2020 Fourth Quarter and Full Year Highlights:

Fourth quarter net income of $14.3 million, or $0.47 per diluted share, down 12.3% from $16.3 million, or $0.53 per diluted share from the prior quarter; full year 2020 net income of $42.2 million, or $1.38 per diluted share, up 28.7% from $32.8 million, or $1.06 per diluted share in 2019.
Loans receivable of $4.88 billion, up 4.0% in the fourth quarter on an annualized basis reflecting $327.8 million of new loan and lease production; loans receivable were up 5.9% year-over-year.
Deposits of $5.28 billion, up 6.4% in the fourth quarter on an annualized basis and up 12.3% year-over-year driven by an increase of $507.1 million in noninterest-bearing demand deposits; cost of interest-bearing deposits fell 23 basis points from the prior quarter.
Credit loss expense was $5.1 million, compared with $0.04 million for the prior quarter and the allowance for credit losses was 1.85% of loans at December 31, 2020, or 1.97% excluding Paycheck Protection Program (PPP) loans.
Nonperforming assets were 1.38% of total assets at December 31, 2020 compared with 1.07% at September 30, 2020; modified loans declined 73.1% in the fourth quarter to $155.6 million or 3.2% of loans.
Fourth quarter net interest income was $46.9 million, up 2.8% from the prior quarter; fourth quarter prepayment penalties were $0.8 million compared with $1.3 million for the prior quarter. For the full year, net interest income was $180.9 million, up 2.9% from $175.9 million last year.
Fourth quarter net interest margin was 3.13% (3.18% excluding PPP loans), unchanged from the prior quarter; net interest margin for the full year was 3.19% (3.23% excluding PPP loans) compared with 3.37% last year.
The efficiency ratio for the fourth quarter was 55.53% compared with 56.73% for the prior quarter. The efficiency ratio for full year 2020 was 53.15% (58.63% excluding securities gains and deferred PPP loan origination costs) compared to 61.89% for the prior year.
Hanmi remained well capitalized with a Total risk-based capital ratio of 15.29% and a Common equity Tier 1 capital ratio of 11.60% at December 31, 2020; tangible common equity to tangible assets ratio was 9.13% (9.59% excluding PPP loans) at year-end.

For more information about Hanmi’s response to the COVID-19 pandemic, including detail regarding participation in the PPP, loan deferrals, including a breakdown by loan type and industry, as well as detail concerning Hanmi’s loan exposure to higher impacted industries, please see the Q4 2020 Investor Update (and Supplemental Financial Information), which is available on the Bank’s website at www.hanmi.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov.

LOS ANGELES, Jan. 26, 2021 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported net income for the 2020 fourth quarter of $14.3 million, or $0.47 per diluted share, compared with $16.3 million, or $0.53 per diluted share for the 2020 third quarter and $3.1 million, or $0.10 per diluted share for the 2019 fourth quarter.

For the 2020 year, net income was $42.2 million, or $1.38 per diluted share, compared with $32.8 million, or $1.06 per diluted share, for 2019.

Bonnie Lee, President and Chief Executive Officer, said, “In a year of unprecedented operating challenges and economic uncertainty, Hanmi completed 2020 with a strong performance in the fourth quarter highlighted by excellent loan production, stable net interest margin and careful expense management. Total loan and lease production of $327.8 million increased more than 27% from the prior quarter and contributed to the 5.9% growth in loans and leases for the full year. Fourth quarter net interest margin—or NIM—remained stable at 3.13% as we were able to offset declining loan yields through lower deposit costs. Overall, we were successful in protecting NIM throughout the year. I was also pleased by our cost reduction measures that led to a year-over-year decline in noninterest expense of 9.3% for the fourth quarter and 5.4% for the full year. In combination, these efforts generated full-year net income of $42.2 million, an increase of 28.7% over the prior year.”

Ms. Lee continued, “Throughout the pandemic, we have focused on helping our borrowers affected by the crisis through loan modifications and these efforts have been very successful in protecting the value of our portfolio. I continue to be very pleased with the trends of the modified portfolio, which has declined significantly from the prior quarter and now represents just 3.2% of our loans. I am also very proud of our efforts earlier in the year originating loans under the federal government’s Paycheck Protection Program that included almost 3,100 loans totaling nearly $309 million to assist affected customers. Overall, we remain very committed to proactive asset management and helping our borrowers weather the crisis while minimizing future charge-offs.”

Ms. Lee concluded, “Much was accomplished in 2020 and I thank our entire team for their dedication and commitment. Looking ahead, our solid balance sheet and capital position coupled with our strong loan and deposit franchise, gives me confidence that we will deliver profitable growth as we remain cautiously optimistic that the economy will continue to improve.”

Quarterly Highlights
(Dollars in thousands, except per share data)

	As of or for the Three Months Ended															Amount Change
	December 31,			September 30,			June 30,			March 31,			December 31,			Q4-20			Q4-20
		2020			2020			2020			2020			2019		vs. Q3-20			vs. Q4-19

Net income	$	14,326		$	16,344		$	9,175		$	2,350		$	3,084		$	(2,019	)	$	11,242
Net income per diluted common share	$	0.47		$	0.53		$	0.30		$	0.08		$	0.10		$	(0.06	)	$	0.37

Assets	$	6,201,888		$	6,106,782		$	6,218,163		$	5,617,690		$	5,538,184		$	95,106		$	663,704
Loans receivable	$	4,880,168		$	4,834,137		$	4,825,642		$	4,543,636		$	4,610,148		$	46,031		$	270,020
Deposits	$	5,275,008		$	5,194,292		$	5,209,781		$	4,582,068		$	4,698,962		$	80,715		$	576,046

Return on average assets		0.92	%		1.08	%		0.63	%		0.17	%		0.22	%		-0.16			0.70
Return on average stockholders' equity		10.01	%		11.74	%		6.73	%		1.69	%		2.15	%		-1.73			7.86

Net interest margin		3.13	%		3.13	%		3.15	%		3.36	%		3.32	%		0.00			-0.19
Efficiency ratio ⁽¹⁾		55.53	%		56.73	%		41.51	%		61.89	%		67.31	%		-1.20			-11.78

Tangible common equity to tangible assets ⁽²⁾		9.13	%		9.05	%		8.63	%		9.65	%		9.98	%		0.09			-0.85
Tangible common equity per common share ⁽²⁾	$	18.41		$	17.95		$	17.47		$	17.67		$	17.90		$	0.45		$	0.51


⁽¹⁾Noninterest expense divided by net interest income plus noninterest income.
⁽²⁾Refer to "Non-GAAP Financial Measures" for further details.

Results of Operations
Net interest income was $46.9 million for the fourth quarter of 2020 compared with $45.6 million for the third quarter of 2020, an increase of 2.8%, or $1.3 million, primarily due to lower interest expense on deposits. Fourth quarter deposit interest expense decreased 24.2%, or $1.7 million, from the preceding quarter driven by a 23 basis point reduction in the average rate paid on interest-bearing deposits. Interest and fees on loans decreased 0.4%, or $0.2 million, from the preceding quarter reflecting an 8 basis point reduction in average yields. Fourth quarter loan prepayment penalties were $0.8 million compared with $1.3 million for the third quarter.

Net interest income of $180.9 million for the full year of 2020 increased 2.9%, or $5.0 million from $175.9 million for the full year of 2019. The year-over-year increase in net interest income reflects an 81 basis point decrease in the average rate paid on interest-bearing deposits offset by a 78 basis point decrease in the average yield on interest-earning assets.


	As of or For the Three Months Ended (in thousands)										Percentage Change
	Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,		Q4-20			Q4-20
Net Interest Income		2020		2020		2020		2020		2019	vs. Q3-20			vs. Q4-19

Interest and fees on loans receivable⁽¹⁾	$	52,372	$	52,586	$	52,230	$	54,648	$	56,267		-0.4	%		-6.9	%
Interest on securities		1,684		1,972		3,225		3,655		3,665		-14.6	%		-54.0	%
Dividends on FHLB stock		206		204		203		289		289		1.1	%		-28.7	%
Interest on deposits in other banks		97		84		78		333		478		16.4	%		-79.6	%
Total interest and dividend income	$	54,359	$	54,846	$	55,736	$	58,925	$	60,699		-0.9	%		-10.4	%

Interest on deposits		5,331		7,032		8,889		12,742		14,699		-24.2	%		-63.7	%
Interest on borrowings		528		582		760		496		325		-9.4	%		62.3	%
Interest on subordinated debentures		1,623		1,627		1,645		1,712		1,739		-0.2	%		-6.7	%
Total interest expense		7,482		9,240		11,295		14,950		16,763		-19.0	%		-55.4	%
Net interest income	$	46,877	$	45,606	$	44,441	$	43,975	$	43,936		2.8	%		6.7	%

⁽¹⁾Includes loans held for sale.

Net interest margin was 3.13% for the fourth quarter of 2020, unchanged from the prior quarter, as a 14 basis point decline in the yield on earning assets was offset by a 23 basis point decline in the cost of interest-bearing deposits. For the full year, net interest margin was 3.19% for 2020 compared with 3.37% for 2019.

The yield on average earning assets was 3.63% for the fourth quarter of 2020 compared with 3.77% for the third quarter of 2020. The 14 basis point decline was primarily due to a reduction in yields on securities and loans receivable. Full year yields decreased 78 basis points to 3.95% for 2020 from 4.73% for 2019.

The cost of interest-bearing liabilities was 0.83% for the fourth quarter of 2020 compared with 1.05% for the third quarter of 2020. The 23 basis point decline in the cost of interest-bearing deposits drove the lower cost of interest-bearing liabilities. For 2020, the cost of interest-bearing liabilities was 1.20% compared with 1.99% for the full year 2019, reflecting the current lower interest rate environment.


	For the Three Months Ended (in thousands)															Percentage Change
	Dec 31,			Sep 30,			Jun 30			Mar 31,			Dec 31,			Q4-20		Q4-20
Average Earning Assets and Interest-bearing Liabilities		2020			2020			2020			2020			2019		vs. Q3-20		vs. Q4-19
Loans receivable ⁽¹⁾	$	4,803,238		$	4,734,511		$	4,680,048		$	4,518,395		$	4,487,998		1.5	%	7.0	%
Securities		743,636			696,285			589,932			623,711			624,861		6.8	%	19.0	%
FHLB stock		16,385			16,385			16,385			16,385			16,385		0.0	%	0.0	%
Interest-bearing deposits in other banks		392,949			340,486			386,956			104,513			114,462		15.4	%	243.3	%
Average interest-earning assets	$	5,956,208		$	5,787,667		$	5,673,321		$	5,263,004		$	5,243,706		2.9	%	13.6	%

Demand: interest-bearing	$	101,758		$	99,161		$	92,676		$	82,934		$	82,604		2.6	%	23.2	%
Money market and savings		1,895,830			1,771,615			1,677,081			1,687,013			1,640,162		7.0	%	15.6	%
Time deposits		1,315,227			1,357,167			1,458,351			1,522,745			1,605,276		-3.1	%	-18.1	%
Average interest-bearing deposits		3,312,815			3,227,943			3,228,108			3,292,692			3,328,042		2.6	%	-0.5	%
Borrowings		150,000			163,364			342,437			130,659			75,500		-8.2	%	98.7	%
Subordinated debentures		118,888			118,733			118,583			118,444			118,297		0.1	%	0.5	%
Average interest-bearing liabilities	$	3,581,703		$	3,510,040		$	3,689,128		$	3,541,795		$	3,521,839		2.0	%	1.7	%

Average Noninterest Bearing Deposits
Demand deposits - noninterest bearing	$	1,935,564		$	1,859,832		$	1,589,668		$	1,333,697		$	1,342,524		4.1	%	44.2	%

⁽¹⁾Includes loans held for sale.

	For the Three Months Ended															Amount Change
	Dec 31,			Sep 30,			Jun 30,			Mar 31,			Dec 31,			Q4-20		Q4-20
Average Yields and Rates		2020			2020			2020			2020			2019		vs. Q3-20		vs. Q4-19
Loans receivable⁽¹⁾		4.34	%		4.42	%		4.49	%		4.86	%		4.97	%	-0.08		-0.63
Securities ⁽²⁾		0.91	%		1.13	%		2.19	%		2.34	%		2.35	%	-0.22		-1.44
FHLB stock		5.00	%		4.95	%		5.00	%		7.10	%		7.00	%	0.05		-2.00
Interest-bearing deposits in other banks		0.10	%		0.10	%		0.08	%		1.28	%		1.66	%	0.00		-1.56
Interest-earning assets		3.63	%		3.77	%		3.95	%		4.50	%		4.59	%	-0.14		-0.96

Interest-bearing deposits		0.64	%		0.87	%		1.11	%		1.56	%		1.75	%	-0.23		-1.11
Borrowings		1.40	%		1.42	%		0.89	%		1.53	%		1.71	%	-0.02		-0.31
Subordinated debentures		5.46	%		5.48	%		5.55	%		5.78	%		5.88	%	-0.02		-0.42
Interest-bearing liabilities		0.83	%		1.05	%		1.23	%		1.70	%		1.89	%	-0.22		-1.06

Net interest margin (taxable equivalent basis)		3.13	%		3.13	%		3.15	%		3.36	%		3.32	%	0.00		-0.19

Cost of deposits		0.40	%		0.55	%		0.74	%		1.11	%		1.25	%	-0.15		-0.85

⁽¹⁾Includes loans held for sale.
⁽²⁾Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.

For the fourth quarter of 2020, credit loss expense was $5.1 million, comprised of a $5.7 million provision for loan losses, a $2.9 million negative provision for off-balance sheet items and a $2.3 million provision for losses on accrued interest receivable for modified loans. Credit loss expense for the third quarter of 2020 was $0.04 million, comprised of a provision for loan losses of $0.70 million and a negative provision for off-balance sheet items of $0.66 million. At December 31, 2020, accrued interest receivable on current and former modified loans was $9.2 million and the related allowance for possible losses was $1.7 million.

Credit loss expense for the full year 2020 was $45.5 million compared with $30.2 million for 2019. Credit loss expense for 2020 reflected the new accounting standard for determining the allowance for credit losses and included a $42.5 million provision for loan losses which primarily reflected the change to life of loan current expected credit losses and the impact of the pandemic, a $0.7 million provision for off-balance sheet items and a $2.3 million provision for losses on accrued interest receivable for loans currently or previously modified under the CARES Act. A year ago, under the former accounting standard for determining the allowance for loan losses, the provision for loan losses was $30.2 million, which primarily reflected specific allowance allocations related to a troubled loan relationship. The 2019 provision for off-balance sheet items, included in other operating expenses, was $1.0 million.

Fourth quarter noninterest income increased to $8.8 million from $7.1 million for the third quarter, primarily due to a $1.0 million litigation settlement from a failed acquisition and $1.0 million from the disposition of a previously acquired loan. This increase was partially offset by a $0.6 million decrease in gain on sale of SBA loans. Gains on sales of SBA loans were $1.8 million for the fourth quarter of 2020, down from $2.3 million for the preceding quarter reflecting lower sale volumes. The volume of SBA loans sold for the 2020 fourth quarter and third quarter were $21.6 million and $29.3 million, respectively while trade premiums were 10.09% and 9.53%, respectively.

Noninterest income was $43.1 million for the full year 2020 compared with $27.6 million for 2019 primarily due to $15.7 million in gains on sales of securities realized in the second quarter of 2020 as a result of repositioning the securities portfolio to capture the high-level of unrealized gains arising from the very low rate environment.


	For the Three Months Ended (in thousands)										Percentage Change
	Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,		Q4-20			Q4-20
Noninterest Income		2020		2020		2020		2020		2019	vs. Q3-20			vs. Q4-19
Service charges on deposit accounts	$	2,051	$	2,002	$	2,032	$	2,400	$	2,589		2.4	%		-20.8	%
Trade finance and other service charges and fees		1,113		972		961		986		1,267		14.5	%		-12.1	%
Servicing income		361		704		855		561		227		-48.7	%		59.0	%
Bank-owned life insurance income		271		289		276		277		281		-6.1	%		-3.6	%
All other operating income		1,879		806		1,095		845		846		133.2	%		122.1	%
Service charges, fees & other		5,675		4,773		5,219		5,069		5,210		18.9	%		8.9	%

Gain on sale of SBA loans		1,769		2,324		-		1,154		1,499		-23.9	%		18.0	%
Net gain on sales of securities		-		-		15,712		-		-		0.0	%		0.0	%
Gain on sale of bank premises		365		43		-		-		-		748.8	%		0.0	%
Legal settlement		1,000		-		-		-		-		0.0	%		0.0	%
Total noninterest income	$	8,809	$	7,140	$	20,931	$	6,223	$	6,709		23.4	%		31.3	%

During the fourth quarter of 2020, noninterest expense increased 3.3% to $30.9 million from $29.9 million for the third quarter primarily due to the $0.5 million change in other real estate owned and repossessed personal property due to a $0.2 million net charge in the quarter compared with a $0.3 million net credit in the previous quarter. Primarily as a result of the increase in revenues (noninterest income and net interest income), partially offset by higher noninterest expense, the efficiency ratio improved to 55.53% in the fourth quarter from 56.73% in the prior quarter.

Noninterest expense for the year ended December 31, 2020 was $119.1 million, reflecting a decrease of $6.9 million from the year ended December 31, 2019 stemming primarily from the capitalization of $3.1 million in costs for PPP originations, a $1.6 million decrease in repossessed personal property expense and a $1.5 million decrease in impairments on bank premises. The efficiency ratio for full year 2020 was 53.15% (58.63% excluding securities gains and deferred PPP loan origination costs) compared to 61.89% for the prior year.


	For the Three Months Ended (in thousands)													Percentage Change
	Dec 31,			Sep 30,			Jun 30,			Mar 31,		Dec 31,		Q4-20			Q4-20
		2020			2020			2020			2020		2019	vs. Q3-20			vs. Q4-19
Noninterest Expense
Salaries and employee benefits	$	17,344		$	17,194		$	14,701		$	17,749	$	17,752		0.9	%		-2.3	%
Occupancy and equipment		4,651			4,650			4,508			4,475		4,547		0.0	%		2.3	%
Data processing		2,989			2,761			2,804			2,669		2,122		8.2	%		40.8	%
Professional fees		1,846			1,794			1,545			1,915		2,601		2.9	%		-29.0	%
Supplies and communication		759			698			858			781		717		8.8	%		5.9	%
Advertising and promotion		888			594			456			734		1,165		49.5	%		-23.8	%
All other operating expenses		2,006			2,553			2,655			2,722		3,379		-21.4	%		-40.6	%
subtotal		30,483			30,244			27,527			31,045		32,283		0.8	%		-5.6	%

Other real estate owned expense (income)		310			(116	)		(191	)		2		40		-367.2	%		675.0	%
Repossessed personal property expense (income)		(71	)		(204	)		(198	)		21		32		-65.2	%		-321.9	%
Impairment loss on bank premises		201			-			-			-		1,734		0.0	%		-88.4	%
Total noninterest expense	$	30,923		$	29,924		$	27,138		$	31,068	$	34,089		3.3	%		-9.3	%

For the full years ended December 31, 2020 and 2019, the provision for income taxes was $17.3 million and $14.6 million, respectively, representing effective tax rates of 29.1% and 30.8%, respectively.

Financial Position
Total assets were $6.20 billion at December 31, 2020, a 1.6% increase from $6.11 billion at September 30, 2020.

Loans receivable, before the allowance for credit losses, were $4.88 billion at December 31, 2020, up 1.0% from $4.83 billion at September 30, 2020. Loans held for sale, representing the guaranteed portion of SBA 7(a) loans were $8.6 million at the end of the fourth quarter, compared with $12.8 million at the end of the third quarter.


	As of (in thousands)										Percentage Change
	Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,		Q4-20			Q4-20
		2020		2020		2020		2020		2019	vs. Q3-20			vs. Q4-19
Loan Portfolio
Commercial real estate loans	$	3,353,818	$	3,264,447	$	3,266,242	$	3,187,189	$	3,226,478		2.7	%		3.9	%
Residential/consumer loans		345,831		370,883		366,190		391,206		415,698		-6.8	%		-16.8	%
Commercial and industrial loans		757,255		765,484		730,399		472,714		484,093		-1.1	%		56.4	%
Leases		423,264		433,323		462,811		492,527		483,879		-2.3	%		-12.5	%
Loans receivable		4,880,168		4,834,137		4,825,642		4,543,636		4,610,148		1.0	%		5.9	%
Loans held for sale		8,568		12,834		17,942		-		6,020		-33.2	%		42.3	%
Total	$	4,888,736	$	4,846,971	$	4,843,584	$	4,543,636	$	4,616,168		0.9	%		5.9	%

For the fourth quarter of 2020, commercial real estate loans as a percentage of loans receivable decreased to 68.7% compared with 70.0% for the same period last year. Commercial and industrial loans, which included $295.7 million of SBA guaranteed PPP loans, reached 15.5% of the portfolio at year-end, up from 10.5% a year ago.

Hanmi generated solid loan production volume during the fourth quarter. New loan production totaled $327.8 million at an average rate of 4.11%, while the average rate of loans paid off during the same period was 4.44%.

	For the Three Months Ended (in thousands)
	Dec 31,			Sep 30,			Jun 30,			Mar 31,			Dec 31,
		2020			2020			2020			2020			2019
New Loan Production
Commercial real estate loans	$	187,050		$	99,618		$	129,432		$	109,433		$	185,070
Commercial and industrial loans		71,412			78,594			61,114			18,237			95,349
SBA loans		27,516			31,335			328,274			23,422			33,649
Leases receivable		39,830			21,271			15,279			56,849			65,525
Residential/consumer loans		2,011			25,766			10			714			1,768
subtotal		327,819			256,584			534,109			208,655			381,361


Payoffs		(160,006	)		(139,797	)		(67,537	)		(122,686	)		(205,012	)
Amortization		(78,632	)		(66,907	)		(90,678	)		(95,414	)		(77,580	)
Loan sales		(21,580	)		(36,068	)		-			(18,352	)		(26,087	)
Net line utilization		(18,815	)		(2,199	)		(92,230	)		(11,242	)		(31,333	)
Charge-offs & OREO		(2,755	)		(3,118	)		(1,658	)		(27,473	)		(1,038	)

Loans receivable-beginning balance		4,834,137			4,825,642			4,543,636			4,610,148			4,569,837
Loans receivable-ending balance	$	4,880,168		$	4,834,137		$	4,825,642		$	4,543,636		$	4,610,148

Deposits totaled $5.28 billion at the end of the fourth quarter, compared with $5.19 billion at the end of the preceding quarter. Growth in money market and savings deposits was partially offset by reductions in time deposits and noninterest-bearing demand deposits. At December 31, 2020, the loan-to-deposit ratio was 92.5% compared with 93.1% at the end of the previous quarter.


	As of (in thousands)										Percentage Change
	Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,		Q4-20			Q4-20
		2020		2020		2020		2020		2019	vs. Q3-20			vs. Q4-19
Deposit Portfolio
Demand: noninterest-bearing	$	1,898,766	$	1,961,006	$	1,865,213	$	1,366,270	$	1,391,624		-3.2	%		36.4	%
Demand: interest-bearing		100,617		100,155		96,941		87,313		84,323		0.5	%		19.3	%
Money market and savings		1,991,926		1,794,627		1,812,612		1,648,022		1,667,096		11.0	%		19.5	%
Time deposits		1,283,699		1,338,504		1,435,015		1,480,463		1,555,919		-4.1	%		-17.5	%
Total deposits	$	5,275,008	$	5,194,292	$	5,209,781	$	4,582,068	$	4,698,962		1.6	%		12.3	%

At December 31, 2020, stockholders’ equity was $577.0 million, compared with $563.2 million at September 30, 2020. Tangible common stockholders’ equity was $565.4 million, or 9.13% of tangible assets, at December 31, 2020 compared with $551.5 million, or 9.05% of tangible assets at the end of the third quarter. The ratio of tangible common equity to tangible assets excluding the $295.7 million of PPP loans was 9.59% at year-end. Tangible book value per share increased 2.6% to $18.41 at December 31, 2020 from $17.95 at the end of the prior quarter.

Hanmi continues to be well capitalized for regulatory purposes, with a preliminary Tier 1 risk-based capital ratio of 12.02% and a Total risk-based capital ratio of 15.29% at December 31, 2020, versus 11.85% and 15.16%, respectively, at the end of the third quarter.

	As of															Amount Change
	Dec 31,			Sep 30,			Jun 30,			Mar 31,			Dec 31,			Q4-20		Q4-20
		2020			2020			2020			2020			2019		vs. Q3-20		vs. Q4-19
Regulatory Capital ratios⁽¹⁾
Hanmi Financial
Total risk-based capital		15.29	%		15.16	%		14.85	%		14.77	%		15.11	%		0.13		0.18
Tier 1 risk-based capital		12.02	%		11.85	%		11.55	%		11.52	%		11.78	%		0.17		0.24
Common equity tier 1 capital		11.60	%		11.43	%		11.12	%		11.09	%		11.36	%		0.17		0.24
Tier 1 leverage capital ratio		9.53	%		9.53	%		9.69	%		9.91	%		10.15	%		0.00		-0.62
Hanmi Bank
Total risk-based capital		14.94	%		14.77	%		14.41	%		14.29	%		14.64	%		0.17		0.30
Tier 1 risk-based capital		13.69	%		13.51	%		13.15	%		13.12	%		13.39	%		0.18		0.30
Common equity tier 1 capital		13.69	%		13.51	%		13.15	%		13.12	%		13.39	%		0.18		0.30
Tier 1 leverage capital ratio		10.87	%		10.88	%		11.04	%		11.35	%		11.56	%		-0.01		-0.69

⁽¹⁾Preliminary ratios for December 31, 2020

Asset Quality
Loans and leases 30 to 89 days past due and still accruing were 0.19% of loans and leases at the end of the fourth quarter of 2020, compared with 0.20% at the end of the third quarter.

Special mention loans were $77.0 million at the end of the fourth quarter compared with $57.1 million at September 30, 2020. The quarter over quarter change reflects additions of $37.5 million and reductions or downgrades of $17.6 million. The December 31, 2020 balance of special mention loans included $49.1 million of loans adversely affected by the pandemic.

Classified loans were $140.2 million at December 31, 2020 compared with $106.2 million at the end of the third quarter. The quarter-over-quarter change reflects additions or downgrades of $45.4 million and reductions of $11.4 million. At December 31, 2020 classified loans included $54.0 million of loans adversely affected by the COVID-19 pandemic.

Nonperforming loans and leases were $83.0 million at the end of the fourth quarter of 2020, or 1.70% of loans and leases, compared with $64.3 million at the end of the third quarter, or 1.33% of the portfolio. The quarter-over-quarter change reflects additions or downgrades of $22.3 million and payoffs of $3.6 million. At December 31, 2020 nonperforming loans and leases included $33.0 million of loans and leases adversely affected by the COVID-19 pandemic.

Nonperforming assets were $85.4 million at the end of the fourth quarter of 2020, or 1.38% of total assets, compared with $65.4 million, or 1.07% of assets, at the end of the prior quarter.

Loans and leases modified under the CARES Act declined 73% to $155.6 million at December 31, 2020 from $578.6 million at September 30, 2020. Approximately 13.6%, or $21.1 million, of modified loans and leases are currently under deferred payment arrangements, with the remainder making payments that are less than the contractually required amount. Of the modified loan and lease portfolio, 20.1% were special mention and 15.7% were classified. In addition, 4.6% were on nonaccrual status at December 31, 2020.

Gross charge-offs for the fourth quarter of 2020 were $2.8 million compared with $2.2 million for the preceding quarter. Recoveries of previously charged-off loans for the fourth quarter of 2020 were $0.8 million compared with $1.7 million for the preceding quarter. As a result, there were net charge-offs of $1.9 million for the fourth quarter of 2020, compared with net charge-offs of $0.4 million for the preceding quarter. For the fourth quarter of 2020, net charge-offs represented an annualized 0.16% of average loans compared with 0.03% of average loans for the third quarter.

The allowance for credit losses was $90.4 million as of December 31, 2020 generating an allowance for credit losses to loans of 1.85% (1.97% excluding the PPP loans) compared with 1.79% (1.91% excluding the PPP loans) at the end of the prior quarter. The increase primarily reflected an increase in specific allowances for individually impaired loans resulting from the COVID-19 pandemic. Although macroeconomic assumptions continue to improve, the risk factors associated with the impact of the COVID-19 pandemic on the Bank’s loan portfolio continue to be considered in establishing the allowance for credit losses.


	As of or for the Three Months Ended (in thousands)															Amount Change
	Dec 31,			Sep 30,			Jun 30,			Mar 31,			Dec 31,			Q4-20		Q4-20
		2020			2020			2020			2020			2019		vs. Q3-20		vs. Q4-19
Asset Quality Data and Ratios

Delinquent loans:
Loans, 30 to 89 days past due and still accruing	$	9,473		$	9,428		$	9,984		$	10,001		$	10,251		$	45	$	(778	)
Delinquent loans to total loans		0.19	%		0.20	%		0.21	%		0.22	%		0.22	%		-0.01		-0.03

Criticized loans:
Special mention	$	76,978		$	57,105		$	21,134		$	20,945		$	26,632		$	19,873	$	50,346
Classified		140,168			106,211			93,922			88,225			94,025			33,957		46,143
Total criticized loans	$	217,146		$	163,316		$	115,056		$	109,170		$	120,657		$	53,830	$	96,489

Nonperforming assets:
Nonaccrual loans	$	83,032		$	64,333		$	58,264		$	46,383		$	63,761		$	18,699	$	19,271
Loans 90 days or more past due and still accruing		-			-			-			5,843			-			-		-
Nonperforming loans		83,032			64,333			58,264			52,226			63,761			18,699		19,271
Other real estate owned, net		2,360			1,052			148			63			63			1,308		2,297
Nonperforming assets	$	85,392		$	65,385		$	58,412		$	52,289		$	63,824		$	20,007	$	21,568

Nonperforming loans to total loans		1.70	%		1.33	%		1.21	%		1.15	%		1.38	%
Nonperforming assets to assets		1.38	%		1.07	%		0.94	%		0.93	%		1.15	%

Allowance for credit losses:
Balance at beginning of period	$	86,620		$	86,330		$	66,500		$	61,408		$	50,712
Impact of CECL adoption		-			-			-			17,433			-
Credit loss expense on loans		5,731			696			21,131			14,916			10,751
Net loan (charge-offs) recoveries		(1,925	)		(406	)		(1,301	)		(27,257	)		(55	)
Balance at end of period	$	90,426		$	86,620		$	86,330		$	66,500		$	61,408

Net loan charge-offs to average loans ⁽¹⁾		0.16	%		0.03	%		0.11	%		2.41	%		0.00	%
Allowance for credit losses to loans		1.85	%		1.79	%		1.79	%		1.46	%		1.33	%

Allowance for credit losses related to off-balance sheet items:
Balance at beginning of period	$	5,689		$	6,347		$	2,885		$	2,397		$	1,542
Impact of CECL adoption		-			-			-			(335	)		-
Credit loss expense on off-balance sheet items		(2,898	)		(658	)		3,462			823			855
Balance at end of period	$	2,791		$	5,689		$	6,347		$	2,885		$	2,397

Allowance for Losses on Accrued Interest Receivable:
Balance at beginning of period	$	-		$	-		$	-		$	-		$	-
Interest reversal for loans placed on nonaccrual		(584	)		-			-			-			-
Credit loss expense on interest accrued on CARES Act modifications		2,250			-			-			-			-
Balance at end of period	$	1,666		$	-		$	-		$	-		$	-

Commitments to extend credit	$	453,899		$	444,782		$	486,852		$	375,233		$	371,287

⁽¹⁾Annualized

Corporate Developments
On November 5, 2020 Hanmi’s Board of Directors declared a cash dividend on its common stock for the 2020 fourth quarter of $0.08 per share. The dividend was paid on November 30, 2020 to stockholders of record as of the close of business on November 16, 2020.

Conference Call
Management will host a conference call today, January 26, 2021 at 2:00 p.m. PT (5:00 p.m. ET) to discuss these results. This call will also be broadcast live via the internet. Investment professionals and all current and prospective stockholders are invited to access the live call by dialing 1-877- 407-9039 before 2:00 p.m. PT, using access code HANMI. To listen to the call online, either live or archived, visit the Investor Relations page of Hanmi’s website at www.hanmi.com.

About Hanmi Financial Corporation
Headquartered in Los Angeles, California, Hanmi Financial Corporation owns Hanmi Bank, which serves multi-ethnic communities through its network of 35 full-service branches and 9 loan production offices in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Washington and Georgia. Hanmi Bank specializes in real estate, commercial, SBA and trade finance lending to small and middle market businesses. Additional information is available at www.hanmi.com.

Forward-Looking Statements
This press release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital and strategic plans, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that our forward-looking statements to be reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statements. These factors include the following:

a failure to maintain adequate levels of capital and liquidity to support our operations;
the effect of potential future supervisory action against us or Hanmi Bank;
our ability to remediate any material weakness in our internal controls over financial reporting;
general economic and business conditions internationally, nationally and in those areas in which we operate;
volatility and deterioration in the credit and equity markets;
changes in consumer spending, borrowing and savings habits;
availability of capital from private and government sources;
demographic changes;
competition for loans and deposits and failure to attract or retain loans and deposits;
fluctuations in interest rates and a decline in the level of our interest rate spread;
risks of natural disasters;
a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;
the failure to maintain current technologies;
our inability to successfully implement future information technology enhancements;
difficult business and economic conditions that can adversely affect our industry and business, including competition and lack of soundness of other financial institutions, fraudulent activity and negative publicity;
risks associated with Small Business Administration loans;
failure to attract or retain key employees;
our ability to access cost-effective funding;
fluctuations in real estate values;
changes in accounting policies and practices;
the imposition of tariffs or other domestic or international governmental policies impacting the value of the products of our borrowers;
changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums;
the ability of Hanmi Bank to make distributions to Hanmi Financial Corporation, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial tests;
the adequacy of our allowance for credit losses;
our credit quality and the effect of credit quality on our provision for loan losses and allowance for credit losses;
changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements;
our ability to control expenses;
changes in securities markets; and
risks as it relates to cyber security against our information technology and those of our third-party providers and vendors.

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and whether the gradual reopening of businesses will result in a meaningful increase in economic activity. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

demand for our products and services may decline;
if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase;
collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;
our allowance for credit losses may have to be increased if borrowers experience financial difficulties;
a worsening of business and economic conditions or in the financial markets could result in an impairment of certain intangible assets, such as goodwill or our servicing assets;
the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;
as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may continue to decline to a greater extent than the decline in our cost of interest-bearing liabilities;
a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;
litigation, regulatory enforcement risk and reputation risk regarding our participation in the Paycheck Protection Program and the risk that the Small Business Administration may not fund some or all PPP loan guaranties;
our cyber security risks are increased as the result of an increase in the number of employees working remotely;
FDIC premiums may increase if the agency experiences additional resolution costs; and
the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable replacements.

In addition, we set forth certain risks in our reports filed with the U.S. Securities and Exchange Commission, including, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K that we will file hereafter, which could cause actual results to differ from those projected. We undertake no obligation to update such forward-looking statements except as required by law.

Investor Contacts:
Romolo (Ron) Santarosa
Senior Executive Vice President & Chief Financial Officer
213-427-5636

Lasse Glassen
Investor Relations / Addo Investor Relations
310-829-5400


Hanmi Financial Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) (In thousands)

	December 31,			September 30,			Percentage		December 31,			Percentage
		2020			2020		Change			2019		Change
Assets
Cash and due from banks	$	391,849		$	359,755		8.9	%	$	121,678		222.0	%
Securities available for sale, at fair value		753,781			723,601		4.2	%		634,477		18.8	%
Loans held for sale, at the lower of cost or fair value		8,568			12,834		-33.2	%		6,020		42.3	%
Loans receivable, net of allowance for credit losses		4,789,742			4,747,517		0.9	%		4,548,739		5.3	%
Accrued interest receivable		16,363			21,417		-23.6	%		11,742		39.4	%
Premises and equipment, net		26,431			27,956		-5.5	%		26,070		1.4	%
Customers' liability on acceptances		1,319			208		535.2	%		66		1899.2	%
Servicing assets		6,212			6,348		-2.1	%		6,956		-10.7	%
Goodwill and other intangible assets, net		11,612			11,677		-0.6	%		11,873		-2.2	%
Federal Home Loan Bank ("FHLB") stock, at cost		16,385			16,385		0.0	%		16,385		0.0	%
Bank-owned life insurance		53,894			53,623		0.5	%		52,782		2.1	%
Prepaid expenses and other assets		125,732			125,461		0.2	%		101,396		24.0	%
Total assets	$	6,201,888		$	6,106,782		1.6	%	$	5,538,184		12.0	%

Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing	$	1,898,766		$	1,961,006		-3.2	%	$	1,391,624		36.4	%
Interest-bearing		3,376,242			3,233,286		4.4	%		3,307,338		2.1	%
Total deposits		5,275,008			5,194,292		1.6	%		4,698,962		12.3	%
Accrued interest payable		4,564			5,427		-15.9	%		11,215		-59.3	%
Bank's liability on acceptances		1,319			208		535.2	%		66		1899.2	%
Borrowings		150,000			150,000		0.0	%		90,000		66.7	%
Subordinated debentures		118,972			118,821		0.1	%		118,377		0.5	%
Accrued expenses and other liabilities		74,981			74,831		0.2	%		56,297		33.2	%
Total liabilities		5,624,844			5,543,579		1.5	%		4,974,917		13.1	%

Stockholders' equity:
Common stock		33			33		0.0	%		33		0.0	%
Additional paid-in capital		578,360			577,727		0.1	%		575,816		0.4	%
Accumulated other comprehensive income		3,076			1,721		78.7	%		3,382		-9.0	%
Retained earnings		114,621			102,751		11.6	%		100,551		14.0	%
Less treasury stock		(119,046	)		(119,029	)	0.0	%		(116,515	)	-2.2	%
Total stockholders' equity		577,044			563,203		2.5	%		563,267		2.4	%
Total liabilities and stockholders' equity	$	6,201,888		$	6,106,782		1.6	%	$	5,538,184		12.0	%

Hanmi Financial Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) (In thousands, except share and per share data)

	Three Months Ended
	December 31,		September 30,		Percentage		December 31,		Percentage
		2020		2020	Change			2019	Change
Interest and dividend income:
Interest and fees on loans receivable	$	52,372	$	52,586	-0.4	%	$	56,267	-6.9	%
Interest on securities		1,684		1,972	-14.6	%		3,665	-54.0	%
Dividends on FHLB stock		206		204	1.1	%		289	-28.7	%
Interest on deposits in other banks		97		84	16.4	%		478	-79.6	%
Total interest and dividend income		54,359		54,846	-0.9	%		60,699	-10.4	%
Interest expense:
Interest on deposits		5,331		7,032	-24.2	%		14,699	-63.7	%
Interest on borrowings		528		582	-9.4	%		325	62.3	%
Interest on subordinated debentures		1,623		1,627	-0.2	%		1,739	-6.7	%
Total interest expense		7,482		9,241	-19.0	%		16,763	-55.4	%
Net interest income before credit loss expense		46,877		45,605	2.8	%		43,936	6.7	%
Credit loss expense		5,083		38	0.0	%		10,752	-52.7	%
Net interest income after credit loss expense		41,794		45,567	-8.3	%		33,184	25.9	%
Noninterest income:
Service charges on deposit accounts		2,051		2,002	2.4	%		2,589	-20.8	%
Trade finance and other service charges and fees		1,113		972	14.5	%		1,267	-12.1	%
Gain on sale of Small Business Administration ("SBA") loans		1,769		2,324	-23.9	%		1,499	18.0	%
Net gain on sales of securities		-		-	-			-	-
Other operating income		3,876		1,842	110.4	%		1,354	186.3	%
Total noninterest income		8,809		7,140	23.4	%		6,709	31.3	%
Noninterest expense:
Salaries and employee benefits		17,344		17,194	0.9	%		17,752	-2.3	%
Occupancy and equipment		4,651		4,650	0.0	%		4,547	2.3	%
Data processing		2,989		2,761	8.2	%		2,122	40.8	%
Professional fees		1,846		1,794	2.9	%		2,601	-29.0	%
Supplies and communications		759		698	8.8	%		717	5.9	%
Advertising and promotion		888		594	49.4	%		1,165	-23.8	%
Other operating expenses		2,446		2,233	9.5	%		5,185	-52.8	%
Total noninterest expense		30,923		29,924	3.3	%		34,089	-9.3	%
Income before tax		19,680		22,783	-13.6	%		5,804	239.1	%
Income tax expense		5,354		6,439	-16.9	%		2,720	96.8	%
Net income	$	14,326	$	16,344	-12.3	%	$	3,084	364.5	%

Basic earnings per share:	$	0.47	$	0.53			$	0.10
Diluted earnings per share:	$	0.47	$	0.53			$	0.10

Weighted-average shares outstanding:
Basic		30,466,723		30,464,263				30,692,487
Diluted		30,466,723		30,464,263				30,723,958
Common shares outstanding		30,717,835		30,719,591				30,799,624



Hanmi Financial Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) (In thousands, except share and per share data)

	Twelve Months Ended
	December 31,		December 31,		Percentage
		2020		2019	Change
Interest and dividend income:
Interest and fees on loans receivable	$	211,836	$	229,402	-7.7	%
Interest on securities		10,536		14,661	-28.1	%
Dividends on FHLB stock		902		1,147	-21.3	%
Interest on deposits in other banks		592		1,562	-62.1	%
Total interest and dividend income		223,866		246,772	-9.3	%
Interest expense:
Interest on deposits		33,994		63,105	-46.1	%
Interest on borrowings		2,367		763	210.2	%
Interest on subordinated debentures		6,607		7,032	-6.0	%
Total interest expense		42,968		70,900	-39.4	%
Net interest income before credit loss expense		180,898		175,872	2.9	%
Credit loss expense		45,454		30,170	50.7	%
Net interest income after credit loss expense		135,444		145,702	-7.0	%
Noninterest income:
Service charges on deposit accounts		8,485		9,951	-14.7	%
Trade finance and other service charges and fees		4,033		4,786	-15.7	%
Gain on sale of Small Business Administration ("SBA") loans		5,247		5,251	-0.1	%
Net gain on sales of securities		15,712		1,295	1113.3	%
Other operating income		9,627		6,269	53.6	%
Total noninterest income		43,104		27,552	56.4	%
Noninterest expense:
Salaries and employee benefits		66,988		67,900	-1.3	%
Occupancy and equipment		18,283		17,064	7.1	%
Data processing		11,222		8,755	28.2	%
Professional fees		6,771		9,060	-25.3	%
Supplies and communications		3,096		2,936	5.4	%
Advertising and promotion		2,671		3,797	-29.7	%
Other operating expenses		10,022		16,394	-38.9	%
Total noninterest expense		119,053		125,906	-5.4	%
Income before tax		59,495		47,348	25.7	%
Income tax expense		17,299		14,560	18.8	%
Net income	$	42,196	$	32,788	28.7	%

Basic earnings per share:	$	1.38	$	1.06
Diluted earnings per share:	$	1.38	$	1.06

Weighted-average shares outstanding:
Basic		30,280,415		30,725,376
Diluted		30,280,415		30,760,422
Common shares outstanding		30,717,835		30,799,624

Hanmi Financial Corporation and Subsidiaries Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited) (In thousands, except ratios)

	Three Months Ended
	December 31, 2020							September 30, 2020							December 31, 2019
				Interest		Average					Interest		Average					Interest		Average
	Average			Income /		Yield /		Average			Income /		Yield /		Average			Income /		Yield /
	Balance			Expense		Rate		Balance			Expense		Rate		Balance			Expense		Rate
Assets
Interest-earning assets:
Loans receivable ⁽¹⁾	$	4,803,238		$	52,372	4.34	%	$	4,734,511		$	52,586	4.42	%	$	4,487,998		$	56,267	4.97	%
Securities		743,636			1,684	0.91	%		696,285			1,972	1.13	%		624,861			3,665	2.35	%
FHLB stock		16,385			206	5.00	%		16,385			204	4.95	%		16,385			289	7.00	%
Interest-bearing deposits in other banks		392,949			97	0.10	%		340,486			84	0.10	%		114,462			478	1.66	%
Total interest-earning assets		5,956,208			54,359	3.63	%		5,787,667			54,846	3.77	%		5,243,706			60,699	4.59	%

Noninterest-earning assets:
Cash and due from banks		58,541							64,814							104,591
Allowance for credit losses		(86,160	)						(86,615	)						(50,978	)
Other assets		241,405							245,589							210,004

Total assets	$	6,169,994						$	6,011,455						$	5,507,323

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Demand: interest-bearing	$	101,758		$	14	0.05	%	$	99,161		$	17	0.07	%	$	82,604		$	24	0.11	%
Money market and savings		1,895,830			1,737	0.36	%		1,771,615			2,192	0.49	%		1,640,162			5,616	1.36	%
Time deposits		1,315,227			3,581	1.08	%		1,357,167			4,823	1.41	%		1,605,276			9,059	2.24	%
Total interest-bearing deposits		3,312,815			5,332	0.64	%		3,227,943			7,032	0.87	%		3,328,042			14,699	1.75	%
Borrowings		150,000			529	1.40	%		163,364			582	1.42	%		75,500			325	1.71	%
Subordinated debentures		118,888			1,623	5.46	%		118,733			1,627	5.48	%		118,297			1,739	5.88	%
Total interest-bearing liabilities		3,581,703			7,484	0.83	%		3,510,040			9,241	1.05	%		3,521,839			16,763	1.89	%

Noninterest-bearing liabilities and equity:
Demand deposits: noninterest-bearing		1,935,564							1,859,832							1,342,524
Other liabilities		83,414							87,811							74,862
Stockholders' equity		569,313							553,772							568,098

Total liabilities and stockholders' equity	$	6,169,994						$	6,011,455						$	5,507,323

Net interest income (tax equivalent basis)				$	46,875						$	45,605						$	43,936

Cost of deposits						0.40	%						0.55	%						1.25	%
Net interest spread (taxable equivalent basis)						2.80	%						2.72	%						2.70	%
Net interest margin (taxable equivalent basis)						3.13	%						3.13	%						3.32	%



⁽¹⁾ Includes average loans held for sale



Hanmi Financial Corporation and Subsidiaries Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited) (In thousands, except ratios)

	Twelve Months Ended
	December 31, 2020							December 31, 2019
				Interest		Average					Interest		Average
	Average			Income /		Yield /		Average			Income /		Yield /
	Balance			Expense		Rate		Balance			Expense		Rate
Assets
Interest-earning assets:
Loans receivable ⁽¹⁾	$	4,684,512		$	211,836	4.52	%	$	4,507,975		$	229,402	5.09	%
Securities ⁽²⁾		663,700			10,537	1.59	%		618,610			14,806	2.39	%
FHLB stock		16,385			902	5.51	%		16,385			1,147	7.00	%
Interest-bearing deposits in other banks		306,668			592	0.19	%		73,906			1,562	2.11	%
Total interest-earning assets		5,671,265			223,867	3.95	%		5,216,876			246,917	4.73	%

Noninterest-earning assets:
Cash and due from banks		72,557							103,475
Allowance for credit losses		(75,250	)						(41,933	)
Other assets		228,131							197,517

Total assets	$	5,896,703						$	5,475,935

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Demand: interest-bearing	$	94,167		$	70	0.07	%	$	83,613		$	116	0.14	%
Money market and savings		1,758,300			11,016	0.63	%		1,566,403			23,556	1.50	%
Time deposits		1,412,951			22,908	1.62	%		1,752,642			39,433	2.25	%
Total interest-bearing deposits		3,265,418			33,994	1.04	%		3,402,658			63,105	1.85	%
Borrowings		196,397			2,367	1.21	%		40,374			763	1.89	%
Subordinated debentures		118,663			6,607	5.57	%		118,079			7,032	5.96	%
Total interest-bearing liabilities		3,580,478			42,968	1.20	%		3,561,111			70,900	1.99	%

Noninterest-bearing liabilities and equity:
Demand deposits: noninterest-bearing		1,680,882							1,288,301
Other liabilities		77,478							61,209
Stockholders' equity		557,865							565,314

Total liabilities and stockholders' equity	$	5,896,703						$	5,475,935

Net interest income (tax equivalent basis)				$	180,899						$	176,017

Cost of deposits						0.69	%						1.35	%
Net interest spread (taxable equivalent basis)						2.75	%						2.74	%
Net interest margin (taxable equivalent basis)						3.19	%						3.37	%


⁽¹⁾ Includes average loans held for sale
⁽²⁾ Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.

Non-GAAP Financial Measures

Tangible Common Equity to Tangible Assets Ratio

Tangible common equity to tangible assets ratio is supplemental financial information determined by a method other than in accordance with U.S. generally accepted accounting principles (“GAAP”). This non-GAAP measure is used by management in the analysis of Hanmi’s capital strength. Tangible common equity is calculated by subtracting goodwill and other intangible assets from stockholders’ equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from stockholders’ equity when assessing the capital adequacy of a financial institution. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the capital strength of Hanmi. This disclosure should not be viewed as a substitution for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following table reconciles this non-GAAP performance measure to the GAAP performance measure for the periods indicated:

Tangible Common Equity to Tangible Assets Ratio (Unaudited) (In thousands, except share, per share data and ratios)


Hanmi Financial Corporation	December 31,			September 30,			June 30,			March 31,			December 31,
		2020			2020			2020			2020			2019
Assets	$	6,201,888		$	6,106,782		$	6,218,163		$	5,617,690		$	5,538,184
Less goodwill and other intangible assets		(11,612	)		(11,677	)		(11,742	)		(11,808	)		(11,873	)
Tangible assets	$	6,190,276		$	6,095,105		$	6,206,421		$	5,605,882		$	5,526,311

Stockholders' equity (1)	$	577,044		$	563,203		$	547,436		$	552,958		$	563,267
Less goodwill and other intangible assets		(11,612	)		(11,677	)		(11,742	)		(11,808	)		(11,873	)
Tangible stockholders' equity (1)	$	565,432		$	551,526		$	535,694		$	541,150		$	551,394

Stockholders' equity to assets		9.30	%		9.22	%		8.80	%		9.84	%		10.17	%
Tangible common equity to tangible assets (1)		9.13	%		9.05	%		8.63	%		9.65	%		9.98	%

Common shares outstanding		30,717,835			30,719,591			30,657,629			30,622,741			30,799,624
Tangible common equity per common share	$	18.41		$	17.95		$	17.47		$	17.67		$	17.90


⁽¹⁾There were no preferred shares outstanding at the periods indicated.

Paycheck Protection Program

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was adopted, which included authorization for the U.S. Small Business Administration (the “SBA”) to introduce a new program, entitled the “Paycheck Protection Program,” which provides loans for eligible businesses through the SBA’s 7(a) loan guaranty program. These loans are fully guaranteed and available for loan forgiveness of up to the full principal amount so long as certain employee and compensation levels of the business are maintained and the proceeds of the loan are used as required under the program. The Paycheck Protection Program (“PPP”) and loan forgiveness are intended to provide economic relief to small businesses nationwide adversely impacted under the COVID-19 pandemic.

Hanmi participated in this program and the financial information for the 2020 fourth quarter reflects this participation. This table below shows financial information excluding the effect of the origination of the PPP loans, including the corresponding interest income earned on such loans, which constitutes a non-GAAP measure. Management believes the presentation of certain financial measures excluding the effect of PPP loans provides useful supplemental information that is essential to a proper understanding of the financial condition and results of operations of Hanmi. This disclosure should not be viewed as a substitution for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP financial measures that may be used by other companies.

PPP Non-GAAP Financial Data (Unaudited) (In thousands, except ratios)


	As of December 31, 2020			As of September 30, 2020

Tangible assets		6,190,276			6,095,105
Less PPP loans		(295,702	)		(302,929	)
Tangible assets adjusted for PPP loans	$	5,894,574		$	5,792,176

Tangible stockholders' equity		565,432			551,526

Tangible common equity to tangible assets (1)		9.13	%		9.05	%
Tangible common equity to tangible assets adjusted for PPP loans (1)		9.59	%		9.52	%

(1) There were no preferred shares outstanding at December 31, or September 30, 2020

Allowance for credit losses		90,426			86,620

Loans receivable		4,880,168			4,834,137
Less PPP loans		(295,702	)		(302,929	)
Loans receivable adjusted for PPP loans	$	4,584,466		$	4,531,208

Allowance for credit losses to loans receivable		1.85	%		1.79	%
Allowance for credit losses to loans receivable adjusted for PPP loans		1.97	%		1.91	%

	For the Twelve Months Ended December 31, 2020			For the Three Months Ended December 31, 2020
Net interest income	$	180,898		$	46,877
Less PPP loan interest income		(4,593	)		(1,751	)
Net interest income adjusted for PPP loans	$	176,305		$	45,126

Average interest-earning assets		5,671,265			5,956,208
Less average PPP loans		(217,999	)		(304,017	)
Average interest-earning assets adjusted for PPP loans	$	5,453,266		$	5,652,191

Net interest margin (1)		3.19	%		3.13	%
Net interest margin adjusted for PPP loans (1)		3.23	%		3.18	%

(1) net interest income (as applicable) divided by average interest-earning assets (as applicable), annualized

Noninterest expense		119,053			30,923
Less PPP deferred origination costs		3,064			-
Noninterest expense adjusted for PPP loans	$	122,117		$	30,923

Net interest income plus noninterest income	$	224,002		$	55,686
Less net gain on sales of securities		(15,712	)		-
Net interest income plus noninterest income adjusted for net securities gains	$	208,290		$	55,686

Efficiency ratio (1)		53.15	%		55.53	%
Efficiency ratio adjusted for PPP loans and securities gains (1)		58.63	%		55.53	%

(1) noninterest expense (as applicable) divided by the sum of net interest income and noninterest income (as applicable)