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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period From To
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or Other Jurisdiction of |
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(I.R.S. Employer |
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Incorporation or Organization) |
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Identification No.) |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
Securities Registered Pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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☐ |
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☒ |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of August 2, 2022, there were
Hanmi Financial Corporation and Subsidiaries Quarterly Report on Form 10-Q
Three Months Ended June 30, 2022
Table of Contents
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Part I – Financial Information |
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Item 1. |
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3 |
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Consolidated Balance Sheets at June 30, 2022 (unaudited) and December 31, 2021 |
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3 |
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4 |
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5 |
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6 |
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Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited) |
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8 |
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9 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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40 |
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Item 3. |
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59 |
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Item 4. |
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59 |
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Part II – Other Information |
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Item 1. |
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60 |
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Item 1A. |
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60 |
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Item 2. |
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60 |
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Item 3. |
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60 |
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Item 4. |
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60 |
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Item 5. |
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60 |
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Item 6. |
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61 |
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62 |
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2
Part I — Financial Information
Item 1. Financial Statements
Hanmi Financial Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
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June 30, |
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December 31, |
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2022 |
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2021 |
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(Unaudited) |
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Assets |
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Cash and due from banks |
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$ |
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$ |
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Securities available for sale, at fair value (amortized cost of $ |
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Loans held for sale, at the lower of cost or fair value |
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Loans receivable, net of allowance for credit losses of $ |
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Accrued interest receivable |
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Premises and equipment, net |
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Customers' liability on acceptances |
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— |
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Servicing assets |
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Goodwill and other intangible assets, net |
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Federal Home Loan Bank ("FHLB") stock, at cost |
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Income tax assets |
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Bank-owned life insurance |
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Prepaid expenses and other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Liabilities: |
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Deposits: |
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Noninterest-bearing |
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$ |
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$ |
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Interest-bearing |
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Total deposits |
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Accrued interest payable |
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Bank's liability on acceptances |
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— |
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Borrowings |
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Subordinated debentures ($ |
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Accrued expenses and other liabilities |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss), net of tax benefit of $ |
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( |
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Retained earnings |
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Less treasury stock; |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See Accompanying Notes to Consolidated Financial Statements (Unaudited)
3
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(in thousands, except share and per share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Interest and dividend income: |
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Interest and fees on loans receivable |
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$ |
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$ |
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$ |
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$ |
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Interest on securities |
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Dividends on FHLB stock |
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Interest on deposits in other banks |
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Total interest and dividend income |
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Interest expense: |
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Interest on deposits |
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Interest on borrowings |
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Interest on subordinated debentures |
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Total interest expense |
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Net interest income before credit loss expense |
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Credit loss expense (recovery) |
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( |
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( |
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Net interest income after credit loss expense (recovery) |
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Noninterest income: |
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Service charges on deposit accounts |
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Trade finance and other service charges and fees |
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Gain on sale of Small Business Administration ("SBA") loans |
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Net gain on sales of securities |
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— |
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— |
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— |
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Other operating income |
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Total noninterest income |
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Noninterest expense: |
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Salaries and employee benefits |
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Occupancy and equipment |
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Data processing |
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Professional fees |
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Supplies and communications |
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Advertising and promotion |
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Other operating expenses |
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Total noninterest expense |
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Income before tax |
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Income tax expense |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Basic earnings per share |
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$ |
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$ |
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$ |
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$ |
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Diluted earnings per share |
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$ |
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$ |
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$ |
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$ |
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Weighted-average shares outstanding: |
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Basic |
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Diluted |
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See Accompanying Notes to Consolidated Financial Statements (Unaudited)
4
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Unrealized gain on securities: |
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Unrealized holding (loss) gain arising during period |
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( |
) |
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( |
) |
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( |
) |
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Less: reclassification adjustment for net gain included in net income |
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— |
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— |
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— |
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( |
) |
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Income tax benefit (expense) related to items of other comprehensive income |
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( |
) |
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Other comprehensive income (loss), net of tax |
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( |
) |
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( |
) |
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( |
) |
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Comprehensive income (loss) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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|
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
5
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
For the Three Months Ended June 30, 2022 and 2021
(in thousands, except share data)
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Common Stock - Number of Shares |
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Stockholders' Equity |
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Accumulated |
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Additional |
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Other |
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Treasury |
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Total |
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Shares |
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Treasury |
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Shares |
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Common |
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Paid-in |
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Comprehensive |
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Retained |
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Stock, |
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Stockholders' |
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Issued |
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Shares |
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Outstanding |
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Stock |
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Capital |
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Income (Loss) |
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Earnings |
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at Cost |
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Equity |
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|||||||||
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Balance at April 1, 2021 |
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( |
) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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Restricted stock awards, net of forfeitures |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Restricted stock surrendered due to employee tax liability |
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— |
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( |
) |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Cash dividends paid (common stock, $ |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Change in unrealized gain (loss) on securities available for sale, net of income taxes |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|
Balance at June 30, 2021 |
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( |
) |
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$ |
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$ |
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$ |
( |
) |
|
$ |
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$ |
( |
) |
|
$ |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 1, 2022 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Restricted stock awards, net of forfeitures |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Restricted stock surrendered due to employee tax liability |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Cash dividends paid (common stock, $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Change in unrealized gain (loss) on securities available for sale, net of income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Balance at June 30, 2022 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
6
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
For the Six Months Ended June 30, 2022 and 2021
(in thousands, except share data)
|
|
|
Common Stock - Number of Shares |
|
|
Stockholders' Equity |
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
Treasury |
|
|
Total |
|
||||
|
|
|
Shares |
|
|
Treasury |
|
|
Shares |
|
|
Common |
|
|
Paid-in |
|
|
Comprehensive |
|
|
Retained |
|
|
Stock, |
|
|
Stockholders' |
|
|||||||||
|
|
|
Issued |
|
|
Shares |
|
|
Outstanding |
|
|
Stock |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
at Cost |
|
|
Equity |
|
|||||||||
|
Balance at January 1, 2021 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Restricted stock awards, net of forfeitures |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Restricted stock surrendered due to employee tax liability |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Repurchase of common stock |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Cash dividends paid (common stock, $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Change in unrealized gain (loss) on securities available for sale, net of income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Balance at June 30, 2021 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2022 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Restricted stock awards, net of forfeitures |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Restricted stock surrendered due to employee tax liability |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Cash dividends paid (common stock, $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Change in unrealized gain (loss) on securities available for sale, net of income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Balance at June 30, 2022 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
7
Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
Credit loss expense (recovery) |
|
|
|
|
|
|
( |
) |
|
Gain on sales of securities |
|
|
— |
|
|
|
( |
) |
|
Gain on sales of SBA loans |
|
|
( |
) |
|
|
( |
) |
|
Origination of SBA loans held for sale |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from sales of SBA loans |
|
|
|
|
|
|
|
|
|
Change in bank-owned life insurance |
|
|
( |
) |
|
|
( |
) |
|
Change in prepaid expenses and other assets |
|
|
( |
) |
|
|
|
|
|
Change in income tax assets |
|
|
|
|
|
|
|
|
|
Change in accrued expenses and other liabilities |
|
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of securities available for sale |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from matured, called and repayment of securities |
|
|
|
|
|
|
|
|
|
Proceeds from sales of securities available for sale |
|
|
— |
|
|
|
|
|
|
Purchases of loans receivable |
|
|
( |
) |
|
|
( |
) |
|
Purchases of premises and equipment |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from sales of other real estate owned ("OREO") |
|
|
— |
|
|
|
|
|
|
Change in loans receivable, excluding purchases |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by (used in) investing activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Change in deposits |
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
|
|
|
|
|
|
|
|
Repayment of borrowings |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from redeemed subordinated debentures |
|
|
|
|
|
|
— |
|
|
Redemption of subordinated debentures |
|
|
( |
) |
|
|
— |
|
|
Cash paid for surrender of vested shares due to employee tax liability |
|
|
( |
) |
|
|
( |
) |
|
Repurchase of common stock |
|
|
— |
|
|
|
( |
) |
|
Cash dividends paid |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and due from banks |
|
|
( |
) |
|
|
|
|
|
Cash and due from banks at beginning of year |
|
|
|
|
|
|
|
|
|
Cash and due from banks at end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
|
|
|
$ |
|
|
|
Income taxes paid |
|
$ |
|
|
|
$ |
|
|
|
Non-cash activities: |
|
|
|
|
|
|
|
|
|
Income tax benefit related to items of other comprehensive income |
|
$ |
|
|
|
$ |
|
|
|
Change in right-of-use asset obtained in exchange for lease liability |
|
$ |
|
|
|
$ |
— |
|
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
8
Hanmi Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note 1 — Organization and Basis of Presentation
Hanmi Financial Corporation (“Hanmi Financial,” the “Company,” “we,” “us” or “our”) is a bank holding company whose primary subsidiary is Hanmi Bank (the “Bank”). Our primary operations are related to traditional banking activities, including the acceptance of deposits and the lending and investing of money by the Bank.
In management’s opinion, the accompanying unaudited consolidated financial statements of Hanmi Financial and its subsidiaries reflect all adjustments of a normal and recurring nature that are necessary for a fair presentation of the results for the interim periods ended June 30, 2022, but are not necessarily indicative of the results that will be reported for the entire year or any other interim period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. The unaudited consolidated financial statements are prepared in conformity with GAAP and in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. The interim information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report on Form 10-K”).
The preparation of interim unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions affect the amounts reported in the unaudited financial statements and disclosures provided, and actual results could differ.
The extent to which the COVID-19 pandemic may impact business activity or financial results will depend on future developments, including new information which may emerge concerning the severity of the coronavirus and the actions required to contain the coronavirus or treat its impact, among others, which are highly uncertain and cannot be predicted. This uncertainty may impact the accuracy of our significant estimates, which includes the allowance for credit losses, the allowance for credit losses related to off-balance sheet items, and the valuation of intangible assets including deferred tax assets, goodwill, and servicing assets.
Descriptions of our significant accounting policies are included in Note 1 - Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.
9
Note 2 — Securities
The following is a summary of securities available for sale as of the dates indicated:
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|||
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
|
|
|
Cost |
|
|
Gain |
|
|
Loss |
|
|
Value |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
|
U.S. government agency and sponsored agency obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Collateralized mortgage obligations |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
Debt securities |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
Total U.S. government agency and sponsored agency obligations |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Municipal bonds-tax exempt |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
Total securities available for sale |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
U.S. government agency and sponsored agency obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Debt securities |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
Total U.S. government agency and sponsored agency obligations |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Municipal bonds-tax exempt |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total securities available for sale |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The amortized cost and estimated fair value of securities as of June 30, 2022 and December 31, 2021, by contractual or expected maturity, are shown below. Collateralized mortgage obligations are included in the table shown below based on their expected maturities. All other securities are included based on their contractual maturities.
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
|
|
Available for Sale |
|
|
Available for Sale |
|
||||||||||
|
|
|
Amortized |
|
|
Estimated |
|
|
Amortized |
|
|
Estimated |
|
||||
|
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
Within one year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Over one year through five years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over five years through ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
10
The following table summarizes debt securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded at June 30, 2022 and December 31, 2021, aggregated by major security type and length of time in a continuous unrealized loss position:
|
|
|
Holding Period |
|
|||||||||||||||||||||||||||||||||
|
|
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|||||||||||||||||||||||||||
|
|
|
Gross |
|
|
Estimated |
|
|
Number |
|
|
Gross |
|
|
Estimated |
|
|
Number |
|
|
Gross |
|
|
Estimated |
|
|
Number |
|
|||||||||
|
|
|
Unrealized |
|
|
Fair |
|
|
of |
|
|
Unrealized |
|
|
Fair |
|
|
of |
|
|
Unrealized |
|
|
Fair |
|
|
of |
|
|||||||||
|
|
|
Loss |
|
|
Value |
|
|
Securities |
|
|
Loss |
|
|
Value |
|
|
Securities |
|
|
Loss |
|
|
Value |
|
|
Securities |
|
|||||||||
|
|
|
(in thousands, except number of securities) |
|
|||||||||||||||||||||||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
U.S. government agency and sponsored agency obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Debt securities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total U.S. government agency and sponsored agency obligations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Municipal bonds-tax exempt |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
U.S. government agency and sponsored agency obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Debt securities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total U.S. government agency and sponsored agency obligations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Municipal bonds-tax exempt |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
The Company evaluates its available-for-sale securities portfolio for impairment on a quarterly basis. This assessment takes into account the changes in the credit quality of these debt securities since acquisition and the likelihood of a credit loss occurring over the life of the securities. In the event that a credit loss is expected to occur in the future, an allowance is established and a corresponding credit loss is recognized. Based on this analysis, as of June 30, 2022, the Company determined that no credit losses are expected to be realized on the tax-exempt municipal bond portfolio. The remainder of the portfolio consists of U.S. Treasury obligations, U.S. government agency securities, and U.S. government sponsored agency securities, all of which have the backing of the U.S. government, and are therefore not expected to incur credit losses.
Realized gains and losses on sales of securities and proceeds from sales of securities were as follows for the periods indicated:
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
Gross realized gains on sales of securities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Gross realized losses on sales of securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net realized gains on sales of securities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Proceeds from sales of securities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
There were
During the six months ended June 30, 2022, there were
11
Securities available for sale with market values of $
At June 30, 2022, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies in an amount greater than
Note 3 — Loans
Loans Receivable
Loans consisted of the following as of the dates indicated:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
(in thousands) |
|
|||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
|
|
|
$ |
|
|
|
Hospitality |
|
|
|
|
|
|
|
|
|
Other (1) |
|
|
|
|
|
|
|
|
|
Total commercial property loans |
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
Residential (2) |
|
|
|
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
Commercial and industrial loans |
|
|
|
|
|
|
|
|
|
Equipment financing agreements |
|
|
|
|
|
|
|
|
|
Loans receivable |
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
|
Loans receivable, net |
|
$ |
|
|
|
$ |
|
|
|
(1) |
Includes mixed-use, multifamily, office, industrial, gas stations, faith-based facilities, medical and warehouse; all other property types represent less than one percent of total loans receivable. |
|
(2) |
Includes $ |
At June 30, 2022 and December 31, 2021, PPP loans of $
Accrued interest on loans was $
At June 30, 2022 and December 31, 2021, loans of $
12
Loans Held for Sale
The following is the activity for loans held for sale for the three months ended June 30, 2022 and 2021:
|
|
|
Real Estate |
|
|
Commercial and Industrial |
|
|
Total |
|
|||
|
|
|
(in thousands) |
|
|||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Originations and transfers |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Principal paydowns and amortization |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Originations and transfers |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Principal paydowns and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Loans held for sale was comprised of $
The following is the activity for loans held for sale for the six months ended June 30, 2022 and 2021:
|
|
|
Real Estate |
|
|
Commercial and Industrial |
|
|
Total |
|
|||
|
|
|
(in thousands) |
|
|||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Originations and transfers |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Principal payoffs and amortization |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Originations and transfers |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Principal payoffs and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
13
Allowance for Credit Losses
The following table details the information on the allowance for credit losses by portfolio segment as of and for the three months ended June 30, 2022 and 2021:
|
|
|
Real Estate |
|
|
Commercial and Industrial |
|
|
Equipment Financing Agreements |
|
|
Total |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Less loans charged off |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries on loans receivable previously charged off |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Provision (recovery) for credit losses |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Less loans charged off |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries on loans receivable previously charged off |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Provision (recovery) for credit losses |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The following table details the information on the allowance for credit losses by portfolio segment as of and for the six months ended June 30, 2022 and 2021:
|
|
|
Real Estate |
|
|
Commercial and Industrial |
|
|
Equipment Financing Agreements |
|
|
Total |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
Less loans charged off |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries on loans receivable previously charged off |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Provision (recovery) for credit losses |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Less loans charged off |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries on loans receivable previously charged off |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Provision (recovery) for credit losses |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
14
The table below illustrates the allowance for credit losses by loan portfolio segment and each loan portfolio segment as a percentage of total loans.
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||||||||||
|
|
|
Allowance Amount |
|
|
Percentage of Total Allowance |
|
|
Total Loans |
|
|
Percentage of Total Loans |
|
|
Allowance Amount |
|
|
Percentage of Total Allowance |
|
|
Total Loans |
|
|
Percentage of Total Loans |
|
||||||||
|
|
|
(dollars in thousands) |
|
|||||||||||||||||||||||||||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Hospitality |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Other |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Total commercial property loans |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Construction |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Residential |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Total real estate loans |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Commercial and industrial loans |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Equipment financing agreements |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Total |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
The following table represents the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2022 and December 31, 2021, for which repayment is expected to be obtained through the sale of the underlying collateral.
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
Amortized Cost |
|
|
Amortized Cost |
|
||
|
|
|
(in thousands) |
|
|||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
|
|
|
$ |
|
|
|
Hospitality |
|
|
— |
|
|
|
— |
|
|
Other (1) |
|
|
|
|
|
|
|
|
|
Total commercial property loans |
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
(1) |
Includes mixed-use, multifamily, office, industrial, gas stations, faith-based facilities, medical and warehouse; all other property types represent less than one percent of total loans receivable. |
Loan Quality Indicators
As part of the on-going monitoring of the quality of our loans portfolio, we utilize an internal loan grading system to identify credit risk and assign an appropriate grade (from 0 to 8) for each loan in our portfolio. A third-party loan review is performed at least on an annual basis. Additional adjustments are made when determined to be necessary. The loan grade definitions are as follows:
Pass and Pass-Watch: Pass and Pass-Watch loans, grades (0-4), are in compliance with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weaknesses as defined under “Special Mention,” “Substandard” or “Doubtful.” This category is the strongest level of the Bank’s loan grading system. It consists of all performing loans with no identified credit weaknesses. It includes cash and stock/security secured loans or other investment grade loans.
Special Mention: A Special Mention loan, grade (5), has potential weaknesses that deserve management’s close attention. If not corrected, these potential weaknesses may result in deterioration of the repayment of the debt and result in a Substandard classification. Loans that have significant actual, not potential, weaknesses are considered more severely classified.
15
Substandard: A Substandard loan, grade (6), has a well-defined weakness that jeopardizes the liquidation of the debt. A loan graded Substandard is not protected by the sound worth and paying capacity of the borrower, or of the value and type of collateral pledged. With a Substandard loan, there is a distinct possibility that the Bank will sustain some loss if the weaknesses or deficiencies are not corrected.
Doubtful: A Doubtful loan, grade (7), is one that has critical weaknesses that would make the collection or liquidation of the full amount due improbable. However, there may be pending events which may work to strengthen the loan, and therefore the amount or timing of a possible loss cannot be determined at the current time.
Loss: A loan classified as Loss, grade (8), is considered uncollectible and of such little value that their continuance as active bank assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be possible in the future. Loans classified as Loss will be charged off in a timely manner.
Under regulatory guidance, loans graded special mention or worse are considered criticized loans, and loans graded substandard or worse are considered classified loans.
16
Loans by Vintage Year and Risk Rating
|
|
|
Term Loans |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
Amortized Cost Basis by Origination Year (1) |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
Prior |
|
|
Revolving Loans Amortized Cost Basis |
|
|
Total |
|
||||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total construction |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Classified |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment financing agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Classified |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total equipment financing agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision. |
17
|
|
|
Term Loans |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
Amortized Cost Basis by Origination Year (1) |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
Prior |
|
|
Revolving Loans Amortized Cost Basis |
|
|
Total |
|
||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total construction |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Classified |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment financing agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total equipment financing agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass / Pass-Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision. |
18
Loans by Vintage Year and Payment Performance
|
|
|
Term Loans |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
Amortized Cost Basis by Origination Year (1) |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
Prior |
|
|
Revolving Loans Amortized Cost Basis |
|
|
Total |
|
||||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total construction |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment financing agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total equipment financing agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total loans receivable |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision. |
19
|
|
|
Term Loans |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
Amortized Cost Basis by Origination Year (1) |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
Prior |
|
|
Revolving Loans Amortized Cost Basis |
|
|
Total |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total construction |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment financing agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total equipment financing agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total loans receivable |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision. |
20
The following is an aging analysis of loans, disaggregated by loan class, as of the dates indicated:
|
|
|
30-59 Days Past Due |
|
|
60-89 Days Past Due |
|
|
90 Days or More Past Due |
|
|
Total Past Due |
|
|
Current |
|
|
Total |
|
|
Accruing 90 Days or More Past Due |
|
|||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
Hospitality |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Other |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Total commercial property loans |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Residential |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Total real estate loans |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Equipment financing agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Total loans receivable |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
Hospitality |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Total commercial property loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Equipment financing agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Total loans receivable |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually Evaluated Loans
The Company reviews all loans on an individual basis when they do not share similar risk characteristics with loan pools.
21
Nonaccrual Loans and Nonperforming Assets
The following table represents the amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of June 30, 2022 and December 31, 2021.
|
|
|
June 30, 2022 |
|
|||||||||||||
|
|
|
Nonaccrual Loans With No Allowance for Credit Losses |
|
|
Nonaccrual Loans With Allowance for Credit Losses |
|
|
Loans Past Due 90 Days Still Accruing |
|
|
Total Nonperforming Loans |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial property loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Commercial and industrial loans |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Equipment financing agreements |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|||||||||||||
|
|
|
Nonaccrual Loans With No Allowance for Credit Losses |
|
|
Nonaccrual Loans With Allowance for Credit Losses |
|
|
Loans Past Due 90 Days Still Accruing |
|
|
Total Nonperforming Loans |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial property loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Equipment financing agreements |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
The Company recognized $
The following table details nonperforming assets as of the dates indicated:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
(in thousands) |
|
|||||
|
Nonaccrual loans |
|
$ |
|
|
|
$ |
|
|
|
Loans receivable 90 days or more past due and still accruing |
|
|
— |
|
|
|
— |
|
|
Total nonperforming loans receivable |
|
|
|
|
|
|
|
|
|
Other real estate owned ("OREO") |
|
|
|
|
|
|
|
|
|
Total nonperforming assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
OREO is included in prepaid expenses and other assets in the accompanying Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021.
22
Troubled Debt Restructurings
As of June 30, 2022 and December 31, 2021, TDRs were $
The following table details TDRs as of June 30, 2022 and December 31, 2021:
|
|
|
Nonaccrual TDRs |
|
|
Accrual TDRs |
|
||||||||||||||||||||||||||||||||||
|
|
|
Deferral of Principal |
|
|
Deferral of Principal and Interest |
|
|
Reduction of Principal and Interest |
|
|
Extension of Maturity |
|
|
Total |
|
|
Deferral of Principal |
|
|
Deferral of Principal and Interest |
|
|
Reduction of Principal and Interest |
|
|
Extension of Maturity |
|
|
Total |
|
||||||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial and industrial loans |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial and industrial loans |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
The following table presents the number of loans by class modified as TDRs that occurred during the periods indicated, with their pre- and post-modification recorded amounts.
|
|
|
Three Months ended |
|
|
Twelve Months ended |
|
||||||||||||||||||
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||
|
|
|
Number of Loans |
|
|
Pre- Modification Outstanding Recorded Investment |
|
|
Post- Modification Outstanding Recorded Investment |
|
|
Number of Loans |
|
|
Pre- Modification Outstanding Recorded Investment |
|
|
Post- Modification Outstanding Recorded Investment |
|
||||||
|
|
|
(in thousands except for number of loans) |
|
|||||||||||||||||||||
|
Real estate loans |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Total |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months ended |
|
|
Twelve Months ended |
|
||||||||||||||||||
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||
|
|
|
Number of Loans |
|
|
Pre- Modification Outstanding Recorded Investment |
|
|
Post- Modification Outstanding Recorded Investment |
|
|
Number of Loans |
|
|
Pre- Modification Outstanding Recorded Investment |
|
|
Post- Modification Outstanding Recorded Investment |
|
||||||
|
|
|
(in thousands except for number of loans) |
|
|||||||||||||||||||||
|
Real estate loans |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Total |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
All TDRs are individually analyzed using one of three criteria: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral if the loan is collateral dependent. At June 30, 2022 and December 31, 2021, the allowance resulting from the individual evaluation of TDRs was immaterial.
A loan is considered to be in payment default once it is
23
Note 4 — Servicing Assets
The changes in servicing assets for the three and six months ended June 30, 2022 and 2021 were as follows:
|
|
|
Three Months Ended June 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
|
|
(in thousands) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
Addition related to sale of SBA loans |
|
|
|
|
|
|
|
|
|
Amortization |
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
|
|
(in thousands) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
Addition related to sale of SBA loans |
|
|
|
|
|
|
|
|
|
Amortization |
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
At June 30, 2022 and December 31, 2021, we serviced loans sold to unaffiliated parties of $
The Company recorded servicing fee income of $
The fair value of servicing rights was $
Note 5 — Income Taxes
The Company’s income tax expense was $
Management concluded that as of June 30, 2022 and December 31, 2021, a valuation allowance of $
As of June 30, 2022, the Company was subject to examination by various taxing authorities for its federal tax returns for the periods ending on or after December 31, 2018 and state tax returns for the periods ending on or after December 31, 2017. During the quarter ended June 30, 2022, there was
24
Note 6 — Goodwill and other Intangibles
The third-party originators intangible of $
|
|
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||
|
|
|
Amortization Period |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
||||||
|
|
|
|
|
(in thousands) |
|
|||||||||||||||||||||
|
Core deposit intangible |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Third-party originators intangible |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Goodwill |
|
N/A |
|
|
11,031 |
|
|
|
— |
|
|
|
|
|
|
|
11,031 |
|
|
|
— |
|
|
|
|
|
|
Total intangible assets |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The Company performed an impairment analysis on its goodwill and other intangible assets as of December 31, 2021 and determined there was
Note 7 — Deposits
Time deposits exceeding the FDIC insurance limit of $250,000 as of June 30, 2022 and December 31, 2021 were $
The scheduled maturities of time deposits are as follows for the periods indicated:
|
At June 30, 2022 |
|
Time Deposits of $250,000 or More |
|
|
Other Time Deposits |
|
|
Total |
|
|||
|
|
|
(in thousands) |
|
|||||||||
|
2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 and thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 and thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Accrued interest payable on deposits was $
25
Note 8 — Borrowings and Subordinated Debentures
At June 30, 2022, the Bank had $
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
|
|
Outstanding Balance |
|
|
Weighted Average Rate |
|
|
Outstanding Balance |
|
|
Weighted Average Rate |
|
||||
|
|
|
(dollars in thousands) |
|
|||||||||||||
|
Overnight advances |
|
$ |
|
|
|
|
|
% |
|
$ |
— |
|
|
|
|
% |
|
Advances due within 12 months |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Advances due over 12 months through 24 months |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Advances due over 24 months through 36 months |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Outstanding advances |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
The following is financial data pertaining to FHLB advances:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
(dollars in thousands) |
|
|||||
|
Weighted-average interest rate at end of period |
|
|
|
% |
|
|
|
% |
|
Weighted-average interest rate during the period |
|
|
|
% |
|
|
|
% |
|
Average balance of FHLB advances |
|
$ |
|
|
|
$ |
|
|
|
Maximum amount outstanding at any month-end |
|
$ |
|
|
|
$ |
|
|
The Bank maintains a secured credit facility with the FHLB, allowing the Bank to borrow on an overnight and term basis. The Bank had $
The Bank also had securities with market values of $
On August 20, 2021, the Company issued $
The Company issued $
On March 30, 2022, the Company redeemed its 2017 Notes. A portion of the redemption was funded with the proceeds from the Company’s August 20, 2021 subordinated debt offering. The redemption price for each of the 2017 Notes equaled
At June 30, 2022 and December 31, 2021, the balance of the 2017 Notes included in the Company’s Consolidated Balance Sheet, net of debt issuance cost, was $
26
The Company assumed Junior Subordinated Deferrable Interest Debentures (“Subordinated Debentures”) as a result of an acquisition in 2014 with an unpaid principal balance of $
Note 9 — Earnings Per Share
Earnings per share (“EPS”) is calculated on both a basic and a diluted basis. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted from the issuance of common stock that then shared in earnings, excluding common shares in treasury. For diluted EPS, the weighted-average number of common shares includes the impact of unvested performance-based restricted stock under the treasury method.
Unvested restricted stock containing rights to non-forfeitable dividends are considered participating securities prior to vesting and have been included in the earnings allocation in computing basic and diluted EPS under the two-class method.
The following table is a reconciliation of the components used to derive basic and diluted EPS for the periods indicated:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
(dollars in thousands, except per share amounts) |
|
|||||||||||||
|
Basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Less: income allocated to unvested restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income allocated to common shares |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Weighted-average shares for basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive stock options and unvested performance stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income allocated to common shares |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Weighted-average shares for diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Per share amounts may not be able to be recalculated using net income and weighted-average shares presented above due to rounding. |
There were
During the six months ended June 30, 2022, the Company issued
27
Note 10 — Regulatory Matters
Federal bank regulatory agencies require bank holding companies and banks to maintain a minimum ratio of qualifying total capital to risk-weighted assets of
In order for banks to be considered “well capitalized,” federal bank regulatory agencies require a minimum ratio of qualifying total capital to risk-weighted assets of
At June 30, 2022, the Bank’s capital ratios exceeded the minimum requirements for the Bank to be considered “well capitalized” and the Company exceeded all of its applicable minimum regulatory capital ratio requirements.
A capital conservation buffer of
In March 2020, federal banking agencies announced an interim final rule to delay the impact on regulatory capital arising from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company and the Bank adopted the capital transition relief over the permissible five-year period.
The capital ratios of Hanmi Financial and the Bank as of June 30, 2022 and December 31, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
|
Minimum to Be |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Regulatory |
|
|
Categorized as |
|
||||||||||
|
|
|
Actual |
|
|
Requirement |
|
|
“Well Capitalized” |
|
|||||||||||||||
|
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
|
|
|
(dollars in thousands) |
|
|||||||||||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Hanmi Bank |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Tier 1 capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Hanmi Bank |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Common equity Tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Hanmi Bank |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Tier 1 capital (to average assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Hanmi Bank |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Hanmi Bank |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Tier 1 capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Hanmi Bank |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Common equity Tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Hanmi Bank |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Tier 1 capital (to average assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanmi Financial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Hanmi Bank |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
28
Note 11 — Fair Value Measurements
Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three-level fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are defined as follows:
|
|
• |
Level 1 - Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
|
|
• |
Level 2 - Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. |
|
|
• |
Level 3 - Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a non-recurring basis to evaluate assets or liabilities for impairment or for disclosure purposes.
We record securities available for sale at fair value on a recurring basis. Certain other assets, such as loans held for sale, impaired loans, OREO, and core deposit intangible, are recorded at fair value on a non-recurring basis. Non-recurring fair value measurements typically involve assets that are periodically evaluated for impairment and for which any impairment is recorded in the period in which the re-measurement is performed.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument below:
Securities available for sale - The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges. If quoted prices are not available, fair values are measured using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities, or other model-based valuation techniques requiring observable inputs other than quoted prices such as yield curve, prepayment speeds, and default rates. Level 1 securities include U.S. Treasury securities that are traded on an active exchange or by dealers or brokers in active over-the-counter markets. The fair value of these securities is determined by quoted prices on an active exchange or over-the-counter market. Level 2 securities primarily include U.S. government agency and sponsored agency mortgage-backed securities, collateralized mortgage obligations and debt securities as well as municipal bonds in markets that are active. In determining the fair value of the securities categorized as Level 2, we obtain reports from nationally recognized broker-dealers detailing the fair value of each investment security held as of each reporting date. The broker-dealers use prices obtained from nationally recognized pricing services to value our fixed income securities. The fair value of the municipal securities is determined based on pricing data provided by nationally recognized pricing services. We review the prices obtained for reasonableness based on our understanding of the marketplace, and also consider any credit issues related to the bonds. As we have not made any adjustments to the market quotes provided to us and as they are based on observable market data, they have been categorized as Level 2 within the fair value hierarchy. Level 3 securities are instruments that are not traded in the market. As such, no observable market data for the instrument is available, which necessitates the use of significant unobservable inputs.
Derivatives – The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.
29
Loans held for sale - Loans held for sale includes the guaranteed portion of SBA 7(a) loans carried at the lower of cost or fair value. Management obtains quotes, bids or pricing indication sheets on all or part of the loans directly from the purchasing financial institutions. Premiums received or to be received on the quotes, bids or pricing indication sheets are indicative of the fact that cost is lower than fair value. At June 30, 2022 and December 31, 2021, the entire balance of loans held for sale was recorded at its cost. We record loans held for sale on a nonrecurring basis with Level 2 inputs.
Nonperforming loans – Nonaccrual loans receivable and loans 90-days past due and still accruing interest are considered nonperforming for reporting purposes and are measured and recorded at fair value on a non-recurring basis. All nonperforming loans with a carrying balance over $
OREO - Fair value of OREO is based primarily on third party appraisals, less costs to sell and result in a Level 3 classification of the inputs for determining fair value. Appraisals are required annually and may be updated more frequently as circumstances require and the fair value adjustments are made to OREO based on the updated appraised value of the property.
Servicing assets - On a quarterly basis, the Company utilizes a third party service to evaluate servicing assets related to loans sold to unaffiliated parties with servicing retained. Servicing assets are assessed for impairment or increased obligation based on fair value at each reporting date.
Other repossessed assets – Fair value of equipment from equipment financing agreements contracts is based primarily on a third party valuation service, less costs to sell and result in a Level 3 classification of the inputs for determining fair value. Valuations are required at the time the asset is repossessed and may be subsequently updated periodically due to the Company’s short-term possession of the asset prior to sale or as circumstances require and the fair value adjustments are made to the asset based on its value prior to sale.
30
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of June 30, 2022 and December 31, 2021, assets and liabilities measured at fair value on a recurring basis are as follows:
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|||
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Observable |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Inputs with No |
|
|
|
|
|
|
|
|
|
||
|
|
|
Active Markets |
|
|
Active Market |
|
|
Significant |
|
|
|
|
|
|||
|
|
|
for Identical |
|
|
with Identical |
|
|
Unobservable |
|
|
|
|
|
|||
|
|
|
Assets |
|
|
Characteristics |
|
|
Inputs |
|
|
Total Fair Value |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
U.S. government agency and sponsored agency obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. government agency and sponsored agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds-tax exempt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Derivative financial instruments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
U.S. government agency and sponsored agency obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. government agency and sponsored agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds-tax exempt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Derivative financial instruments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
31
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
As of June 30, 2022 and December 31, 2021, assets and liabilities measured at fair value on a non-recurring basis are as follows:
|
|
|
|
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Observable |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Inputs With No |
|
|
|
|
|
||
|
|
|
|
|
|
|
Active Markets |
|
|
Active Market |
|
|
Significant |
|
|||
|
|
|
|
|
|
|
for Identical |
|
|
With Identical |
|
|
Unobservable |
|
|||
|
|
|
Total |
|
|
Assets |
|
|
Characteristics |
|
|
Inputs |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent loans (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other real estate owned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repossessed personal property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent loans (2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other real estate owned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repossessed personal property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Consisted of real estate loans of $ |
|
(2) |
|
32
The following table represents quantitative information about Level 3 fair value assumptions for assets measured at fair value on a non-recurring basis at June 30, 2022 and December 31, 2021:
|
|
|
Fair Value |
|
|
Valuation Techniques |
|
Unobservable Input(s) |
|
Range (Weighted Average) |
|
|
|
|
|
(in thousands) |
|
||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
|
|
|
Market approach |
|
Market data comparison |
|
|
(1) |
|
Other |
|
|
|
|
|
Market approach |
|
Market data comparison |
|
|
(1) |
|
Residential |
|
|
|
|
|
Market approach |
|
Market data comparison |
|
|
(1) |
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned |
|
$ |
|
|
|
Market approach |
|
Market data comparison |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repossessed personal property |
|
|
|
|
|
Market approach |
|
Market data comparison |
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
|
|
|
Market approach |
|
Market data comparison |
|
|
(1) |
|
Other |
|
|
|
|
|
Market approach |
|
Market data comparison |
|
|
(1) |
|
Residential |
|
|
|
|
|
Market approach |
|
Market data comparison |
|
|
(1) |
|
Total real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned |
|
$ |
|
|
|
Market approach |
|
Market data comparison |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repossessed personal property |
|
|
|
|
|
Market approach |
|
Market data comparison |
|
|
(2) |
|
(1) |
Appraisal reports utilize a combination of valuation techniques including a market approach, where prices and other relevant information generated by market transactions involving similar or comparable properties are used to determine the appraised value. Appraisals may include an ‘as is’ and ‘upon completion’ valuation scenarios. Adjustments are routinely made in the appraisal process by third-party appraisers to adjust for differences between the comparable sales and income data. Adjustments also result from the consideration of relevant economic and demographic factors with the potential to affect property values. Also, prospective values are based on the market conditions which exist at the date of inspection combined with informed forecasts based on current trends in supply and demand for the property types under appraisal. Positive adjustments disclosed in this table represent increases to the sales comparison and negative adjustment represent decreases. |
|
(2) |
The equipment is usually too low in value to use a professional appraisal service. The values are determined internally using a combination of auction values, vendor recommendations and sales comparisons depending on the equipment type. Some highly commoditized equipment, such as commercial trucks have services that provide industry values. |
ASC 825, Financial Instruments, requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured on a recurring basis or non-recurring basis are discussed above.
The estimated fair value of financial instruments has been determined by using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data in order to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
33
Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825), among other provisions, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. Other than certain financial instruments for which we had concluded that the carrying amounts approximate fair value, the fair value estimates shown below were based on an exit price notion as of June 30, 2022, as required by ASU 2016-01. The financial instruments for which we had concluded that the carrying amounts approximate fair value include, cash and due from banks, accrued interest receivable and payable, and noninterest-bearing deposits. The fair values of off-balance sheet items were based upon the difference between the current value of similar loans and the price at which the Bank has committed to make the loans.
The estimated fair values of financial instruments were as follows:
|
|
|
June 30, 2022 |
|
|||||||||||||
|
|
|
Carrying |
|
|
Fair Value |
|
||||||||||
|
|
|
Amount |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net of allowance for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings and subordinated debentures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|||||||||||||
|
|
|
Carrying |
|
|
Fair Value |
|
||||||||||
|
|
|
Amount |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net of allowance for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings and subordinated debentures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12 — Off-Balance Sheet Commitments
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk similar to the risk involved with on-balance sheet items.
The Bank’s exposure to losses in the event of non-performance by the other party to commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for extending loan facilities to customers. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, was based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, premises and equipment, and income-producing or borrower-occupied properties.
34
The following table shows the distribution of total loan commitments as of the dates indicated:
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2022 |
|
|
2021 |
|
||
|
|
|
(in thousands) |
|
|||||
|
Unused commitments to extend credit |
|
$ |
|
|
|
$ |
|
|
|
Standby letters of credit |
|
|
|
|
|
|
|
|
|
Commercial letters of credit |
|
|
|
|
|
|
|
|
|
Total commitments |
|
$ |
|
|
|
$ |
|
|
The allowance for credit losses related to off-balance sheet items was maintained at a level believed to be sufficient to absorb current expected lifetime losses related to these unfunded credit facilities. The determination of the allowance adequacy was based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities.
Activity in the allowance for credit losses related to off-balance sheet items was as follows for the periods indicated:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Provision expense (recovery) for credit losses |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Note 13 — Leases
The Company enters into leases in the normal course of business primarily for bank branch offices, back-office operations locations, business development offices, information technology data centers and information technology equipment. The Company’s leases have remaining terms ranging from
The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company’s balance sheet.
Leases are classified as operating or finance leases at the lease commencement date. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the term of the lease. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease term.
As of June 30, 2022, the outstanding balances for our right-of-use asset and lease liability were $
In determining the discount rates, since most of our leases do not provide an implicit rate, we used our incremental borrowing rate provided by the FHLB of San Francisco based on the information available at the commencement date to calculate the present value of lease payments.
35
At June 30, 2022, future minimum rental commitments under these non-cancelable operating leases, with initial or remaining terms of one year or more, were as follows:
|
|
|
Amount |
|
|
|
|
|
(in thousands) |
|
|
|
2022 |
|
$ |
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Remaining lease commitments |
|
|
|
|
|
Interest |
|
|
( |
) |
|
Present value of lease liability |
|
$ |
|
|
Weighted average remaining lease terms for the Company's operating leases were
Cash paid and included in cash flows from operating activities for amounts used in the measurement of the lease liability of the Company's operating leases was $
Note 14 — Liquidity
Hanmi Financial
As of June 30, 2022, Hanmi Financial had $
Hanmi Bank
The principal objective of our liquidity management program is to maintain the Bank’s ability to meet the day-to-day cash flow requirements of our customers who wish either to withdraw funds or to draw upon credit facilities to meet their cash needs. Management believes that the Bank, on a stand-alone basis, has adequate liquid assets to meet its current obligations. The Bank’s primary funding source will continue to be deposits originating from its branch platform. The Bank’s wholesale funds historically consisted of FHLB advances and brokered deposits. As of June 30, 2022 and December 31, 2021, the Bank had $
We monitor the sources and uses of funds on a regular basis to maintain an acceptable liquidity position. The Bank’s primary source of borrowings is the FHLB, from which the Bank is eligible to borrow up to
The amount that the FHLB is willing to advance differs based on the quality and character of qualifying collateral pledged by the Bank, and the FHLB may adjust the advance rates for qualifying collateral upwards or downwards from time to time. To the extent deposit renewals and deposit growth are not sufficient to fund maturing and withdrawable deposits, repay maturing borrowings, fund existing and future loans, equipment financing agreements and securities, and otherwise fund working capital needs and capital expenditures, the Bank may utilize the remaining borrowing capacity from its FHLB borrowing arrangement.
As a means of augmenting its liquidity, the Bank had an available borrowing source of $
36
Note 15 — Derivatives and Hedging Activities
The Company’s derivative financial instruments consist entirely of interest rate swap agreements between the Company and its customers and other third party counterparties. The Company enters into “back-to-back swap” arrangements whereby the Company executes interest rate swap agreements with its customers and acquires an offsetting swap position from a third party counterparty. These derivative financial statements are accounted for at fair value, with changes in fair value recognized in the Company’s Consolidated Statements of Income.
The table below presents the fair value of the Company’s derivative financial instruments as well as their location on the Balance Sheet as of June 30, 2022 and December 31, 2021.
|
As of June 30, 2022 |
|
Derivative Assets |
|
|
Derivative Liabilities |
|
||||||||||||||
|
|
|
Notional Amount |
|
|
Balance Sheet Location |
|
Fair Value |
|
|
Notional Amount |
|
|
Balance Sheet Location |
|
Fair Value |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||||||
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate products |
|
$ |
|
|
|
Other Assets |
|
$ |
|
|
|
$ |
|
|
|
Other Liabilities |
|
$ |
|
|
|
Total derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021 |
|
Derivative Assets |
|
|
Derivative Liabilities |
|
||||||||||||||
|
|
|
Notional Amount |
|
|
Balance Sheet Location |
|
Fair Value |
|
|
Notional Amount |
|
|
Balance Sheet Location |
|
Fair Value |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||||||
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate products |
|
$ |
|
|
|
Other Assets |
|
$ |
|
|
|
$ |
|
|
|
Other Liabilities |
|
$ |
|
|
|
Total derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Income Statement for the three and six months ended June 30, 2022 and 2021.
|
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20 |
|
Location of Gain or (Loss) Recognized in Income on Derivative |
|
Amount of Gain or (Loss) Recognized in Income on Derivative |
|
|||||||||||||
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
|
|
(in thousands) |
|
|||||||||||||
|
Interest rate products |
|
Other income |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Total |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
The Company did
37
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of June 30, 2022 and December 31, 2021. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The derivative assets are located within the prepaid and other assets line item on the Consolidated Balance Sheets and the derivative liabilities are located within the accrued expenses and other liabilities line item on the Consolidated Balance Sheets.
|
Offsetting of Derivative Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets |
|
|||||||||
|
|
|
Gross Amounts of Recognized Assets |
|
|
Gross Amounts Offset in the Consolidated Balance Sheets |
|
|
Net Amounts of Assets presented in the Consolidated Balance Sheets |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amount |
|
||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||
|
Derivatives |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offsetting of Derivative Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets |
|
|||||||||
|
|
|
Gross Amounts of Recognized Liabilities |
|
|
Gross Amounts Offset in the Consolidated Balance Sheets |
|
|
Net Amounts of Liabilities presented in the Consolidated Balance Sheets |
|
|
Financial Instruments |
|
|
Cash Collateral Provided |
|
|
Net Amount |
|
||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||
|
Derivatives |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offsetting of Derivative Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets |
|
|||||||||
|
|
|
Gross Amounts of Recognized Assets |
|
|
Gross Amounts Offset in the Consolidated Balance Sheets |
|
|
Net Amounts of Assets presented in the Consolidated Balance Sheets |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amount |
|
||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||
|
Derivatives |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offsetting of Derivative Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets |
|
|||||||||
|
|
|
Gross Amounts of Recognized Liabilities |
|
|
Gross Amounts Offset in the Consolidated Balance Sheets |
|
|
Net Amounts of Liabilities presented in the Consolidated Balance Sheets |
|
|
Financial Instruments |
|
|
Cash Collateral Provided |
|
|
Net Amount |
|
||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||
|
Derivatives |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
38
The Company has agreements with each of its derivative counterparties that contain a provision stating if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. In addition, these agreements may also require the Company to post additional collateral should it fail to maintain its status as a well- or adequately- capitalized institution.
As of June 30, 2022 and December 31, 2021, the fair value of derivatives in a net asset position for counterparty transactions, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $
Note 16 — Subsequent Events
As of the date of issuance of these financial statements, no subsequent events were identified.
39
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is management’s discussion and analysis of our results of operations and financial condition as of and for the three and six months ended June 30, 2022. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report on Form 10-K”) and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the period ended June 30, 2022 (this “Report”).
Forward-Looking Statements
Some of the statements contained in this Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this Report 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 assumptions 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 the expectations reflected in the forward-looking statements are 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: 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; the effect of our rating under the Community Reinvestment Act and our ability to address any issues raised in our regulatory exams; 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; inflation; risks of natural disasters; the current or anticipated impact of military conflict, terrorism or other geopolitical events; a failure in or breach of our operational or security systems or infrastructure, including cyber-attacks; the failure to maintain current technologies; the inability to successfully implement future information technology enhancements; difficult business and economic conditions that can adversely affect our industry and business, including competition, 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 continuing impact of the COVID-19 pandemic on our business and results of operation; changes in governmental regulation, including, but not limited to, any increase in Federal Deposit Insurance Corporation 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 ability to identify a suitable strategic partner or to consummate a strategic transaction; the adequacy of our allowance for credit losses; our credit quality and the effect of credit quality on our credit losses expense 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 infrastructure and those of our third party providers and vendors.
For additional information concerning risks we face, see “Part II, Item 1A. Risk Factors” in this Report and “Item 1A. Risk Factors” in Part I of the 2021 Annual Report on Form 10-K. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.
Critical Accounting Policies
We have established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to the consolidated financial statements in our 2021 Annual Report on Form 10-K. We had no significant changes in our accounting policies since the filing of our 2021 Annual Report on Form 10-K.
Certain accounting policies require us to make significant estimates and assumptions that have a material impact on the carrying value of certain assets and liabilities, and we consider these critical accounting policies. For a description of these critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in our 2021 Annual Report on Form 10-K. Actual results could differ significantly from these
40
estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods. Management has discussed the development and selection of these critical accounting policies with the Audit Committee of the Company’s Board of Directors.
Executive Overview
Net income was $25.1 million, or $0.82 per diluted share, for the three months ended June 30, 2022 compared with $22.1 million, or $0.72 per diluted share, for the same period a year ago. Net interest income and noninterest income increased $9.5 million and $0.4 million, respectively. These effects were offset by an increase in credit loss expense of $4.9 million to $1.6 million for the three months ended June 30, 2022 compared with a credit loss expense recovery of $3.3 million for the same period a year ago. Noninterest expense and income taxes increased $0.7 million and $1.4 million, respectively.
For the six months ended June 30, 2022, net income was $45.7 million, or $1.50 per diluted share, compared with $38.8 million, or $1.26 per diluted share, for the same period a year ago. The increase in net income for the six months ended June 30, 2022 reflected an increase in net interest income of $14.4 million, offset by increases in credit loss expense of $1.4 million and $2.9 million in other noninterest expense and a $0.9 million decrease in noninterest income.
Other financial highlights include the following:
|
|
• |
Cash and due from banks decreased $391.7 million to $217.2 million as of June 30, 2022 from $609.0 million at December 31, 2021, primarily as excess liquidity was used to fund strong loan production and the redemption of subordinated debentures. |
|
|
• |
Securities decreased $50.6 million to $860.2 million at June 30, 2022 from $910.8 million at December 31, 2021, attributable to the impact of unrealized losses from rising interest rates. |
|
|
• |
Loans receivable, before the allowance for credit losses, were $5.66 billion at June 30, 2022 compared with $5.15 billion at December 31, 2021. |
|
|
• |
Deposits were $5.98 billion at June 30, 2022 compared with $5.79 billion at December 31, 2021. |
|
|
• |
Subordinated debentures and borrowings decreased $78.4 million to $274.1 million at June 30, 2022 from $352.5 million at December 31, 2021, primarily due to the redemption of the 2017 Notes. |
Results of Operations
Net Interest Income
Our primary source of revenue is net interest income, which is the difference between interest derived from earning assets, and interest paid on liabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on loans receivable are affected principally by changes to interest rates, the demand for loans receivable, the supply of money available for lending purposes, and other competitive factors. Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve.
41
The following table shows the average balance of assets, liabilities and stockholders’ equity; the amount of interest income, on a tax-equivalent basis, and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin for the periods indicated. All average balances are daily average balances.
|
|
|
Three Months Ended |
|
|||||||||||||||||||||
|
|
|
June 30, 2022 |
|
|
June 30, 2021 |
|
||||||||||||||||||
|
|
|
|
|
|
|
Interest |
|
|
Average |
|
|
|
|
|
|
Interest |
|
|
Average |
|
||||
|
|
|
Average |
|
|
Income / |
|
|
Yield / |
|
|
Average |
|
|
Income / |
|
|
Yield / |
|
||||||
|
|
|
Balance |
|
|
Expense |
|
|
Rate |
|
|
Balance |
|
|
Expense |
|
|
Rate |
|
||||||
|
Assets |
|
(in thousands) |
|
|||||||||||||||||||||
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (1) |
|
$ |
5,572,504 |
|
|
$ |
59,855 |
|
|
|
4.31 |
% |
|
$ |
4,753,297 |
|
|
$ |
52,787 |
|
|
|
4.45 |
% |
|
Securities (2) |
|
|
945,291 |
|
|
|
2,930 |
|
|
|
1.27 |
% |
|
|
812,805 |
|
|
|
1,404 |
|
|
|
0.69 |
% |
|
FHLB stock |
|
|
16,385 |
|
|
|
242 |
|
|
|
5.93 |
% |
|
|
16,385 |
|
|
|
242 |
|
|
|
5.93 |
% |
|
Interest-bearing deposits in other banks |
|
|
136,473 |
|
|
|
193 |
|
|
|
0.57 |
% |
|
|
659,934 |
|
|
|
176 |
|
|
|
0.11 |
% |
|
Total interest-earning assets |
|
|
6,670,653 |
|
|
|
63,220 |
|
|
|
3.80 |
% |
|
|
6,242,421 |
|
|
|
54,609 |
|
|
|
3.51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
|
67,859 |
|
|
|
|
|
|
|
|
|
|
|
61,560 |
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
|
(73,896 |
) |
|
|
|
|
|
|
|
|
|
|
(88,049 |
) |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
255,095 |
|
|
|
|
|
|
|
|
|
|
|
220,779 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
6,919,711 |
|
|
|
|
|
|
|
|
|
|
$ |
6,436,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand: interest-bearing |
|
$ |
122,771 |
|
|
$ |
18 |
|
|
|
0.06 |
% |
|
$ |
112,252 |
|
|
$ |
23 |
|
|
|
0.08 |
% |
|
Money market and savings |
|
|
2,139,488 |
|
|
|
1,570 |
|
|
|
0.29 |
% |
|
|
2,032,102 |
|
|
|
1,298 |
|
|
|
0.26 |
% |
|
Time deposits |
|
|
894,345 |
|
|
|
869 |
|
|
|
0.39 |
% |
|
|
1,136,903 |
|
|
|
1,682 |
|
|
|
0.59 |
% |
|
Total interest-bearing deposits |
|
|
3,156,604 |
|
|
|
2,457 |
|
|
|
0.31 |
% |
|
|
3,281,257 |
|
|
|
3,003 |
|
|
|
0.37 |
% |
|
Borrowings |
|
|
140,245 |
|
|
|
384 |
|
|
|
1.10 |
% |
|
|
150,091 |
|
|
|
447 |
|
|
|
1.19 |
% |
|
Subordinated debentures |
|
|
129,029 |
|
|
|
1,335 |
|
|
|
4.14 |
% |
|
|
119,170 |
|
|
|
1,585 |
|
|
|
5.32 |
% |
|
Total interest-bearing liabilities |
|
|
3,425,878 |
|
|
|
4,176 |
|
|
|
0.49 |
% |
|
|
3,550,518 |
|
|
|
5,035 |
|
|
|
0.57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities and equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits: noninterest-bearing |
|
|
2,716,297 |
|
|
|
|
|
|
|
|
|
|
|
2,223,172 |
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
104,084 |
|
|
|
|
|
|
|
|
|
|
|
67,771 |
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
673,452 |
|
|
|
|
|
|
|
|
|
|
|
595,250 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
$ |
6,919,711 |
|
|
|
|
|
|
|
|
|
|
$ |
6,436,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
59,044 |
|
|
|
|
|
|
|
|
|
|
$ |
49,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of deposits (3) |
|
|
|
|
|
|
|
|
|
|
0.17 |
% |
|
|
|
|
|
|
|
|
|
|
0.22 |
% |
|
Net interest spread (taxable equivalent basis) (4) |
|
|
|
|
|
|
|
|
|
|
3.31 |
% |
|
|
|
|
|
|
|
|
|
|
2.94 |
% |
|
Net interest margin (taxable equivalent basis) (5) |
|
|
|
|
|
|
|
|
|
|
3.55 |
% |
|
|
|
|
|
|
|
|
|
|
3.19 |
% |
42
|
(1) |
Loans receivable include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans receivable are included in the average loans receivable balance. |
|
(2) |
Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate. |
|
(3) |
Represents interest expense on deposits as a percentage of all interest-bearing and noninterest-bearing deposits. |
|
(4) |
Represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. |
|
(5) |
Represents net interest income as a percentage of average interest-earning assets. |
The table below shows changes in interest income and interest expense and the amounts attributable to variations in interest rates and volumes for the periods indicated. The variances attributable to simultaneous volume and rate changes have been allocated to the change due to volume and the change due to rate categories in proportion to the relationship of the absolute dollar amount attributable solely to the change in volume and to the change in rate.
|
|
|
Three Months Ended |
|
|||||||||
|
|
|
June 30, 2022 vs June 30, 2021 |
|
|||||||||
|
|
|
Increases (Decreases) Due to Change In |
|
|||||||||
|
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|||
|
|
|
(in thousands) |
|
|||||||||
|
Interest and dividend income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (1) |
|
$ |
8,783 |
|
|
$ |
(1,715 |
) |
|
$ |
7,068 |
|
|
Securities (2) |
|
|
248 |
|
|
|
1,278 |
|
|
|
1,526 |
|
|
FHLB stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Interest-bearing deposits in other banks |
|
|
(239 |
) |
|
|
256 |
|
|
|
17 |
|
|
Total interest and dividend income |
|
|
8,792 |
|
|
|
(181 |
) |
|
|
8,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand: interest-bearing |
|
$ |
2 |
|
|
$ |
(7 |
) |
|
$ |
(5 |
) |
|
Money market and savings |
|
|
78 |
|
|
|
194 |
|
|
|
272 |
|
|
Time deposits |
|
|
(314 |
) |
|
|
(499 |
) |
|
|
(813 |
) |
|
Borrowings |
|
|
(28 |
) |
|
|
(35 |
) |
|
|
(63 |
) |
|
Subordinated debentures |
|
|
123 |
|
|
|
(373 |
) |
|
|
(250 |
) |
|
Total interest expense |
|
|
(139 |
) |
|
|
(720 |
) |
|
|
(859 |
) |
|
Change in net interest income |
|
$ |
8,931 |
|
|
$ |
539 |
|
|
$ |
9,470 |
|
|
(1) |
Loans receivable include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans receivable are included in the average loans receivable balance. |
|
(2) |
Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate. |
For the three months ended June 30, 2022 and 2021, net interest income was $59.0 million and $49.6 million, respectively. The net interest spread and net interest margin, on a taxable equivalent basis, for the quarter ended June 30, 2022, were 3.31 percent and 3.55 percent, respectively, compared with 2.94 percent and 3.19 percent, respectively, for the same period in 2021. Interest and dividend income increased $8.6 million, or 15.8 percent, to $63.2 million for the three months ended June 30, 2022 from $54.6 million for the same period in 2021 due to higher average interest-earning asset balances and yields. Interest expense decreased $0.9 million, or 17.1 percent, to $4.2 million for the three months ended June 30, 2022 from $5.0 million for the same period in 2021 primarily due to a shift from time deposits into lower-yielding deposit accounts, lower cost of time deposits and lower interest cost associated with the 2021 Notes.
The average balance of interest earning assets increased $428.2 million, or 6.9 percent, to $6.67 billion for the three months ended June 30, 2022 from $6.24 billion for the three months ended June 30, 2021. The average balance of loans increased $819.2 million, or 17.2 percent, to $5.57 billion for the three months ended June 30, 2022 from $4.75 billion for the three months ended June 30, 2021 due mainly to strong loan production. The average balance of securities increased $132.5 million, or 16.3 percent, to $945.3 million for the three months ended June 30, 2022 from $812.8 million for the three months ended June 30, 2021. Interest-bearing deposits at other banks decreased $523.5 million to $136.5 million for the three months ended June 30, 2021, as excess funds were used to fund loan and securities growth.
The average yield on interest-earning assets, on a taxable equivalent basis, increased 29 basis points to 3.80 percent for the three months ended June 30, 2022 from 3.51 percent for the three months ended June 30, 2021, mainly due to higher average loan balances. The average yield on loans decreased to 4.31 percent for the three months ended June 30, 2022 from 4.45 percent for the three months ended June 30, 2021, driven mainly by lower yields on commercial real estate loans. The average yield on securities,
43
on a taxable equivalent basis, increased to 1.27 percent for the three months ended June 30, 2022 from 0.69 percent for the three months ended June 30, 2021 reflecting the rising market interest rate environment.
The average balance of interest-bearing liabilities decreased $124.6 million, or 3.5 percent, to $3.43 billion for the three months ended June 30, 2022 compared to $3.55 billion for the three months ended June 30, 2021. The average balance of time deposits decreased $242.6 million offset by increases in the average balances of $107.4 million in money market and savings accounts.
The average cost of interest-bearing liabilities was 0.49 percent and 0.57 percent for the three months ended June 30, 2022 and 2021. The average cost of subordinated debentures decreased 118 basis points to 4.14 percent for the three months ended June 30, 2022 compared to 5.32 percent for the three months ended June 30, 2021. The average cost of borrowings decreased 9 basis points to 1.10 percent for the three months ended June 30, 2022 compared to 1.19 percent for the three months ended June 30, 2021. The average cost of interest-bearing deposits decreased 6 basis points to 0.31 percent for the three months ended June 30, 2022 compared to 0.37 percent for the three months ended June 30, 2021.
44
The following table shows: the average balance of assets, liabilities and stockholders’ equity; the amount of interest income, on a tax-equivalent basis, and net interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin for the periods indicated. All average balances are daily average balances.
|
|
|
Six Months Ended |
|
|||||||||||||||||||||
|
|
|
June 30, 2022 |
|
|
June 30, 2021 |
|
||||||||||||||||||
|
|
|
|
|
|
|
Interest |
|
|
Average |
|
|
|
|
|
|
Interest |
|
|
Average |
|
||||
|
|
|
Average |
|
|
Income / |
|
|
Yield / |
|
|
Average |
|
|
Income / |
|
|
Yield / |
|
||||||
|
|
|
Balance |
|
|
Expense |
|
|
Rate |
|
|
Balance |
|
|
Expense |
|
|
Rate |
|
||||||
|
Assets |
|
(in thousands) |
|
|||||||||||||||||||||
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (1) |
|
$ |
5,403,029 |
|
|
$ |
113,779 |
|
|
|
4.25 |
% |
|
$ |
4,798,311 |
|
|
$ |
103,399 |
|
|
|
4.35 |
% |
|
Securities (2) |
|
|
937,939 |
|
|
|
5,447 |
|
|
|
1.19 |
% |
|
|
793,521 |
|
|
|
2,544 |
|
|
|
0.64 |
% |
|
FHLB stock |
|
|
16,385 |
|
|
|
490 |
|
|
|
6.03 |
% |
|
|
16,385 |
|
|
|
448 |
|
|
|
5.52 |
% |
|
Interest-bearing deposits in other banks |
|
|
314,690 |
|
|
|
408 |
|
|
|
0.26 |
% |
|
|
528,498 |
|
|
|
272 |
|
|
|
0.10 |
% |
|
Total interest-earning assets |
|
|
6,672,043 |
|
|
|
120,124 |
|
|
|
3.63 |
% |
|
|
6,136,715 |
|
|
|
106,663 |
|
|
|
3.51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
|
65,427 |
|
|
|
|
|
|
|
|
|
|
|
59,127 |
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
|
(73,538 |
) |
|
|
|
|
|
|
|
|
|
|
(88,860 |
) |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
242,593 |
|
|
|
|
|
|
|
|
|
|
|
227,436 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
6,906,525 |
|
|
|
|
|
|
|
|
|
|
$ |
6,334,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand: interest-bearing |
|
$ |
123,826 |
|
|
$ |
35 |
|
|
|
0.06 |
% |
|
$ |
107,642 |
|
|
$ |
37 |
|
|
|
0.07 |
% |
|
Money market and savings |
|
|
2,122,840 |
|
|
|
2,758 |
|
|
|
0.26 |
% |
|
|
1,999,737 |
|
|
|
2,776 |
|
|
|
0.28 |
% |
|
Time deposits |
|
|
915,577 |
|
|
|
1,677 |
|
|
|
0.37 |
% |
|
|
1,187,427 |
|
|
|
4,148 |
|
|
|
0.70 |
% |
|
Total interest-bearing deposits |
|
|
3,162,243 |
|
|
|
4,470 |
|
|
|
0.29 |
% |
|
|
3,294,806 |
|
|
|
6,961 |
|
|
|
0.43 |
% |
|
Borrowings |
|
|
135,427 |
|
|
|
726 |
|
|
|
1.08 |
% |
|
|
150,046 |
|
|
|
923 |
|
|
|
1.24 |
% |
|
Subordinated debentures |
|
|
170,868 |
|
|
|
4,928 |
|
|
|
5.77 |
% |
|
|
119,105 |
|
|
|
3,204 |
|
|
|
5.38 |
% |
|
Total interest-bearing liabilities |
|
|
3,468,538 |
|
|
|
10,124 |
|
|
|
0.59 |
% |
|
|
3,563,957 |
|
|
|
11,088 |
|
|
|
0.63 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities and equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits: noninterest-bearing |
|
|
2,675,574 |
|
|
|
|
|
|
|
|
|
|
|
2,107,828 |
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
96,269 |
|
|
|
|
|
|
|
|
|
|
|
74,391 |
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
666,144 |
|
|
|
|
|
|
|
|
|
|
|
588,242 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
$ |
6,906,525 |
|
|
|
|
|
|
|
|
|
|
$ |
6,334,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (taxable equivalent basis) |
|
|
|
|
|
$ |
110,000 |
|
|
|
|
|
|
|
|
|
|
$ |
95,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of deposits (3) |
|
|
|
|
|
|
|
|
|
|
0.15 |
% |
|
|
|
|
|
|
|
|
|
|
0.26 |
% |
|
Net interest spread (taxable equivalent basis) (4) |
|
|
|
|
|
|
|
|
|
|
3.04 |
% |
|
|
|
|
|
|
|
|
|
|
2.88 |
% |
|
Net interest margin (taxable equivalent basis) (5) |
|
|
|
|
|
|
|
|
|
|
3.32 |
% |
|
|
|
|
|
|
|
|
|
|
3.14 |
% |
|
(1) |
Loans receivable include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans receivable are included in the average loans receivable balance. |
|
(2) |
Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate. |
|
(3) |
Represents interest expense on deposits as a percentage of all interest-bearing and noninterest-bearing deposits. |
45
|
(4) |
Represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. |
|
(5) |
Represents net interest income as a percentage of average interest-earning assets. |
The following table shows changes in interest income (on a tax-equivalent basis), interest expense and the amounts attributable to variation in interest rates and volumes for the periods indicated. The variances attributable to simultaneous volume and rate changes have been allocated to the change due to volume and rate categories in proportion to the relationship of the absolute dollar amount attributable solely to the change in volume and rate.
|
|
|
Six Months Ended |
|
|||||||||
|
|
|
June 30, 2022 vs June 30, 2021 |
|
|||||||||
|
|
|
Increases (Decreases) Due to Change In |
|
|||||||||
|
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|||
|
|
|
(in thousands) |
|
|||||||||
|
Interest and dividend income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (1) |
|
$ |
12,803 |
|
|
$ |
(2,423 |
) |
|
$ |
10,380 |
|
|
Securities (2) |
|
|
507 |
|
|
|
2,396 |
|
|
|
2,903 |
|
|
FHLB stock |
|
|
— |
|
|
|
42 |
|
|
|
42 |
|
|
Interest-bearing deposits in other banks |
|
|
(142 |
) |
|
|
278 |
|
|
|
136 |
|
|
Total interest and dividend income |
|
|
13,168 |
|
|
|
293 |
|
|
|
13,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand: interest-bearing |
|
$ |
5 |
|
|
$ |
(7 |
) |
|
$ |
(2 |
) |
|
Money market and savings |
|
|
175 |
|
|
|
(193 |
) |
|
|
(18 |
) |
|
Time deposits |
|
|
(808 |
) |
|
|
(1,663 |
) |
|
|
(2,471 |
) |
|
Borrowings |
|
|
(85 |
) |
|
|
(112 |
) |
|
|
(197 |
) |
|
Subordinated debentures |
|
|
1,478 |
|
|
|
246 |
|
|
|
1,724 |
|
|
Total interest expense |
|
|
765 |
|
|
|
(1,729 |
) |
|
|
(964 |
) |
|
Change in net interest income |
|
$ |
12,403 |
|
|
$ |
2,022 |
|
|
$ |
14,425 |
|
|
(1) |
Loans receivable include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans receivable are included in the average loans receivable balance. |
|
(2) |
Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate. |
For the six months ended June 30, 2022 and 2021, net interest income was $110.0 million and $95.6 million, respectively. The net interest spread and net interest margin, on a taxable equivalent basis, for the six months ended June 30, 2022 were 3.04 percent and 3.32 percent, respectively, compared with 2.88 percent and 3.14 percent, respectively, for the same period in 2021. Interest and dividend income increased $13.5 million, or 12.6 percent, to $120.1 million for the six months ended June 30, 2022 from $106.7 million for the same period in 2021 due to higher average interest-earning asset balances and yields. Interest expense decreased $1.0 million, or 8.7 percent, to $10.1 million for the six months ended June 30, 2022 from $11.1 million for the same period in 2021 primarily due to a shift from time deposits into lower yielding deposit accounts and lower rates paid on interest-bearing deposits, offset by the increased interest expense associated with the issuance of the 2021 Notes and the $1.1 million charge for unamortized debt issuance costs related to the redemption of the 2017 Notes.
The average balance of interest earning assets increased $535.3 million, or 8.7 percent, to $6.67 billion for the six months ended June 30, 2022 from $6.14 billion for the six months ended June 30, 2021. The average balance of loans increased $604.7 million, or 12.6 percent, to $5.40 billion for the six months ended June 30, 2022 from $4.80 billion for the six months ended June 30, 2021 due mainly to strong loan production. The average balance of securities increased $144.4 million, or 18.2 percent, to $937.9 million for the six months ended June 30, 2022 from $793.5 million for the six months ended June 30, 2021. Interest-bearing deposits at other banks decreased $213.8 million to $314.7 million for the six months ended June 30, 2021, as excess liquidity was used to fund loan growth and additional securities purchases.
The average yield on interest-earning assets, on a taxable equivalent basis, increased 12 basis points to 3.63 percent for the six months ended June 30, 2022 from 3.51 percent for the six months ended June 30, 2021, mainly due to higher average loan balances. The average yield on loans decreased to 4.25 percent for the six months ended June 30, 2022 from 4.35 percent for the six months ended June 30, 2021, driven mainly by lower yields on commercial real estate loans. The average yield on securities, on a taxable equivalent basis, increased to 1.19 percent for the six months ended June 30, 2022 from 0.64 percent for the six months ended June 30, 2021 reflecting the rising market interest rate environment.
46
The average balance of interest-bearing liabilities decreased $95.4 million, or 2.7 percent, to $3.47 billion for the six months ended June 30, 2022 compared to $3.56 billion for the six months ended June 30, 2021. The average balance of time deposits decreased $271.9 million offset by increases in the average balances of $123.1 million in money market and savings accounts and $51.8 million in subordinated debentures due to the 2021 Notes issued in August 2021.
The average cost of interest-bearing liabilities was 0.59 percent and 0.63 percent for the six months ended June 30, 2022 and 2021. The average cost of subordinated debentures increased 39 basis points to 5.77 percent for the six months ended June 30, 2022 compared to 5.38 percent for the six months ended June 30, 2021 due to a pre-tax charge of $1.1 million for the remaining debt issuance costs related to the redemption of the 2017 Notes. The average cost of borrowings decreased 16 basis points to 1.08 percent for the six months ended June 30, 2022 compared to 1.24 percent for the six months ended June 30, 2021. The average cost of interest-bearing deposits decreased 14 basis points to 0.29 percent for the six months ended June 30, 2022 compared to 0.43 percent for the six months ended June 30, 2021.
Credit Loss Expense
For the second quarter of 2022, the Company recorded $1.6 million of credit loss expense, comprised of a $1.6 million provision for loan losses, and a $45,000 negative provision for off-balance sheet items. For the same period in 2021, the Company recorded a $3.3 million recovery of credit loss expense, comprised of a $4.1 million recovery for loan losses and a $0.5 million reduction in the allowance for accrued interest receivable for loans current or previously modified under the CARES Act, offset partially by a $1.3 million provision for off-balance sheet items. The credit loss expense for the three months ended June 30, 2022 as compared to the same period in 2021 resulted from strong loan growth, offset by a combination of overall improvements in asset quality and economic forecasts, as well as a net reduction in specific qualitative factors allocated to criticized hospitality loans impacted by the pandemic.
For the six months ended June 30, 2022, the Company recorded $0.2 million of credit loss expense, comprised of a $0.5 million provision for loan losses, and a $0.3 million negative provision for off-balance sheet items. For the same period in 2021, credit loss expense recovery was $1.2 million, comprised of a $3.1 million recovery for loan losses and a $1.0 million reduction in the allowance for accrued interest receivable for current or previously modified loans, offset partially by a $2.1 million provision for an SBA guarantee repair loss and a $0.9 million provision for off-balance sheet. The credit loss expense for the six months ended June 30, 2022 as compared to the same period in 2021 resulted from strong loan growth, offset by a combination of overall improvements in asset quality and economic forecasts, as well as a net reduction in specific qualitative factors allocated to criticized hospitality loans impacted by the pandemic.
See also “Allowance for Credit Losses and Allowance for Credit Losses Related to Off-Balance Sheet Items” for further details.
Noninterest Income
The following table sets forth the various components of noninterest income for the periods indicated:
|
|
|
Three Months Ended June 30, |
|
|
Increase (Decrease) |
|
|
Increase (Decrease) |
|
|||||||
|
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
|
(in thousands) |
|
|
|
|
|
|||||||||
|
Service charges on deposit accounts |
|
$ |
2,875 |
|
|
$ |
2,344 |
|
|
$ |
531 |
|
|
|
22.65 |
% |
|
Trade finance and other service charges and fees |
|
|
1,416 |
|
|
|
1,259 |
|
|
|
157 |
|
|
|
12.47 |
% |
|
Servicing income |
|
|
663 |
|
|
|
540 |
|
|
|
123 |
|
|
|
22.78 |
% |
|
Bank-owned life insurance income |
|
|
246 |
|
|
|
252 |
|
|
|
(6 |
) |
|
|
(2.38 |
)% |
|
All other operating income |
|
|
1,336 |
|
|
|
908 |
|
|
|
428 |
|
|
|
47.14 |
% |
|
Service charges, fees & other |
|
|
6,536 |
|
|
|
5,303 |
|
|
|
1,233 |
|
|
|
23.25 |
% |
|
Gain on sale of SBA loans |
|
|
2,774 |
|
|
|
3,305 |
|
|
|
(531 |
) |
|
|
(16.06 |
)% |
|
Gain on sale of PPP loans |
|
|
— |
|
|
|
203 |
|
|
|
(203 |
) |
|
|
(100.00 |
)% |
|
Legal settlement |
|
|
— |
|
|
|
75 |
|
|
|
(75 |
) |
|
|
(100.00 |
)% |
|
Total noninterest income |
|
$ |
9,310 |
|
|
$ |
8,886 |
|
|
$ |
424 |
|
|
|
4.77 |
% |
For the three months ended June 30, 2022, noninterest income was $9.3 million, an increase of $0.4 million, or 4.8 percent, compared with $8.9 million for the same period in 2021. Service charges and fees increased by $1.2 million, which was driven by updates to the Company’s business deposit account fee schedules and enhanced operational practices that increased fee collections. This favorable variance was offset by a $0.2 million decrease in gains on the sale of PPP loans and a $0.5 million decrease in the gains of sale of SBA loans.
47
The following table sets forth the various components of noninterest income for the periods indicated:
|
|
|
Six Months Ended June 30, |
|
|
Increase (Decrease) |
|
|
Increase (Decrease) |
|
|||||||
|
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
|
(in thousands) |
|
|
|
|
|
|||||||||
|
Service charges on deposit accounts |
|
$ |
5,750 |
|
|
$ |
4,599 |
|
|
$ |
1,151 |
|
|
|
25.03 |
% |
|
Trade finance and other service charges and fees |
|
|
2,558 |
|
|
|
2,280 |
|
|
|
278 |
|
|
|
12.19 |
% |
|
Servicing income |
|
|
1,397 |
|
|
|
1,386 |
|
|
|
11 |
|
|
|
0.79 |
% |
|
Bank-owned life insurance income |
|
|
490 |
|
|
|
508 |
|
|
|
(18 |
) |
|
|
(3.54 |
)% |
|
All other operating income |
|
|
2,339 |
|
|
|
1,862 |
|
|
|
477 |
|
|
|
25.62 |
% |
|
Service charges, fees & other |
|
|
12,534 |
|
|
|
10,635 |
|
|
|
1,899 |
|
|
|
17.86 |
% |
|
Gain on sale of SBA loans |
|
|
5,295 |
|
|
|
4,976 |
|
|
|
319 |
|
|
|
6.42 |
% |
|
Gain on sale of PPP loans |
|
|
— |
|
|
|
2,657 |
|
|
|
(2,657 |
) |
|
|
(100.00 |
)% |
|
Net gain on sales of securities |
|
|
— |
|
|
|
99 |
|
|
|
(99 |
) |
|
|
(100.00 |
)% |
|
Legal settlement |
|
|
— |
|
|
|
325 |
|
|
|
(325 |
) |
|
|
(100.00 |
)% |
|
Total noninterest income |
|
$ |
17,829 |
|
|
$ |
18,692 |
|
|
$ |
(863 |
) |
|
|
(4.62 |
)% |
For the six months ended June 30, 2022, noninterest income was $17.8 million, a decrease of $0.9 million, or 4.6 percent, compared with $18.7 million for the same period in 2021. The decrease was mainly attributable to a $2.7 million decrease in gains on sale of PPP loans, partially offset by a $1.9 million increase in service charges and fees, which was driven by updates to the Company’s business deposit account fee schedules and enhanced operational practices that increased fee collections, and a $0.3 million increase in the gains of sale of SBA.
Noninterest Expense
The following table sets forth the components of noninterest expense for the periods indicated:
|
|
|
Three Months Ended June 30, |
|
|
Increase (Decrease) |
|
|
Increase (Decrease) |
|
|||||||
|
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
|
(in thousands) |
|
|
|
|
|
|||||||||
|
Salaries and employee benefits |
|
$ |
18,779 |
|
|
$ |
18,302 |
|
|
$ |
477 |
|
|
|
2.61 |
% |
|
Occupancy and equipment |
|
|
4,597 |
|
|
|
4,602 |
|
|
|
(5 |
) |
|
|
(0.11 |
)% |
|
Data processing |
|
|
3,114 |
|
|
|
2,915 |
|
|
|
199 |
|
|
|
6.83 |
% |
|
Professional fees |
|
|
1,231 |
|
|
|
1,413 |
|
|
|
(182 |
) |
|
|
(12.88 |
)% |
|
Supplies and communications |
|
|
581 |
|
|
|
733 |
|
|
|
(152 |
) |
|
|
(20.74 |
)% |
|
Advertising and promotion |
|
|
660 |
|
|
|
374 |
|
|
|
286 |
|
|
|
76.47 |
% |
|
All other operating expenses |
|
|
2,463 |
|
|
|
2,607 |
|
|
|
(144 |
) |
|
|
(5.52 |
)% |
|
Subtotal |
|
|
31,425 |
|
|
|
30,946 |
|
|
|
479 |
|
|
|
1.55 |
% |
|
Other real estate owned expense (income) |
|
|
50 |
|
|
|
(47 |
) |
|
|
97 |
|
|
|
(206.38 |
)% |
|
Repossessed personal property expense (income) |
|
|
— |
|
|
|
(116 |
) |
|
|
116 |
|
|
|
(100.00 |
)% |
|
Total noninterest expense |
|
$ |
31,475 |
|
|
$ |
30,783 |
|
|
$ |
692 |
|
|
|
2.25 |
% |
48
For the three months ended June 30, 2022, noninterest expense was $31.5 million, an increase of $0.7 million, or 2.2 percent, compared with $30.8 million for the same period in 2021. Salaries and employee benefits increased $0.5 million primarily as a result of an increase in salary, bonus and incentive expenses. A $0.3 million increase in advertising and promotion expense was primarily related to branding and promotional campaigns. Data processing increased $0.2 million due to additional software licenses.
The following table sets forth the components of noninterest expense for the periods indicated:
|
|
|
Six Months Ended June 30, |
|
|
Increase (Decrease) |
|
|
Increase (Decrease) |
|
|||||||
|
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
|
(in thousands) |
|
|
|
|
|
|||||||||
|
Salaries and employee benefits |
|
$ |
36,496 |
|
|
$ |
35,122 |
|
|
$ |
1,374 |
|
|
|
3.91 |
% |
|
Occupancy and equipment |
|
|
9,243 |
|
|
|
9,198 |
|
|
|
45 |
|
|
|
0.49 |
% |
|
Data processing |
|
|
6,351 |
|
|
|
5,841 |
|
|
|
510 |
|
|
|
8.73 |
% |
|
Professional fees |
|
|
2,661 |
|
|
|
2,860 |
|
|
|
(199 |
) |
|
|
(6.96 |
)% |
|
Supplies and communications |
|
|
1,245 |
|
|
|
1,489 |
|
|
|
(244 |
) |
|
|
(16.39 |
)% |
|
Advertising and promotion |
|
|
1,477 |
|
|
|
732 |
|
|
|
745 |
|
|
|
101.78 |
% |
|
All other operating expenses |
|
|
5,649 |
|
|
|
4,984 |
|
|
|
665 |
|
|
|
13.35 |
% |
|
Subtotal |
|
|
63,122 |
|
|
|
60,226 |
|
|
|
2,896 |
|
|
|
4.81 |
% |
|
Other real estate owned expense (income) |
|
|
62 |
|
|
|
174 |
|
|
|
(112 |
) |
|
|
(64.37 |
)% |
|
Repossessed personal property expense (income) |
|
|
(17 |
) |
|
|
(84 |
) |
|
|
67 |
|
|
|
(100.00 |
)% |
|
Total noninterest expense |
|
$ |
63,167 |
|
|
$ |
60,316 |
|
|
$ |
2,851 |
|
|
|
4.73 |
% |
For the six months ended June 30, 2022, noninterest expense was $63.2 million, an increase of $2.9 million, or 4.7 percent, compared with $60.3 million for the same period in 2021. Salaries and employee benefits increased $1.4 million primarily as a result of an increase in salary, bonus and incentive expenses. A $0.7 million increase in advertising and promotion expense was primarily related to branding and promotional campaigns. All other operating expenses increased $0.7 million mainly due to loan related expenses (appraisal fees and real estate taxes paid). Data processing increased $0.5 million due to additional software licenses and other vendor processing fees.
Income Tax Expense
Income tax expense was $10.2 million and $8.9 million representing an effective income tax rate of 29.0 percent and 28.6 percent for the three months ended June 30, 2022 and 2021, respectively. The increase in the effective tax rate for the three months ended June 30, 2022, compared to the same period in 2021 was principally due to an increase in incremental tax charges resulting from increases related to the Company’s share-based compensation.
Income tax expense was $18.7 million and $16.4 million representing an effective income tax rate of 29.0 percent and 29.7 percent for the six months ended June 30, 2022 and 2021, respectively. The decrease in the effective tax rate for the six months ended June 30, 2022, compared to the same period in 2021 was principally due to a decrease of incremental tax charges related to the Company’s share-based compensation recognized as income tax expense.
Financial Condition
Securities
As of June 30, 2022, our securities portfolio consisted of U.S. government agency and sponsored agency mortgage-backed securities, collateralized mortgage obligations and debt securities, tax-exempt municipal bonds and, to a lesser extent, U.S. Treasury securities. Most of these securities carry fixed interest rates. Other than holdings of U.S. government agency and sponsored agency obligations, there were no securities of any one issuer exceeding 10 percent of stockholders’ equity as of June 30, 2022 or December 31, 2021.
49
The following table summarizes the contractual maturity schedule for securities, at amortized cost, and their cost weighted average yield, which is calculated using amortized cost as the weight, as of June 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
After One Year But |
|
|
After Five Years But |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
Within One Year |
|
|
Within Five Years |
|
|
Within Ten Years |
|
|
After Ten Years |
|
|
Total |
|
|||||||||||||||||||||||||
|
|
|
Amount |
|
|
Yield |
|
|
Amount |
|
|
Yield |
|
|
Amount |
|
|
Yield |
|
|
Amount |
|
|
Yield |
|
|
Amount |
|
|
Yield |
|
||||||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||||||
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
1,507 |
|
|
|
2.23 |
% |
|
$ |
22,441 |
|
|
|
1.47 |
% |
|
$ |
— |
|
|
|
0.00 |
% |
|
$ |
— |
|
|
|
0.00 |
% |
|
$ |
23,948 |
|
|
|
1.52 |
% |
|
U.S. government agency and sponsored agency obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
151 |
|
|
|
1.96 |
% |
|
|
3,628 |
|
|
|
0.84 |
% |
|
|
6,390 |
|
|
|
3.11 |
% |
|
|
606,851 |
|
|
|
1.37 |
% |
|
|
617,020 |
|
|
|
1.38 |
% |
|
Collateralized mortgage obligations |
|
|
4 |
|
|
|
2.29 |
% |
|
|
7 |
|
|
|
0.96 |
% |
|
|
1,413 |
|
|
|
2.26 |
% |
|
|
97,890 |
|
|
|
1.46 |
% |
|
|
99,314 |
|
|
|
1.47 |
% |
|
Debt securities |
|
|
5,000 |
|
|
|
0.40 |
% |
|
|
131,387 |
|
|
|
1.06 |
% |
|
|
— |
|
|
|
0.00 |
% |
|
|
— |
|
|
|
0.00 |
% |
|
|
136,387 |
|
|
|
1.04 |
% |
|
Total U.S. government agency and sponsored agency obligations |
|
|
5,155 |
|
|
|
0.45 |
% |
|
|
135,022 |
|
|
|
1.05 |
% |
|
|
7,803 |
|
|
|
2.96 |
% |
|
|
704,741 |
|
|
|
1.38 |
% |
|
|
852,721 |
|
|
|
1.33 |
% |
|
Municipal bonds-tax exempt |
|
|
— |
|
|
|
0.00 |
% |
|
|
— |
|
|
|
0.00 |
% |
|
|
7,362 |
|
|
|
1.41 |
% |
|
|
71,287 |
|
|
|
1.33 |
% |
|
|
78,649 |
|
|
|
1.34 |
% |
|
Total securities available for sale |
|
$ |
6,662 |
|
|
|
0.85 |
% |
|
$ |
157,463 |
|
|
|
1.11 |
% |
|
$ |
15,165 |
|
|
|
2.20 |
% |
|
$ |
776,028 |
|
|
|
1.38 |
% |
|
$ |
955,318 |
|
|
|
1.34 |
% |
Loans Receivable
As of June 30, 2022 and December 31, 2021, loans receivable (excluding loans held for sale), net of deferred loan fees and costs, discounts and allowance for credit losses, were $5.58 billion and $5.08 billion, respectively. The increase primarily reflected $1.15 billion in new loan production, offset by $483.1 million in loan sales and payoffs and amortization and other reductions of $156.9 million. Loan production primarily consisted of commercial real estate of $504.3 million, commercial and industrial loans of $194.6 million and residential mortgages of $172.8 million. Loan growth resulted in further diversification of the portfolio by industry, geography and loan type.
The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses as of June 30, 2022. In addition, the table shows the distribution of such loans between those with floating or variable interest rates and those with fixed or predetermined interest rates.
|
|
|
Within One Year |
|
|
After One Year but Within Five Years |
|
|
After Five Years but Within Fifteen Years |
|
|
After Fifteen Years |
|
|
Total |
|
|||||
|
|
|
(in thousands) |
|
|||||||||||||||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
106,199 |
|
|
$ |
600,411 |
|
|
$ |
364,769 |
|
|
$ |
— |
|
|
$ |
1,071,379 |
|
|
Hospitality |
|
|
174,568 |
|
|
|
360,100 |
|
|
|
116,918 |
|
|
|
— |
|
|
|
651,586 |
|
|
Other |
|
|
230,315 |
|
|
|
1,151,784 |
|
|
|
499,616 |
|
|
|
130,012 |
|
|
|
2,011,727 |
|
|
Total commercial property loans |
|
|
511,082 |
|
|
|
2,112,295 |
|
|
|
981,303 |
|
|
|
130,012 |
|
|
|
3,734,692 |
|
|
Construction |
|
|
48,794 |
|
|
|
46,088 |
|
|
|
— |
|
|
|
— |
|
|
|
94,882 |
|
|
Residential |
|
|
5,830 |
|
|
|
62 |
|
|
|
5,286 |
|
|
|
510,398 |
|
|
|
521,576 |
|
|
Total real estate loans |
|
|
565,706 |
|
|
|
2,158,445 |
|
|
|
986,589 |
|
|
|
640,410 |
|
|
|
4,351,150 |
|
|
Commercial and industrial loans |
|
|
400,881 |
|
|
|
292,911 |
|
|
|
73,102 |
|
|
|
— |
|
|
|
766,894 |
|
|
Equipment financing agreements |
|
|
18,789 |
|
|
|
469,199 |
|
|
|
49,370 |
|
|
|
— |
|
|
|
537,358 |
|
|
Loans receivable |
|
$ |
985,376 |
|
|
$ |
2,920,555 |
|
|
$ |
1,109,061 |
|
|
$ |
640,410 |
|
|
$ |
5,655,402 |
|
|
Loans with predetermined interest rates |
|
$ |
418,762 |
|
|
$ |
2,106,115 |
|
|
$ |
246,419 |
|
|
$ |
207,794 |
|
|
$ |
2,979,090 |
|
|
Loans with variable interest rates |
|
|
566,614 |
|
|
|
814,440 |
|
|
|
862,642 |
|
|
|
432,616 |
|
|
|
2,676,312 |
|
50
The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses, with fixed or predetermined interest rates due after one year, as of June 30, 2022.
|
|
|
After One Year but Within Three Years |
|
|
After Three Years but Within Five Years |
|
|
After Five Years but Within Fifteen Years |
|
|
After Fifteen Years |
|
|
Total |
|
|||||
|
|
|
(in thousands) |
|
|||||||||||||||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
168,573 |
|
|
$ |
349,363 |
|
|
$ |
48,850 |
|
|
$ |
— |
|
|
$ |
566,786 |
|
|
Hospitality |
|
|
81,233 |
|
|
|
122,560 |
|
|
|
7,158 |
|
|
|
— |
|
|
|
210,951 |
|
|
Other |
|
|
270,177 |
|
|
|
597,545 |
|
|
|
124,050 |
|
|
|
16,297 |
|
|
|
1,008,069 |
|
|
Total commercial property loans |
|
|
519,983 |
|
|
|
1,069,468 |
|
|
|
180,058 |
|
|
|
16,297 |
|
|
|
1,785,806 |
|
|
Construction |
|
|
27,727 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
27,727 |
|
|
Residential |
|
|
— |
|
|
|
51 |
|
|
|
2,872 |
|
|
|
191,497 |
|
|
|
194,420 |
|
|
Total real estate loans |
|
|
547,710 |
|
|
|
1,069,519 |
|
|
|
182,930 |
|
|
|
207,794 |
|
|
|
2,007,953 |
|
|
Commercial and industrial loans |
|
|
6,896 |
|
|
|
12,792 |
|
|
|
14,119 |
|
|
|
— |
|
|
|
33,807 |
|
|
Equipment financing agreements |
|
|
175,532 |
|
|
|
293,666 |
|
|
|
49,370 |
|
|
|
— |
|
|
|
518,568 |
|
|
Loans receivable |
|
$ |
730,138 |
|
|
$ |
1,375,977 |
|
|
$ |
246,419 |
|
|
$ |
207,794 |
|
|
$ |
2,560,328 |
|
The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses, with floating or variable interest rates (including hybrids) due after one year, as of June 30, 2022.
|
|
|
After One Year but Within Three Years |
|
|
After Three Years but Within Five Years |
|
|
After Five Years but Within Fifteen Years |
|
|
After Fifteen Years |
|
|
Total |
|
|||||
|
|
|
(in thousands) |
|
|||||||||||||||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
53,608 |
|
|
$ |
28,866 |
|
|
$ |
315,920 |
|
|
$ |
— |
|
|
$ |
398,394 |
|
|
Hospitality |
|
|
128,107 |
|
|
|
28,199 |
|
|
|
109,761 |
|
|
|
— |
|
|
|
266,067 |
|
|
Other |
|
|
134,506 |
|
|
|
149,556 |
|
|
|
375,565 |
|
|
|
113,716 |
|
|
|
773,343 |
|
|
Total commercial property loans |
|
|
316,221 |
|
|
|
206,621 |
|
|
|
801,246 |
|
|
|
113,716 |
|
|
|
1,437,804 |
|
|
Construction |
|
|
18,361 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,361 |
|
|
Residential |
|
|
12 |
|
|
|
— |
|
|
|
2,413 |
|
|
|
318,900 |
|
|
|
321,325 |
|
|
Total real estate loans |
|
|
334,594 |
|
|
|
206,621 |
|
|
|
803,659 |
|
|
|
432,616 |
|
|
|
1,777,490 |
|
|
Commercial and industrial loans |
|
|
66,406 |
|
|
|
206,819 |
|
|
|
58,983 |
|
|
|
— |
|
|
|
332,208 |
|
|
Loans receivable |
|
$ |
401,000 |
|
|
$ |
413,440 |
|
|
$ |
862,642 |
|
|
$ |
432,616 |
|
|
$ |
2,109,698 |
|
Industry
As of June 30, 2022, the loan portfolio included the following concentrations of loans to one type of industry that were greater than 10.0 percent of loans receivable outstanding:
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
Balance as of |
|
|
Loans Receivable |
|
||
|
|
|
June 30, 2022 |
|
|
Outstanding |
|
||
|
|
|
(in thousands) |
|
|||||
|
Lessor of nonresidential buildings |
|
$ |
1,823,550 |
|
|
|
32.2 |
% |
|
Hospitality |
|
|
691,374 |
|
|
|
12.2 |
% |
Loan Quality Indicators
Loans and equipment financing agreements 30 to 89 days past due and still accruing were 0.07 percent of loans and equipment financing agreements at June 30, 2022, compared with 0.11 percent at December 31, 2021.
51
At June 30, 2022 and December 31, 2021, there were no loans 90 days or more past due and still accruing.
Special mention loans were $80.5 million at June 30, 2022 compared with $95.3 million at December 31, 2021. The change reflects additions of $70.8 million and reductions (comprising upgrades, downgrades, payments and payoffs) of $85.6 million. Of note, one construction loan of $22.4 million was upgraded from special mention to pass-watch, one $31.3 million commercial and industrial relationship was downgraded to special mention from pass-watch and three separate hospitality relationships totaling $22.8 million were downgraded from pass-watch to special mention.
Classified loans were $53.0 million at June 30, 2022 compared with $60.6 million at December 31, 2021. The change reflects additions of $5.7 million and reductions (comprising upgrades, payments, payoffs, sales, and charge-offs) of $13.3 million.
Activity in criticized loans was as follows for the periods indicated:
|
|
|
Special Mention |
|
|
Classified |
|
||
|
|
|
(in thousands) |
|
|||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
95,294 |
|
|
$ |
60,633 |
|
|
Additions |
|
|
70,769 |
|
|
|
5,663 |
|
|
Reductions |
|
|
(85,610 |
) |
|
|
(13,289 |
) |
|
Balance at end of period |
|
$ |
80,453 |
|
|
$ |
53,007 |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
76,978 |
|
|
$ |
140,169 |
|
|
Additions |
|
|
146,226 |
|
|
|
60,083 |
|
|
Reductions |
|
|
(127,910 |
) |
|
|
(139,619 |
) |
|
Balance at end of period |
|
$ |
95,294 |
|
|
$ |
60,633 |
|
Nonperforming Assets
Nonperforming loans consist of loans receivable on nonaccrual status and loans 90 days or more past due and still accruing interest. Nonperforming assets consist of nonperforming loans and OREO. Loans are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless we believe the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on nonaccrual status earlier, depending upon the individual circumstances surrounding the loan’s delinquency. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans may be restored to accrual status when principal and interest become current and full repayment is expected. Interest income is recognized on the accrual basis for impaired loans not meeting the criteria for nonaccrual. OREO consists of properties acquired by foreclosure or similar means, or vacant bank properties for which their usage for operations has ceased and management intends to offer for sale.
Except for nonaccrual loans, management is not aware of any other loans as of June 30, 2022 for which known credit problems of the borrower would cause serious doubts as to the ability of such borrowers to comply with their present loan or equipment financing agreement repayment terms, or any known events that would result in a loan or equipment financing agreement being designated as nonperforming at some future date. Management cannot, however, predict the extent to which a deterioration in general economic conditions, real estate values, increases in general rates of interest, inflation or changes in the financial condition or business of borrowers may adversely affect a borrower’s ability to pay.
Nonperforming loans were $11.0 million at June 30, 2022, or 0.20 percent of loans, compared with $13.4 million at December 31, 2021, or 0.26 percent of the portfolio. The change reflects reductions (comprising upgrades, payments, payoffs, sales, and charge-offs) of $6.5 million and additions of $4.1 million.
Nonperforming assets were $11.7 million at June 30, 2022, or 0.17 percent of total assets, compared with $14.0 million, or 0.20 percent, at December 31, 2021.
Individually Evaluated Loans
The Company reviews loans on an individual basis when the loan does not share similar risk characteristics with loan pools.
52
Individually evaluated loans were $11.0 million and $13.4 million as of June 30, 2022 and December 31, 2021, respectively, representing a decrease of $2.4 million, or 17.6 percent. Specific allowances associated with individually evaluated loans decreased $0.8 million to $2.0 million as of June 30, 2022 compared with $2.8 million as of December 31, 2021.
For the three months ended June 30, 2022, no loans were restructured and subsequently classified as TDRs. For the six months ended June 30, 2022, we restructured monthly payments for one loan, with a net carrying value of $92,000 at the time of modification, which was subsequently classified as a TDR. For the year ended December 31, 2021, no loans were restructured and subsequently classified as TDRs. Temporary payment structure modifications can include extending the maturity date, reducing the amount of principal and/or interest due monthly, and/or allowing for interest only monthly payments for six months or less.
As of June 30, 2022 and December 31, 2021, there were no TDRs on accrual status. As of June 30, 2022 and December 31, 2021, restructured loans on nonaccrual status were $2.3 million and $2.9 million, respectively, and the allowance for credit losses relating to these loans, respectively, was immaterial.
Allowance for Credit Losses and Allowance for Credit Losses Related to Off-Balance Sheet Items
The Company’s estimate of the allowance for credit losses at June 30, 2022 and December 31, 2021 reflected losses expected over the remaining contractual life of the assets based on historical, current, and forward-looking information. The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected troubled debt restructuring.
Management selected three loss methodologies for the collective allowance estimation. At June 30, 2022, the Company used the discounted cash flow (“DCF”) method to estimate allowances for credit losses for the commercial and industrial loan portfolio, the Probability of Default/Loss Given Default (“PD/LGD”) method for the commercial real estate, construction, SBA and residential real estate portfolios, and the Weighted Average Remaining Maturity (“WARM”) method to estimate expected credit losses for the equipment financing agreements portfolio. Loans that do not share similar risk characteristics are individually evaluated for allowances.
For the loans utilizing the DCF method, the Company determined that four quarters represented a reasonable and supportable forecast period and reverted to a historical loss rate over twelve quarters on a straight-line basis. Since reasonable and supportable forecasts of economic conditions are imbedded directly into the DCF model, qualitative adjustments are reduced but considered.
For each of the loan segments identified above, the Company applied an annualized historical PD/LGD using all available historical periods. The PD/LGD method incorporates a forecast into loss estimates using a qualitative adjustment.
The Company applied an expected loss ratio based on internal historical losses adjusted as appropriate for qualitative factors when applying the WARM method.
As of June 30, 2022 and December 31, 2021, the Company relied on the economic projections from Moody’s Analytics Economic Scenarios and Forecasts and the Federal Open Market Committee to inform its loss driver forecasts over the four-quarter forecast period. For all loan pools, the Company utilizes and forecasts the national unemployment rate as the primary loss driver.
To adjust the historical and forecast periods to current conditions, the Company applies various qualitative factors derived from market, industry or business specific data, changes in the underlying portfolio composition, trends relating to credit quality, delinquency, nonperforming and adversely rated equipment financing agreements, and reasonable and supportable forecasts of economic conditions.
The allowance for credit losses was $73.1 million at June 30, 2022 compared with $72.6 million at December 31, 2021. The allowance attributed to individually evaluated loans was $2.0 million at June 30, 2022 compared with $2.8 million at December 31, 2021. The allowance attributed to collectively evaluated loans was $71.1 million at June 30, 2022 compared with $69.8 million at December 31, 2021, and considered the impact of changes in macroeconomic assumptions, including an improving unemployment rate and rising interest rates for the subsequent four quarters.
53
The following table reflects our allocation of the allowance for credit losses by loan category as well as the loans receivable for each loan category to total loans, including related percentages:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||||||||||
|
|
|
Allowance Amount |
|
|
Percentage of Total Allowance |
|
|
Total Loans |
|
|
Percentage of Total Loans |
|
|
Allowance Amount |
|
|
Percentage of Total Allowance |
|
|
Total Loans |
|
|
Percentage of Total Loans |
|
||||||||
|
|
|
(dollars in thousands) |
|
|||||||||||||||||||||||||||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
7,889 |
|
|
|
10.8 |
% |
|
$ |
1,071,379 |
|
|
|
18.9 |
% |
|
$ |
6,579 |
|
|
|
9.1 |
% |
|
$ |
970,134 |
|
|
|
18.8 |
% |
|
Hospitality |
|
|
16,935 |
|
|
|
23.2 |
% |
|
|
651,586 |
|
|
|
11.5 |
% |
|
|
22,670 |
|
|
|
31.2 |
% |
|
|
717,692 |
|
|
|
13.9 |
% |
|
Other |
|
|
16,832 |
|
|
|
23.0 |
% |
|
|
2,011,727 |
|
|
|
35.6 |
% |
|
|
15,065 |
|
|
|
20.8 |
% |
|
|
1,919,033 |
|
|
|
37.3 |
% |
|
Total commercial property loans |
|
|
41,656 |
|
|
|
57.0 |
% |
|
|
3,734,692 |
|
|
|
66.0 |
% |
|
|
44,314 |
|
|
|
61.1 |
% |
|
|
3,606,859 |
|
|
|
70.0 |
% |
|
Construction |
|
|
3,915 |
|
|
|
5.4 |
% |
|
|
94,882 |
|
|
|
1.7 |
% |
|
|
4,078 |
|
|
|
5.6 |
% |
|
|
95,006 |
|
|
|
1.8 |
% |
|
Residential |
|
|
541 |
|
|
|
0.7 |
% |
|
|
521,576 |
|
|
|
9.2 |
% |
|
|
498 |
|
|
|
0.7 |
% |
|
|
400,546 |
|
|
|
7.8 |
% |
|
Total real estate loans |
|
|
46,112 |
|
|
|
63.1 |
% |
|
|
4,351,150 |
|
|
|
76.9 |
% |
|
|
48,890 |
|
|
|
67.4 |
% |
|
|
4,102,411 |
|
|
|
79.6 |
% |
|
Commercial and industrial loans |
|
|
14,275 |
|
|
|
19.5 |
% |
|
|
766,894 |
|
|
|
13.6 |
% |
|
|
12,418 |
|
|
|
17.1 |
% |
|
|
561,831 |
|
|
|
10.9 |
% |
|
Equipment financing agreements |
|
|
12,680 |
|
|
|
17.4 |
% |
|
|
537,358 |
|
|
|
9.5 |
% |
|
|
11,249 |
|
|
|
15.5 |
% |
|
|
487,299 |
|
|
|
9.5 |
% |
|
Total |
|
$ |
73,067 |
|
|
|
100.0 |
% |
|
$ |
5,655,402 |
|
|
|
100.0 |
% |
|
$ |
72,557 |
|
|
|
100.0 |
% |
|
$ |
5,151,541 |
|
|
|
100.0 |
% |
The following table sets forth certain ratios related to our allowance for credit losses at the dates presented:
|
|
|
As of |
|
|||||
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
(in thousands) |
|
|||||
|
Ratios: |
|
|
|
|
|
|
|
|
|
Allowance for credit losses to loans receivable |
|
|
1.29 |
% |
|
|
1.41 |
% |
|
Nonaccrual loans to loans |
|
|
0.20 |
% |
|
|
0.26 |
% |
|
Allowance for credit losses to nonaccrual loans |
|
|
661.54 |
% |
|
|
543.09 |
% |
|
|
|
|
|
|
|
|
|
|
|
Balance: |
|
|
|
|
|
|
|
|
|
Nonaccrual loans at end of period |
|
$ |
11,045 |
|
|
$ |
13,360 |
|
|
Nonperforming loans at end of period |
|
$ |
11,045 |
|
|
$ |
13,360 |
|
As of June 30, 2022 and December 31, 2021, the allowance for credit losses related to off-balance sheet items, primarily unfunded loan commitments, was $2.3 million and $2.6 million, respectively. The Bank closely monitors the borrower’s repayment capabilities, while funding existing commitments to ensure losses are minimized. Based on management’s evaluation and analysis of portfolio credit quality and prevailing economic conditions, we believe these allowances were adequate for current expected lifetime losses in the loan portfolio and off-balance sheet exposure as of June 30, 2022.
The following table presents a summary of net charge-offs (recoveries) for the loan portfolio:
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
|
Average Loans |
|
|
Net Charge-Offs (Recoveries) |
|
|
Net Charge-Offs (Recoveries) to Average Loans (1) |
|
|
Average Loans |
|
|
Net Charge-Offs (Recoveries) |
|
|
Net Charge-Offs (Recoveries) to Average Loans (1) |
|
||||||
|
|
|
(in thousands) |
|
|||||||||||||||||||||
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
$ |
3,877,458 |
|
|
$ |
(62 |
) |
|
|
(0.01 |
)% |
|
$ |
3,815,403 |
|
|
$ |
273 |
|
|
|
0.03 |
% |
|
Residential loans |
|
|
472,178 |
|
|
|
(2 |
) |
|
|
(0.00 |
)% |
|
|
440,249 |
|
|
|
(2 |
) |
|
|
(0.00 |
)% |
|
Commercial and industrial loans |
|
|
706,918 |
|
|
|
(112 |
) |
|
|
(0.06 |
)% |
|
|
643,105 |
|
|
|
(372 |
) |
|
|
(0.23 |
)% |
|
Equipment financing agreements |
|
|
515,950 |
|
|
|
260 |
|
|
|
0.20 |
% |
|
|
504,272 |
|
|
|
85 |
|
|
|
0.07 |
% |
|
Total |
|
$ |
5,572,504 |
|
|
$ |
84 |
|
|
|
0.01 |
% |
|
$ |
5,403,029 |
|
|
$ |
(16 |
) |
|
|
(0.00 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
$ |
3,402,300 |
|
|
$ |
98 |
|
|
|
0.01 |
% |
|
$ |
3,386,150 |
|
|
$ |
92 |
|
|
|
0.01 |
% |
|
Residential loans |
|
|
322,817 |
|
|
|
(278 |
) |
|
|
(0.34 |
)% |
|
|
328,812 |
|
|
|
964 |
|
|
|
1.17 |
% |
|
Commercial and industrial loans |
|
|
613,548 |
|
|
|
97 |
|
|
|
0.06 |
% |
|
|
668,142 |
|
|
|
92 |
|
|
|
0.06 |
% |
|
Equipment financing agreements |
|
|
414,632 |
|
|
|
991 |
|
|
|
0.96 |
% |
|
|
415,207 |
|
|
|
2,758 |
|
|
|
2.66 |
% |
|
Total |
|
$ |
4,753,297 |
|
|
$ |
908 |
|
|
|
0.08 |
% |
|
$ |
4,798,311 |
|
|
$ |
3,906 |
|
|
|
0.33 |
% |
|
(1) |
Annualized |
54
For the three months ended June 30, 2022, gross charge-offs were $0.6 million, a decrease of $0.9 million, from $1.5 million for the same period in 2021 and gross recoveries were $0.5 million, a decrease of $0.1 million, from $0.6 million for the three months ended June 30, 2021. Net loan charge-offs were $0.1 million, or 0.01 percent of average loans, compared with net loan charge-offs of $0.9 million, or 0.08 percent of average loans, for the three months ended June 30, 2022 and 2021, respectively.
For the six months ended June 30, 2022, gross charge-offs were $1.4 million, a decrease of $3.5 million, from $5.0 million for the same period in 2021 and gross recoveries were $1.5 million, an increase of $0.4 million, from $1.1 million for the six months ended June 30, 2021. Net loan charge-offs were $16,000, or 0.00 percent of average loans, compared with net loan charge-offs of $3.9 million, or 0.33 percent of average loans, for the six months ended June 30, 2022 and 2021, respectively.
Deposits
The following table shows the composition of deposits by type as of the dates indicated:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
|
|
Balance |
|
|
Percent |
|
|
Balance |
|
|
Percent |
|
||||
|
|
|
(dollars in thousands) |
|
|||||||||||||
|
Demand – noninterest-bearing |
|
$ |
2,782,737 |
|
|
|
46.5 |
% |
|
$ |
2,574,517 |
|
|
|
44.5 |
% |
|
Interest-bearing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand |
|
|
123,614 |
|
|
|
2.1 |
% |
|
|
125,183 |
|
|
|
2.2 |
% |
|
Money market and savings |
|
|
2,102,161 |
|
|
|
35.2 |
% |
|
|
2,099,381 |
|
|
|
36.3 |
% |
|
Uninsured time deposits of more than $250,000: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months or less |
|
|
45,109 |
|
|
|
0.8 |
% |
|
|
69,464 |
|
|
|
1.2 |
% |
|
Over three months through six months |
|
|
44,951 |
|
|
|
0.8 |
% |
|
|
73,808 |
|
|
|
1.3 |
% |
|
Over six months through twelve months |
|
|
81,569 |
|
|
|
1.4 |
% |
|
|
29,706 |
|
|
|
0.5 |
% |
|
Over twelve months |
|
|
8,822 |
|
|
|
0.2 |
% |
|
|
549 |
|
|
|
0.0 |
% |
|
Other time deposits |
|
|
790,427 |
|
|
|
13.2 |
% |
|
|
813,661 |
|
|
|
14.1 |
% |
|
Total deposits |
|
$ |
5,979,390 |
|
|
|
100.0 |
% |
|
$ |
5,786,269 |
|
|
|
100.0 |
% |
Total deposits were $5.98 billion and $5.79 billion as of June 30, 2022 and December 31, 2021, respectively, representing an increase of $193.1 million, or 3.3 percent.
The increase in deposits was primarily driven by an increase in noninterest-bearing demand deposits, offset by a reduction in time deposits. At June 30, 2022, the loan-to-deposit ratio was 94.6 percent compared with 89.0 percent at December 31, 2021. The increase in noninterest-bearing deposits reflects growth from new and existing customer relationships.
As of June 30, 2022, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $2.75 billion, of which $2.57 billion were demand deposits and money market and savings deposits and $180.5 million were time deposits. As of December 31, 2021, the aggregate amount of uninsured deposits was $2.63 billion, consisting of $2.46 billion in demand deposits and money market and savings deposits and $173.5 million in time deposits.
Borrowings and Subordinated Debentures
Borrowings mostly take the form of advances from the FHLB. At June 30, 2022 and December 31, 2021, total advances from the FHLB were $145.0 million and $137.5 million, respectively. The Bank had $20.0 million in overnight advances from the FHLB at June 30, 2022. There were no overnight advances from the FHLB at December 31, 2021.
The weighted-average interest rate of all FHLB advances at June 30, 2022 and December 31, 2021 were 1.13 percent and 1.05 percent, respectively, and weighted-average interest rate of FHLB advances for the six months ended June 30, 2022 and December 31, 2021 were 1.05 percent and 1.17 percent, respectively.
Average balances of FHLB advances for the three months ended June 30, 2022 and December 31, 2021 were $135.4 million and $145.3 million, respectively, with maximum amount outstanding at any month end during the year to date periods ended June 30, 2022 and December 31, 2021 of $215.0 million and $162.5 million, respectively.
Interest expense on borrowings for the three months ended June 30, 2022 and 2021 was $370,000 and $447,000, respectively. Interest expense on borrowings for the six months ended June 30, 2022 and 2021 was $0.7 million and $0.9 million, respectively.
55
The following is a summary of contractual maturities greater than twelve months of FHLB advances:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
FHLB of San Francisco |
|
Outstanding Balance |
|
|
Weighted Average Rate |
|
|
Outstanding Balance |
|
|
Weighted Average Rate |
|
||||
|
|
|
(dollars in thousands) |
|
|||||||||||||
|
Advances due over 12 months through 24 months |
|
$ |
50,000 |
|
|
|
0.37 |
% |
|
$ |
50,000 |
|
|
|
0.97 |
% |
|
Advances due over 24 months through 36 months |
|
|
25,000 |
|
|
|
1.22 |
% |
|
|
37,500 |
|
|
|
0.40 |
% |
|
Outstanding advances over 12 months |
|
$ |
75,000 |
|
|
|
0.65 |
% |
|
$ |
87,500 |
|
|
|
0.73 |
% |
Subordinated debentures were $129.1 million as of June 30, 2022 and $215.0 million as of December 31, 2021. The $86.0 million decrease in subordinated debentures was primarily due to the redemption of the 2017 Notes on March 30, 2022. Subordinated debentures are comprised of fixed-to-floating subordinated notes of $108.1 million and $194.2 million as of June 30, 2022 and December 31, 2021, respectively, and junior subordinated deferrable interest debentures of $21.0 million and $20.8 million as of June 30, 2022 and December 31, 2021, respectively. See “Note 8 – Borrowings and Subordinated Debentures” to the consolidated financial statements for more details.
Interest Rate Risk Management
The spread between interest income on interest-earning assets and interest expense on interest-bearing liabilities is the principal component of net interest income, and interest rate changes substantially affect our financial performance. We emphasize capital protection through stable earnings. In order to achieve stable earnings, we prudently manage our assets and liabilities and closely monitor the percentage changes in net interest income and equity value in relation to limits established within our guidelines.
The Company performs simulation modeling to estimate the potential effects of interest rate changes. The following table summarizes one of the stress simulations performed to forecast the impact of changing interest rates on net interest income and the value of interest-earning assets and interest-bearing liabilities reflected on our balance sheet (i.e., an instantaneous parallel shift in the yield curve of the magnitude indicated below) as of June 30, 2022. The Company compares this stress simulation to policy limits, which specify the maximum tolerance level for net interest income exposure over a 1- to 12-month and a 13- to 24- month horizon, given the basis point adjustment in interest rates reflected below.
|
|
|
|
|
Net Interest Income Simulation |
|
|||||||||||||
|
Change in |
|
|
1- to 12-Month Horizon |
|
|
13- to 24-Month Horizon |
|
|||||||||||
|
Interest |
|
|
Dollar |
|
|
Percentage |
|
|
Dollar |
|
|
Percentage |
|
|||||
|
Rate |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
Change |
|
|||||
|
|
|
|
|
(dollars in thousands) |
|
|||||||||||||
|
300% |
|
|
$ |
22,889 |
|
|
|
9.19 |
% |
|
$ |
40,479 |
|
|
|
16.33 |
% |
|
|
200% |
|
|
$ |
15,321 |
|
|
|
6.15 |
% |
|
$ |
27,036 |
|
|
|
10.91 |
% |
|
|
100% |
|
|
$ |
8,344 |
|
|
|
3.35 |
% |
|
$ |
15,160 |
|
|
|
6.12 |
% |
|
|
(100%) |
|
|
$ |
(12,720 |
) |
|
|
(5.10 |
%) |
|
$ |
(23,520 |
) |
|
|
(9.49 |
%) |
|
|
Change in |
|
|
|
|
|
|
Economic Value of Equity (EVE) |
|
||||||
|
Interest |
|
|
|
|
|
|
Dollar |
|
|
Percentage |
|
|||
|
Rate |
|
|
|
|
|
|
Change |
|
|
Change |
|
|||
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|||||
|
300% |
|
|
|
|
|
|
$ |
86,322 |
|
|
|
9.16 |
% |
|
|
200% |
|
|
|
|
|
|
$ |
67,814 |
|
|
|
7.19 |
% |
|
|
100% |
|
|
|
|
|
|
$ |
45,818 |
|
|
|
4.86 |
% |
|
|
(100%) |
|
|
|
|
|
|
$ |
(77,001 |
) |
|
|
(8.17 |
%) |
|
The estimated sensitivity does not necessarily represent our forecast, and the results may not be indicative of actual changes to our net interest income. These estimates are based upon a number of assumptions, including the timing and magnitude of interest rate changes, prepayments on loans receivable and securities, pricing strategies on loans receivable and deposits, and replacement of asset and liability cash flows.
56
The key assumptions, based upon loans receivable, securities and deposits, are as follows:
|
|
Conditional prepayment rates*: |
|
|
|
|
|
|
|
|
Loans receivable |
|
|
|
|
19 |
% |
|
|
Securities |
|
|
|
|
8 |
% |
|
|
Deposit rate betas*: |
|
|
|
|
|
|
|
|
NOW, savings, money market demand |
|
|
|
|
47 |
% |
|
|
Time deposits, retail and wholesale |
|
|
|
|
78 |
% |
|
|
|
|
|
|
|
|
|
|
|
* Balance-weighted average |
|
|
|
|
|
|
While the assumptions used are based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions, including how customer preferences or competitor influences might change.
Capital Resources and Liquidity
Capital Resources
Historically, our primary source of capital has been the retention of operating earnings. In order to ensure adequate capital levels, the Board regularly assesses projected sources and uses of capital, expected loan growth, anticipated strategic actions (such as stock repurchases and dividends), and projected capital thresholds under adverse and severely adverse economic conditions. In addition, the Board considers the Company’s access to capital from financial markets through the issuance of additional debt and securities, including common stock or notes, to meet its capital needs.
In response to the uncertainty surrounding the COVID-19 pandemic, the Board reduced the quarterly cash dividends paid on common stock beginning in the second quarter of 2020. Due to the continued stabilization of Company results and financial condition, the Board authorized an increase in the quarterly cash dividend to $0.12 per share for the second quarter of 2021 from $0.10 per share for the first quarter of 2021. As the effects of the pandemic continued to subside and the Company’s results and financial condition improved, the Board again increased the dividend to $0.20 per share for the fourth quarter of 2021, and to $0.22 per share for the first and second quarters of 2022. The Board expects to continue to re-evaluate the level of quarterly dividends in subsequent quarters.
The Company’s ability to pay dividends to shareholders depends in part upon dividends it receives from the Bank. California law restricts the amount available for cash dividends to the lesser of a bank’s retained earnings or net income for its last three fiscal years (less any distributions to shareholders made during such period). Where the above test is not met, cash dividends may still be paid, with the prior approval of the Department of Financial Protection and Innovation (“DFPI”), in an amount not exceeding the greatest of: (1) retained earnings of the bank; (2) net income of the bank for its last fiscal year; or (3) the net income of the bank for its current fiscal year. As of July 1, 2022, after giving effect to the $0.25 per share 2022 third quarter dividend declared by the Company, the Bank has the ability to pay dividends of approximately $73.5 million without the prior approval of the Commissioner of the DFPI.
At June 30, 2022, the Bank’s total risk-based capital ratio of 13.70 percent, Tier 1 risk-based capital ratio of 12.64 percent, common equity Tier 1 capital ratio of 12.64 percent and Tier 1 leverage capital ratio of 11.00 percent, placed the Bank in the “well capitalized” category pursuant to capital rules, which is defined as institutions with total risk-based capital ratio equal to or greater than 10.00 percent, Tier 1 risk-based capital ratio equal to or greater than 8.00 percent, common equity Tier 1 capital ratios equal to or greater than 6.50 percent, and Tier 1 leverage capital ratio equal to or greater than 5.00 percent.
At June 30, 2022, the Company's total risk-based capital ratio was 14.31 percent, Tier 1 risk-based capital ratio was 11.42 percent, common equity Tier 1 capital ratio was 11.07 percent and Tier 1 leverage capital ratio was 9.94 percent.
For a discussion of implemented changes to the capital adequacy framework prompted by Basel III and the Dodd- Frank Wall Street Reform and Consumer Protection Act, see our 2021 Annual Report on Form 10-K.
57
Liquidity
For a discussion of liquidity for the Company, see Note 14 - Liquidity included in the notes to unaudited consolidated financial statements in this Report and Note 22 – Liquidity in our 2021 Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
For a discussion of off-balance sheet arrangements, see Note 12 - Off-Balance Sheet Commitments included in the notes to unaudited consolidated financial statements in this Report and “Item 1. Business - Off-Balance Sheet Commitments” in our 2021 Annual Report on Form 10-K.
Contractual Obligations
There have been no material changes to the contractual obligations described in our 2021 Annual Report on Form 10-K.
Recently Issued Accounting Standards
FASB ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, On March 12, 2020, the FASB issued ASU 2020-04 to ease the potential burden in accounting for reference rate reform. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.
The new guidance provided several optional expedients that reduce costs and complexity of accounting for reference rate reform, including measures to simplify or modify accounting issues resulting from reference rate reform for contract modifications, hedges, and debt securities.
The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of ASU 2020-04. An entity may elect to apply the amendments prospectively through December 31, 2022.
The adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.
FASB ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures (Topic 326): The FASB amended the accounting and disclosure requirements for expected credit losses by removing the recognition and measurement guidance on TDRs and enhancing disclosures pertaining to certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Additionally, this standard requires disclosure of current-period gross write-offs by year of origination for financing receivables.
The standard becomes effective for the Company for the interim and annual periods beginning on January 1, 2023. Early adoption is permitted.
The Company is in the process of evaluating the standard and its effect on the Company’s financial condition, results of operations, cash flows, and financial statement disclosures.
58
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For quantitative and qualitative disclosures regarding market risks in Hanmi Bank’s portfolio, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk Management” and “- Capital Resources” in this Report.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Management is responsible for the disclosure controls and procedures of the Corporation. Disclosure controls and procedures are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of June 30, 2022.
Changes in Internal Control over Financial Reporting
There were no changes in the Corporation's internal control over financial reporting (as defined in Rule 13a-15(f)) during the quarter ended June 30, 2022 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
59
Part II — Other Information
Item 1. Legal Proceedings
From time to time, Hanmi Financial and its subsidiaries are parties to litigation that arises in the ordinary course of business, such as claims to enforce liens, claims involving the origination and servicing of loans, and other issues related to the business of Hanmi Financial and its subsidiaries. In the opinion of management, the resolution of any such issues would not have a material adverse impact on the financial condition, results of operations, or liquidity of Hanmi Financial or its subsidiaries.
Item 1A. Risk Factors
There have been no material changes in risk factors applicable to the Corporation from those described in “Risk Factors” in Part I, Item 1A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 24, 2019, the Company announced a stock repurchase program that authorized the repurchase of up to 5 percent of its outstanding shares or approximately 1.5 million shares of common stock. As of June 30, 2022, 659,972 shares remained available for future purchases under that stock repurchase program. The Company acquired 22,216 shares from employees in connection with the satisfaction of employee tax withholding obligations incurred through vesting of Company stock awards for the six months ended June 30, 2022.
The following table represents information with respect to repurchases of common stock made by the Company during the three months ended June 30, 2022:
|
Purchase Date: |
|
Average Price Paid Per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Program |
|
|
Maximum Shares That May Yet Be Purchased Under the Program |
|
|||
|
April 1, 2022 - April 30, 2022 |
|
$ |
— |
|
|
|
— |
|
|
|
659,972 |
|
|
May 1, 2022 - May 31, 2022 |
|
$ |
— |
|
|
|
— |
|
|
|
659,972 |
|
|
June 1, 2022 - June 30, 2022 |
|
$ |
— |
|
|
|
— |
|
|
|
659,972 |
|
|
Total |
|
$ |
— |
|
|
|
— |
|
|
|
659,972 |
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
60
Item 6. Exhibits
|
Exhibit Number |
|
Document |
|
|
|
|
|
10.1 |
|
|
|
|
|
|
|
31.1 |
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
32.2 |
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document * |
|
|
|
|
|
101.SCH |
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Inline XBRL Taxonomy Extension Schema Document * |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document * |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document * |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document * |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document * |
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104 |
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The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL |
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* |
Attached as Exhibit 101 to this report are documents formatted in Inline XBRL (Extensible Business Reporting Language). |
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† |
Constitutes a management contract or compensatory plan or arrangement. |
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
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Hanmi Financial Corporation |
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Date: |
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August 9, 2022 |
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By: |
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/s/ Bonita I. Lee |
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Bonita I. Lee |
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President and Chief Executive Officer (Principal Executive Officer) |
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Date: |
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August 9, 2022 |
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By: |
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/s/ Romolo C. Santarosa |
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Romolo C. Santarosa |
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Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
62