Hanmi Financial Corporation Reports Net Income of $15.0 Million for Third Quarter of 2005; Earnings Per Share Increase 36 Percent to $0.30

Business Wire, Oct 27, 2005

LOS ANGELES -- Hanmi Financial Corporation (NASDAQ:HAFC), the holding company for Hanmi Bank, reported that for the three months ended September 30, 2005, it earned net income of $15.0 million, an increase of 35.2 percent over net income of $11.1 million in the comparable period a year ago. Earnings per share were $0.30 (diluted), an increase of 36.4 percent compared to $0.22 (diluted) for the same period in 2004. Earnings per share for 2004 have been restated to reflect a 100 percent stock dividend in January 2005.

For the nine months ended September 30, 2005, net income was $43.3 million, an increase of 73.4 percent over net income of $25.0 million in the comparable period a year ago. Earnings per share were $0.86 (diluted), an increase of 38.7 percent compared to $0.62 (diluted) for the same period in 2004.

"I am pleased to report that with the close of the third quarter, Hanmi's assets were a record $3.37 billion, thanks in large part to an increase in deposits during the quarter of $187 million, or 7.3 percent, to $2.75 billion," said Sung Won Sohn, Ph.D., Hanmi's President and Chief Executive Officer. "However, third-quarter net income, although well ahead of the comparable period last year, was essentially flat versus the prior quarter, with third-quarter net interest margin of 4.75 percent compared to 4.89 percent in the second quarter and 4.38 percent in the third quarter of 2004."

"The sequential pressure on margins came despite a modest increase in the yield on the loan portfolio and reflected an increase in cost of funds as we relied more heavily on time deposits to build assets and, more important, maintain our base of existing customers," said Dr. Sohn. "The market environment for both loans and deposits remains extremely competitive. On a positive note, however, our liquidity is now such that we are well positioned to fund anticipated loan growth in the fourth quarter, which will benefit from the opening of two SBA lending offices in October, and we expect to be more conservative in pricing deposits."

"Also on a positive note, we continue to streamline the bank's operations, to good effect," concluded Dr. Sohn. "In the third quarter, our efficiency ratio was 38.34 percent, compared to 40.30 percent in the prior quarter and 51.12 percent a year ago."

THIRD QUARTER HIGHLIGHTS

--Pre-tax income for the third quarter of 2005 increased 33.1 percent to $24.2 million, compared to $18.2 million for the same quarter in 2004.

--Net interest income before provision for credit losses for the third quarter of 2005 increased 16.9 percent to $34.8 million from $29.8 million for the same quarter in 2004.

--The provision for credit losses was $3.2 million in the third quarter of 2005, compared to $450 thousand for the second quarter of 2005 and $0 for the same quarter of 2004.

--Gain on sales of loans was $1.7 million in the third quarter of 2005, compared to $56 thousand for the second quarter of 2005 and $352 thousand for the same quarter in 2004.

--Return on average assets for the third quarter of 2005 was 1.80 percent, compared to 1.90 percent for the second quarter of 2005 and 1.41 percent for the same quarter in 2004.

--Return on average shareholders' equity for the third quarter of 2005 was 13.89 percent, compared to 14.48 percent for the second quarter of 2005 and 11.62 percent for the same quarter in 2004.

--Return on average tangible shareholders' equity for the third quarter of 2005 was 28.45 percent, compared to 30.61 percent for the second quarter of 2005 and 28.02 percent for the same quarter in 2004.

--Net interest margin for the third quarter of 2005 decreased to 4.75 percent from 4.89 percent for the second quarter of 2005 and 4.38 percent for the same quarter in 2004.

--Total assets increased to $3.37 billion at September 30, 2005 from $3.25 billion at June 30, 2005 and $3.10 billion at December 31, 2004.

--The loan portfolio increased by $54.9 million, or 2.3 percent, during the third quarter of 2005 to $2.46 billion from $2.40 billion at June 30, 2005. The loan portfolio totaled $2.23 billion at December 31, 2004.

--Deposits grew by $186.8 million, or 7.3 percent, during the third quarter of 2005 to $2.75 billion from $2.56 billion at June 30, 2005. Deposits totaled $2.53 billion at December 31, 2004.

--Borrowings decreased from $147.6 million at June 30, 2005 to $86.9 million at September 30, 2005.

--The efficiency ratio for the third quarter of 2005 improved to 38.34 percent compared to 40.30 percent for the second quarter of 2005 and 51.12 percent for the same quarter in 2004.

NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES

Net interest income before provision for credit losses was $34.8 million for the third quarter of 2005, an increase of $797,000, or 2.3 percent, compared to $34.0 million in the second quarter of 2005, and an increase of $5.0 million, or 16.9 percent, compared to $29.8 million for the same quarter in 2004.

The sequential increase in net interest income was primarily due to an increase in average interest-earning assets, which increased by $120.1 million, or 4.3 percent, to $2.91 billion for the third quarter of 2005, compared to $2.79 billion for the second quarter of 2005. The effect of the increase in interest-earning assets was offset by a decline in net interest margin, which decreased 14 basis points compared to the second quarter of 2005, and accounted for a $171 thousand decrease in net interest income.