast to coast. CORE BANKING VALUES While Hanmi will be looking to extend its reach to an expanded base of customers in new markets, we will also continue to adhere to the same core banking values that have helped drive our strong performance year after year. Safety continues to be a top priority. Over the past few years, this has manifest itself in Hanmi’s improving asset quality. In fact, during 2014 we successfully reduced classified loans, excluding purchased credit impaired loans, by 42% compared to the prior year. Moreover, our loan charge offs declined by 41% to $7.0 million. For the year, due to recoveries of previously charged off loans, we were in a net recovery position of $1.4 million. An important part of effectively managing risk and enhancing safety is through the diversity of our loan portfolio. Aside from strong growth in our core CRE loan portfolio, our initiatives to drive loan diversification through C&I lending began to generate momentum during 2014 as the C&I line commitments grew 31% and the outstanding balances grew 24% year over year. In addition, our strong SBA lending team continues to serve small businesses in different communities to drive overall loan portfolio growth. Our focus on maintaining a relationship-driven, high-touch banking model allows Hanmi to benefit from a low-cost deposit base, which has helped us to consistently achieve a strong net interest margin. At year-end 2014, core deposits were $2.65 billion, up by $641.0 million, or 32.0%, compared to 2013. We also firmly believe that prudent investments in technology drive returns through improved customer satisfaction and enhanced employee productivity. Our treasury management products and services are helping Hanmi attract new business clients, deepen existing customer relationships and drive higher core deposits. In addition, we recently converted to a more robust platform that allows our customers to conveniently per- form expanded banking activities online. Importantly, this platform provides technology for fraud analytics and seamless use between desktop and mobile devices. Hanmi’s ability to attract, develop and retain talented bankers continues to set us apart from our peers. During 2014, we pro- vided 67 different courses through the Hanmi Banking School that provides training in traditional banking products, services and communication skills. At Hanmi, we are committed to employee development, and we firmly believe that our ultimate success will be based on our ability to train the next generation of bankers to shape our future. CULTURE OF EXCELLENT CUSTOMER SERVICE Our confidence in our ability to successfully expand into new markets and attract new customers rests upon our rich legacy of providing excellent customer service. We are currently ranked first for brand affinity and customer loyalty among our peers. In fact, 45% of legacy Hanmi customers have been with the bank for ten or more years. At Hanmi, we have created a culture of going the extra mile for our customers, providing superior service founded in the core values we demonstrate with every interaction. We are confident that our products, services, technology and employees are ready to meet and exceed the expectations of our growing customer base. We have established a solid foundation to drive growth through the unwavering dedication of all our team members and support from our Board of Directors. We are also grateful for the ongoing loyalty of our customers. We thank you for your business and are privileged to serve you. As we look forward, we see exciting opportunities to continue our transformation in 2015. Hanmi has made great strides in a short time and remain committed to our goal of maximizing stockholder value. Sincerely, Joseph K. Rho Chairman of the Board of Directors C. G. Kum President and Chief Executive Officer 4 5 H A N M I F I N A N C I A L C O R P O R AT I O N 2 0 14 A N N U A L R E P O R T EXPANDING OUR HORIZONS With the completion of the Central Bancorp, Inc. (“CBI”) acquisition on August 31, 2014, we now offer our customers service from 46 branches and five loan production offices across the United States in key communities in Texas, Illinois, Virginia, New Jersey, Colorado and Washington. This is in addition to our extensive branch network in California. At the end of 2014, Hanmi Bank reported $4.2 billion in assets, $2.8 billion in gross loans and $3.6 billion in deposits. ASSET GROWTH (DOLLARS IN THOUSANDS) 2012 2013 2014 $2,881,409 $3,054,379 $4,232,443 The acquisition of CBI fulfilled a critical part of our a wider range of communities and businesses. We corporate growth strategy. Not only did we expand our understand the needs of our local communities and geographic reach in 2014, we also saw the cultural are committed to offering products and services that are diversity of our customer base grow. We now have a loyal universally valued in the banking industry. customer base that includes Korean, South Asian and Chinese Americans, as well as mainstream customers. We are proud to have the opportunity to extend our reach into these important entrepreneurial communities. As the first Korean American bank to expand our relationships with broader Asian American and mainstream communi- ties, we are well positioned to expand our horizons into new markets. We believe the knowledge and expertise we have developed over years of serving the financial needs of immigrants and small businesses will resonate across As we look to grow, we will hold steadfast to our core banking values that have helped create a strong franchise. This will help us achieve our longer term aspiration of becoming the best franchise in our sector. This commitment will ultimately lead Hanmi Bank to our goal of being recognized as a high performing bank, not just a high performing “ethnic” bank. W E B ELI E V E W E CA N B E B OT H . 6 7 H A N M I F I N A N C I A L C O R P O R AT I O N 2 0 14 A N N U A L R E P O R T SUCCEEDING TOGETHER Hanmi’s strength in personal banking comes from a deep under standing of our customers. Hanmi Bank has a rich history of serving immigrant communities and their entrepreneurial spirit. At Hanmi Bank, we specialize in small- to mid-sized Last year, we showed growth in CRE loans, and in 2015, business loans. Hanmi’s Corporate Banking Centers are we will continue to grow our Commercial and Industrial dedicated to providing personalized business lending loans, with a particular focus on increased loan origina- solutions to address the unique needs of each business tions in our new regions. owner. Our bankers have the expertise and flexibility to cater to our customers’ needs. Capitalizing on the assets we acquired in 2014, we are seizing the opportunity to diversify our loan mix and drive We also have substantial expertise in the SBA loan mar- asset generation in key geographies outside of California, ketplace. As the first Korean American bank to offer SBA particularly in the Midwest and South. loans, we have always placed the highest priority on investing in and growing together with the members of our community. Today, Hanmi Bank is able to provide its loyal customers with expanded product offerings, increased lending capacity and enhanced service. Hanmi Bank presents a compelling platform from which to grow further and faster. 8 9 H A N M I F I N A N C I A L C O R P O R AT I O N 2 0 14 A N N U A L R E P O R T Just as our customers’ needs have grown and evolved, today Hanmi is offering an expanded selection of products and services to meet those changing needs. The explosive growth in mobile banking has driven our particular focus on remote access. In 2014, we upgraded our online banking platform to offer added security and even more convenience. Our new robust platform provides the latest in technology for fraud analytics and seamless application between desktop and mobile devices, enabling our customers to perform expanded banking activ ities online. We also strengthened our treasury management products and services offerings for our business customers. New services include merchant services, credit card and Positive Pay serv- ices, allowing business owners to gain more control over their cash flow. Additionally, our payroll service and account analysis system allows for customization for each unique business relationship. For customers who have a growing interest in mobile banking, we enhanced deposit products. Our newest offerings include the Green Checking Account that features free paperless checking with unlimited electronic transactions. We also offer the Student Checking Account designed for young adults who do not conduct frequent in-branch transactions. Enhancing technology is just one way Hanmi is improving its competitive position. SHAPING OUR FUTURE THROUGH INNOVATION 10 11 H A N M I F I N A N C I A L C O R P O R AT I O N 2 0 14 A N N U A L R E P O R T CULTIVATING THE SUCCESS OF OUR PEOPLE At Hanmi Bank, we strive to promote a culture of excellence in customer service with each team member enabled with superior knowledge of the products and services we offer. To that end, our Hanmi Banking School operates with the goal of supporting career development across the Company. Hanmi Banking School supports our employees by offering nearly 70 training courses in areas including: • Branch operations • Lending • New products and services • Sales and communication • General regulatory compliance We are pleased to report that all of our staff took advantage of training in 2014. We plan to continue this trend with expanded educational offerings that further enhances our employees’ product knowledge and customer service skills. Investing in employee education is an important part of building a loyal and motivated workforce. This will serve as a key component of our success and in turn, the success of our customers and communities. 12 13 H A N M I F I N A N C I A L C O R P O R AT I O N 2 0 14 A N N U A L R E P O R T IMPACTING OUR COMMUNITIES Hanmi’s passion to connect with the communities we serve runs deep. Our creative approach to fostering volunteerism among our employees made us a pioneer among Korean American banks. Our long tradition of community giving thrives through our Hanmi Neighbor Volunteer Service Program. This program was founded in response to our employees’ interest in being involved with the communities they serve. Employees are encouraged to support the organizations of their choice by seeking out volunteer opportunities that focus primarily on Youth, Education, Health, Senior Concerns and Community Development. Last year, approximately 200 Hanmi Bank employees gave nearly 2,000 hours of service to their communities through engaging in various volunteer activities. As a bank that values relationship building, we seek to further connect to our customers by being actively involved in our communities. With our expanded branch presence, we will positively impact an even greater number of communities in the future. 14 15 H A N M I F I N A N C I A L C O R P O R AT I O N 2 0 14 A N N U A L R E P O R T WIDENING OUR FOOTPRINT Our strategy is focused on investing in our people, technology, and infrastructure to support our goals to expand our franchise organically as well as through mergers and acquisitions. CALIFORNIA BEVERLY HILLS BRANCH 9300 Wilshire Boulevard Suite #101 Beverly Hills, CA 90212 CERRITOS-ARTESIA BRANCH 11754 East Artesia Boulevard Artesia, CA 90701 CERRITOS-SOUTH BRANCH 11900 South Street Suite #109 Cerritos, CA 90703 DIAMOND BAR BRANCH 1101 Brea Canyon Road Suite #A-1 Diamond Bar, CA 91789 DOWNTOWN-LA BRANCH 950 South Los Angeles Street Los Angeles, CA 90015 FASHION DISTRICT BRANCH 726 East 12th Street Suite #211 Los Angeles, CA 90021 FULLERTON-BEACH BRANCH 5245 Beach Boulevard Buena Park, CA 90621 GARDENA BRANCH 2001 West Redondo Beach Boulevard Gardena, CA 90247 GARDEN GROVE-BROOKHURST BRANCH 9820 Garden Grove Boulevard Garden Grove, CA 92844 GARDEN GROVE-MAGNOLIA BRANCH 9122 Garden Grove Boulevard Garden Grove, CA 92844 IRVINE BRANCH 14474 Culver Drive Suite #D Irvine, CA 92604 TORRANCE-CRENSHAW BRANCH 2370 Crenshaw Boulevard Suite #H Torrance, CA 90501 IRVINE SOUTH BRANCH 1140 Roosevelt Irvine, CA 92620 TORRANCE-DEL AMO MALL BRANCH 21838 Hawthorne Boulevard Torrance, CA 90503 KOREATOWN GALLERIA BRANCH 3250 West Olympic Boulevard Suite #200 Los Angeles, CA 90006 KOREATOWN PLAZA BRANCH 928 South Western Avenue Suite #260 Los Angeles, CA 90006 NORTHRIDGE BRANCH 10180 Reseda Boulevard Northridge, CA 91324 OLYMPIC BRANCH 3737 West Olympic Boulevard Los Angeles, CA 90019 OLYMPIC-KINGSLEY BRANCH 3099 West Olympic Boulevard Los Angeles, CA 90006 VAN NUYS BRANCH 14427 Sherman Way Van Nuys, CA 91405 VERMONT BRANCH 933 South Vermont Avenue Los Angeles, CA 90006 WESTERN BRANCH 120 South Western Avenue Los Angeles, CA 90004 WILSHIRE-HOBART BRANCH 3660 Wilshire Boulevard Suite #103 Los Angeles, CA 90010 COMMERCIAL LOAN DEPARTMENT 933 South Vermont Avenue 3rd Floor Los Angeles, CA 90006 ROWLAND HEIGHTS BRANCH 18720 East Colima Road Rowland Heights, CA 91748 CONSUMER LENDING CENTER 3737 West Olympic Boulevard Los Angeles, CA 90019 SAN DIEGO BRANCH 4637 Convoy Street Suite #101 San Diego, CA 92111 SAN FRANCISCO BRANCH 1469 Webster Street San Francisco, CA 94115 SILICON VALLEY BRANCH 2765 El Camino Real Santa Clara, CA 95051 CORPORATE BANKING CENTER I & II 933 South Vermont Avenue 2nd Floor Los Angeles, CA 90006 TREASURY MANAGEMENT DEPARTMENT 3660 Wilshire Boulevard Suite #1004 Los Angeles, CA 90010 PLANO BRANCH 280 Legacy Drive Plano, TX 75023 DALLAS LPO 11461 Harry Hines Boulevard Suite #103 Dallas, TX 75229 ILLINOIS CAROL STREAM BRANCH 1275 North County Farm Road Carol Stream, IL 60188 CHICAGO BRANCH 6335 North Western Avenue Chicago, IL 60659 DOWNERS GROVE BRANCH 1303 Ogden Avenue Downers Grove, IL 60515 HARVEY BRANCH 16540 South Halsted Street Harvey, IL 60426 NAPERVILLE SOUTH BRANCH 1112 South Washington Street Naperville, IL 60540 NAPERVILLE WEST BRANCH 664 Raymond Drive Naperville, IL 60563 ROSELLE BRANCH 801 East Nerge Road Roselle, IL 60172 VIRGINIA ANNANDALE BRANCH 7140 Little River Turnpike Suite #749 Annandale, VA 22003 SPRINGFIELD BRANCH 6400 Brandon Avenue Springfield, VA 22150 VIRGINIA LPO 7700 Little River Turnpike Suite #200 Annandale, VA 22003 NEW JERSEY EDISON BRANCH 1031 US Highway 1 Edison, NJ 08837 COLORADO COLORADO LPO 2530 South Parker Road Suite #105 Aurora, CO 80014 WASHINGTON SEATTLE LPO 500 108th Avenue NE Suite #1760 Bellevue, WA 98004 SBA LENDING DIVISION 3660 Wilshire Boulevard Suite #917 Los Angeles, CA 90010 NORTHERN CALIFORNIA LPO 39420 Liberty Street Suite #250 Fremont, CA 94583 TEXAS ARLINGTON BRANCH 1107 East Pioneer Parkway Arlington, TX 76010 AUSTIN BRANCH 5816 North Interstate 35 Austin, TX 78751 CARROLLTON BRANCH 2625 Old Denton Road Suite #100 Carrollton, TX 75007 DALLAS BRANCH 11235 Harry Hines Boulevard Suite #101 Dallas, TX 75229 GARLAND BRANCH 4555 West Walnut Street Garland, TX 75042 HOUSTON GESSNER BRANCH 8585 South Gessner Road Houston, TX 77074 HOUSTON HILLCROFT BRANCH 5910 Hillcroft Street Houston, TX 77036 HOUSTON SPRING BRANCH 1611 Gessner Drive Houston, TX 77080 16 17 H A N M I F I N A N C I A L C O R P O R AT I O N CORPORATE INFORMATION LEGAL COUNSEL Manatt, Phelps & Phillips, LLP Los Angeles, CA INDEPENDENT AUDITORS KPMG LLP Los Angeles, CA TRANSFER AGENT AND REGISTRAR Computershare Trust Company, N.A. 211 Quality Circle, Suite 210 College Station, TX 77845 (800) 962-4284 www.computershare.com STOCK LISTING Common Stock Symbol: HAFC Stock Exchange: NASDAQ INVESTOR RELATIONS Christina Lee (213) 427-5631 christina.lee@hanmi.com Addo Communications, Inc. (External IR Firm) (310) 829-5400 lasseg@AddoCommunications.com CORPORATE HEADQUARTERS 3660 Wilshire Blvd., Penthouse Suite A Los Angeles, CA 90010 (213) 382-2200 www.hanmi.com From Left to Right: Paul Seon-Hong Kim, David L. Rosenblum, John J. Ahn, C. G. Kum, Joon Hyung Lee, Joseph K. Rho, I Joon Ahn, John A. Hall, Christie K. Chu, William J. Stolte BOARD OF DIRECTORS JOSEPH K. RHO Chairman of the Board I JOON AHN Former Chairman of the Board JOHN J. AHN President of B. Riley & Co., LLC CHRISTIE K. CHU President and CEO of CKC Accountancy Corp. JOHN A. HALL Former National Bank Examiner PAUL SEON-HONG KIM Former Bank President JOON HYUNG LEE Former Chairman of the Board President of Nustar LED Lighting, Inc.; Owner of Root-3 Corp. DAVID L. ROSENBLUM Former Management Consultant President of the Southern California Chapter of NACD WILLIAM J. STOLTE Former Bank Executive (retiring from the Board this year) C. G. KUM President and Chief Executive Officer 18 m o c . s r o n n o c - n a r r u c . w w w / . c n I , s r o n n o C & n a r r u C y b n g i s e D t r o p e R l a u n n A HANMI FINANCIAL CORPOR ATION Corporate Headquar ters 3660 Wilshire Boulevard Penthouse Suite A Los Angeles, CA 90010 213.382.2200 w w w.hanmi.com 

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