Hanmi Financial Corporation Annual Report 2014

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FY2014 Annual Report · Hanmi Financial Corporation

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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

0.14

12.60

2.87

1.38

(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.

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

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 .

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.

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

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.

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.

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

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

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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