Hanmi Financial Corp Form 425
 

Filed by Hanmi Financial Corporation
Pursuant to Rule 425 Under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934

Subject Company: Pacific Union Bank
FDIC Certificate No.: 21765

     The following press release was issued by Hanmi Financial Corporation (“HAFC”) on January 26, 2004:

HANMI FINANCIAL CORPORATION REPORTS RECORD NET INCOME OF $19.2
MILLION FOR 2003; EARNINGS PER SHARE INCREASE TO $1.34

— Total Assets Grow to a Record $1.79 Billion —

LOS ANGELES, CA. — January 26, 2004 (Market Wire) — Hanmi Financial Corporation (NASDAQ:HAFC), the holding company for Hanmi Bank, today reported net income for the year ended December 31, 2003 of $19.2 million, an increase of 12.8 percent compared with 2002 net income of $17.0 million. Fully diluted earnings per share increased in 2003 to $1.34 compared with $1.20 in 2002.

Fourth quarter pre-tax income was $9.9 million, an increase of 37.0 percent compared with $7.2 million in the same period of 2002. Fourth quarter earnings were reduced by $929,000, or $0.06 per fully diluted share, as a result of the reversal of certain net state tax benefits recorded in the first three quarters of 2003. Fourth quarter income exclusive of such reversals was $6.0 million, or $0.42 per fully diluted share.

Fourth quarter 2003 net income was $5.1 million, an increase of 5.9 percent compared with $4.8 million in the same period of 2002. Fourth quarter 2003 fully diluted earnings per share were $0.35, compared with $0.34 in the fourth quarter of 2002.

“This was an extraordinary year both in terms of our financial performance and the building of the foundation for a successful future for Hanmi Bank,” said Jae Whan Yoo, President and CEO. “We are pleased with our strong financial results: our net interest income increased 18.0 percent and our total assets grew 22.6 percent in 2003 to a record $1.79 billion, and our net loans increased 28 percent during the year to $1.25 billion. From this position of strength, we are looking forward to the next steps under our definitive agreement to acquire Pacific Union Bank. The combination, which we hope to complete in the second quarter of 2004, will position Hanmi Bank as the premier Korean-American bank, second to none in the U.S. I am also pleased to report the progress of both banks in developing a post-merger integration plan.”

FOURTH QUARTER HIGHLIGHTS

          Fourth quarter 2003 earnings before income taxes increased 37.0 percent to $9.9 million, compared with $7.2 million during the same quarter in 2002.

 


 

          Net interest income before provision for loan losses increased 32.7 percent to $16.5 million from $12.4 million in the fourth quarter of 2002.
 
          Service charges and fee income increased 14.1 percent to $3.9 million from $3.4 million in the fourth quarter of 2002.
 
          Gain on sale of investments declined 83.9 percent to $244,000 from $1.5 million in the fourth quarter of 2002.
 
          Income taxes increased 98.6 percent from $2.4 million to $4.8 million, due primarily to the higher pre-tax income in the fourth quarter and the reversal of net state tax benefits recorded in the first three quarters of 2003. The company reversed the tax benefits in response to an announcement issued by the California Franchise Tax Board in the fourth quarter of 2003.
 
          Hanmi on December 22 announced a definitive agreement to acquire Pacific Union Bank, a commercial bank based in Los Angeles with assets reported at $1.1 billion.
 
          Hanmi appointed new Chief Financial Officer, Michael J. Winiarski.

FULL-YEAR HIGHLIGHTS

          Full year earnings before income taxes increased 21.5 percent to $31.6 million, compared with $26.0 million in 2002.
 
          Net interest income before provision for loan losses increased 18.0 percent to $57.0 million from $48.3 million in 2002.
 
          Service charges and fee income increased 14.1 percent to $15.1 million from $13.2 million in 2002.
 
          Total assets increased to a record $1.79 billion, an increase of 22.6 percent from $1.46 billion as of December 31, 2002.
 
          Net loans increased 28.0 percent to $1.25 billion from $0.97 billion as of December 31, 2002.
 
          The efficiency ratio improved to 51.3 percent from 55.4 percent in 2002.
 
          Hanmi opened two additional branches in Silicon Valley and Downtown Los Angeles, bringing its total branches to fifteen.

Net Interest Income Before Provision for Loan Losses

Net interest income before provision for loan losses was $16.5 million for the fourth quarter of 2003, an increase of $4.1 million, or 32.7 percent, compared with $12.4 million for the same quarter in 2002. Net interest income before provision for loan losses for the full year increased by $8.7 million, or 18 percent, to $57.0 million compared with $48.3 million for 2002. The increase in net interest income was primarily due to an increase of average interest-earning assets over average interest bearing liabilities. The net interest margin was 3.99 percent for the fourth quarter of 2003 and 3.73 percent for the full year.

Average interest-earning assets increased $333.8 million or 25.3 percent over the fourth quarter of 2002 and provided an additional $3.7 million of interest income compared with the fourth quarter of 2002. The majority of this growth was funded by a $252 million, or a 20.2 percent, increase in total deposits and a $48 million increase in the quarterly average balance of Federal

 


 

Home Loan Bank borrowings. However, interest expense decreased by $403,000 due to faster re-pricing of interest-bearing liabilities.

Provision for Loan Losses

The provision for loan losses represents the charge against current earnings that is determined by management, through a disciplined credit review process, as the amount needed to maintain an allowance that is sufficient to absorb loan losses inherent in the Company’s loan portfolio. The provision for loan losses was $1.3 million in the fourth quarter of 2003 compared with $1.7 million for the fourth quarter of 2002.

Non-interest Income

Non-interest income was $5.1 million for the fourth quarter of 2003, which represented a decrease of 10.2 percent compared with $5.7 million recognized during the same quarter in 2002. The decrease was mainly due to a decrease in the gain on sales of securities, offset by increases in service charges on deposit accounts and international trade finance fees. The gain on sales of available-for-sale securities decreased by $1.3 million to $244,000, compared with $1.5 million during the fourth quarter of 2002. Other non-interest income increased by 16.8 percent or $695,000, which includes a $291,000 increase in service charges on deposit accounts and a $158,000 increase in trade finance fees.

Non-interest Expense

Non-interest expense increased by $1.2 million or 12.7 percent to $10.4 million in the fourth quarter of 2003 compared with $9.2 million in the fourth quarter of 2002. The increase during the fourth quarter of 2003 was primarily attributable to increases in salaries and employee benefits, due to the opening of two new branches.

Income Taxes

The provision for taxes for the fourth quarter of 2003 was $4.8 million, bringing the provision for the full year to $12.4 million, at an effective rate of 39.3 percent. The provision for the fourth quarter includes the reversal of California tax benefits arising from certain transactions involving a real estate investment trust (REIT). The California Franchise Tax Board has taken the position that such tax benefits will be disallowed pursuant to California Senate Bill 614 and Assembly Bill 1601, which were enacted in October 2003. The Company continues to believe that it is entitled to the benefits of them under the law. However, realization of them in the near term is not assured, and for that reason the Company has reversed all REIT consent dividend benefits recorded in 2003.

Financial Position

Total assets were $1.79 billion at December 31, 2003, up 22.6 percent from the balance of $1.46 billion at December 31, 2002, primarily reflecting the growth in commercial real estate loans and commercial loans. Hanmi Bank’s investment securities portfolio increased 49.4 percent to $417.7 million at December 31, 2003, up $138.1 million compared to $279.5 million at December 31, 2002.

 


 

At December 31, 2003, net loans totaled $1.25 billion, an increase of $272.9 million or 28.0 percent from $974.1 million at December 31, 2002. The majority of the growth was in commercial and real estate loans, which resulted primarily from new business. Commercial loans grew by $138.1 million to $711.0 million at December 31, 2003, compared to $572.9 million at December 31, 2002. Real estate loans increased by $127.8 million to $499.4 million at December 31, 2003, compared to $371.6 million at December 31, 2002.

The growth in total assets was funded by increases in customer deposits of $161.9 million, up by 12.6 percent, to $1.45 billion. These rising balances were led by increases in time deposits of $84.3 million, up 14.5 percent to $667.8 million, non-interest bearing accounts of $63.0 million, up 15.3 percent to $475.1 million, money market checking accounts of $15.8 million, up 8.3 percent to $206.1 million, and offset by a decrease in savings accounts of $1.3 million or 1.3 percent to $96.9 million.

The Company’s borrowings mostly take the form of advances from the Federal Home Loan Bank of San Francisco (“FHLB”) and repurchase agreements. Advances from the FHLB were $148.4 million, and securities sold under agreements to repurchase were $9.5 million at December 31, 2003.

Asset Quality

Total non-performing assets (“NPAs”), which include accruing loans due 90 days or more, non-accrual loans, and other real estate owned (“OREO”) assets increased by $2.2 million to $8.7 million at year end 2003 from $6.5 million at December 31, 2002. Non-performing assets as a percentage of gross loans increased to 0.68 percent at December 31, 2003 from 0.65 percent at December 31, 2002.

At December 31, 2003, accruing loans 90 days or more past due were $557,000, down $60,000 from $617,000 at December 31, 2002. However, non-accrual loans were $8.1 million, up $2.2 million from $5.9 million at December 31, 2002. There were no OREO assets at December 31, 2003.

The allowance for loan losses was $14.7 million, and represented the amount needed to maintain an allowance that the Company believes should be sufficient to absorb loan losses inherent in its loan portfolio. The allowance for loan losses represented 1.16 percent of gross loans and 170.1 percent of non-performing loans at December 31, 2003. The comparable ratios were 1.24 percent of year-end 2002 gross loans and 189.5 percent of non-performing loans at December 31, 2002.

About Hanmi Financial Corporation:

Headquartered in Los Angeles, Hanmi Bank, a wholly owned subsidiary of Hanmi Financial Corporation, provides services to the multi-ethnic communities of California, with 15 full-service offices in Los Angeles, Orange, San Diego and Santa Clara counties. Hanmi Bank specializes in commercial, SBA, trade finance and consumer lending, and is a recognized community leader. Hanmi Bank’s mission is to provide a full range of quality products and premier services to its customers and to maximize shareholder value.

 


 

Forward-Looking Statements:

This release may contain forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. 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. These 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 statement. These factors include the following: risks associated with the Company’s pending acquisition of Pacific Union Bank, including potential deposit run-off; general economic and business conditions in those areas in which the Company operates; demographic changes; competition for loans and deposits; fluctuation in interest rates; risks of natural disasters related to the Company’s real estate portfolio; risks associated with SBA loans; changes in governmental regulation; credit quality; the availability of capital to fund the expansion of the Company’s business; and changes in securities markets. In addition, Hanmi sets forth certain risks in its reports filed with the Securities and Exchange Commission, including the Company’s Form 10-Q for the quarter ended September 30, 2003 and its Annual Report on Form 10-K for the fiscal year ended December 31, 2002 which could cause actual results to differ from those projected.

 


 

FINANCIAL HIGHLIGHTS

                                                                                       
(Dollars in thousands, except per share data)   For the Quarter Ended   For the Year Ended

  December 31,   December 31,
         
 
          2003   2002   2003   2002
         
 
 
 
CONDENSED INCOME STATEMENT                                
Interest income
  $ 21,623     $ 17,960     $ 77,761     $ 69,607  
Interest expense
    5,121       5,524       20,796       21,345  
 
   
     
     
     
 
 
Net interest income
    16,502       12,436       56,965       48,262  
 
Provision for loan losses
    1,300       1,650       5,680       4,800  
 
   
     
     
     
 
 
Net interest income after provision
    15,202       10,786       51,285       43,462  
Service charge on deposit accounts
    2,684       2,393       10,339       9,195  
Trade finance fees
    758       600       2,887       2,410  
Remittance fees
    264       232       952       786  
Other service charges and fees
    195       194       875       803  
Bank owned life insurance income
    116       141       499       552  
Change in fair value of interest rate swap
    35             35       1,368  
Gain on sales of loans
    528       409       2,157       1,875  
Gain on sale of investments
    244       1,514       1,094       3,265  
All other non-interest income
    263       179       840       659  
 
   
     
     
     
 
 
Non interest income
    5,087       5,662       19,678       20,913  
 
Salaries and employee benefits
    5,703       4,822       21,214       17,930  
Expenses of premises and fixed assets
    1,343       1,125       5,198       4,330  
Data processing expense
    770       717       3,080       2,784  
Supplies and communications
    383       370       1,496       1,466  
Professional fees
    229       201       1,167       1,003  
Advertising and promotion
    544       486       1,635       1,523  
Loan referral fees
    268       160       921       691  
Impairment charge on investment
          10             4,416  
Other non-interest expense
    1,162       1,342       4,614       4,190  
 
   
     
     
     
 
 
Non-interest expense
    10,402       9,233       39,325       38,333  
 
   
     
     
     
 
   
Income before income taxes
    9,887       7,215       31,638       26,042  
 
                               
Income taxes
    4,812       2,423       12,425       9,012  
 
   
     
     
     
 
     
Net Income
  $ 5,075     $ 4,792     $ 19,213     $ 17,030  
 
   
     
     
     
 
Basic EPS
  $ 0.36     $ 0.34     $ 1.37     $ 1.23  
Diluted EPS
  $ 0.35     $ 0.34     $ 1.34     $ 1.20  
Weighted average shares outstanding — basic
    14,144,497       13,823,785       14,046,354       13,823,785  
Weighted average shares outstanding — diluted
    14,452,873       14,052,343       14,331,013       14,153,246  
                                         
            As of   As of   Change
            December 31, 2003   December 31, 2002   Amount   Percentage
           
 
 
 
CONDENSED BALANCE SHEET                                
Assets
                               
Cash and due from banks
  $ 59,595     $ 67,772     $ (8,177 )     -12.1 %
Federal funds sold
          55,000       (55,000 )     -100.0 %
Term federal funds sold
          30,000       (30,000 )     -100.0 %
FRB and FHLB stock
    10,355       4,579       5,776          
Investment securities
    417,616       279,548       138,068       49.4 %
Loans:
                               
 
Loans, net of unearned income
    1,261,748       986,408       275,340       27.9 %
 
Allowance for loan and lease losses
    14,734       12,269       2,465       20.1 %
 
   
     
     
     
 
   
Net loans
    1,247,014       974,139       272,875       28.0 %
Due from customers on acceptances
    3,930       4,472       (542 )     -12.1 %
Bank premises and equipments
    8,435       8,240       195       2.4 %
Accrued interest receivable
    6,686       5,533       1,153       20.8 %
Deferred income taxes
    7,207       4,223       2,984       70.7 %
Bank owned life insurance
    11,137       10,637       500       4.7 %
Other assets
    13,779       12,155       1,624       13.4 %
 
   
     
     
     
 
       
Total Assets
  $ 1,785,754     $ 1,456,298     $ 329,456       22.6 %
 
   
     
     
     
 
Liabilities and Stockholders’ equity
                               
Noninterest-bearing deposits
  $ 475,100     $ 412,060     $ 63,040       15.3 %
Interest-bearing deposits
  $ 970,735     $ 871,919     $ 98,816       11.3 %
 
   
     
                 
Total deposits
    1,445,835       1,283,979       161,856       12.6 %
Accrued interest payable
    4,403       3,385       1,018       30.1 %
Acceptances outstanding
    3,930       4,472       (542 )     -12.1 %
Borrowed funds
    182,999       37,797       145,202       384.2 %
Other liabilities
    9,120       2,197       6,923       315.1 %
 
   
     
     
     
 
       
Total Liabilities
    1,646,287       1,331,830       314,457       23.6 %
 
   
     
     
     
 
Shareholders’ equity
    139,467       124,468       14,999       12.1 %
 
   
     
     
     
 
     
Total Liabilities and Equity
  $ 1,785,754     $ 1,456,298     $ 329,456       22.6 %
 
   
     
     
     
 
                         
    For the year ended
   
    December 31, 2003   December 31, 2002
   
 
Average Balance
               
Average net loans
  $ 1,103,765     $ 882,625  
Average interest-earning assets
    1,525,633       1,211,553  
Average assets
    1,623,214       1,308,886  
Average interest-bearing liabilities
    1,057,249       854,858  
Average deposits
    1,416,564       1,164,561  
Average equity
    132,369       112,927  
Selected Performance Ratios
               
Return on average assets
    1.18 %     1.30 %
Return on average equity
    14.51 %     15.08 %
Efficiency ratio
    51.31 %     55.41 %
Net interest margin
    3.73 %     3.98 %
                 
    As of   As of
    December 31, 2003   December 31, 2002
   
 
Allowance for Loan Losses
               
Balance at the beginning of the year
  $ 12,269     $ 10,064  
Provision for loan losses
    5,680       4,800  
Charge-offs, net of recoveries
    3,215       2,595  
 
   
     
 
Balance at the end of the year
  $ 14,734     $ 12,269  
 
   
     
 
Loan loss allowance /Gross loans
    1.16 %     1.24 %
Loan loss allowance/Non-performing loans
    170.12 %     189.48 %
                 
    As of   As of
    December 31, 2003   December 31, 2002
   
 
Non-performing assets
               
Accruing loans - 90 days past due
  $ 557     $ 617  
Non accrual loans
    8,104       5,858  
 
   
     
 
Total Non-performing loans
  $ 8,661     $ 6,475  
 
   
     
 
Total Non-performing loans / Total gross loans
    0.68 %     0.65 %
Total Non-performing assets
  $ 8,661     $ 6,475  
 
   
     
 
Total Non-performing assets / Total Assets
    0.49 %     0.44 %
                                     
        As of   As of   Change
        December 31, 2003   December 31, 2002   Amount   Percentage
       
 
 
 
Loan Portfolio
                               
Real estate loans
  $ 499,376     $ 371,593     $ 127,783       34.4 %
Commercial loans
    711,012       572,910       138,102       24.1 %
Consumer loans
    54,878       44,416       10,462       23.6 %
 
   
     
     
     
 
 
Total gross loans
    1,265,266       988,919       276,347       27.9 %
Unearned loan fees
    (3,518 )     (2,511 )     (1,007 )     40.1 %
Allowance for loan losses
    (14,734 )     (12,269 )     (2,465 )     20.1 %
 
   
     
     
     
 
   
Net loans
  $ 1,247,014     $ 974,139     $ 272,875       28.0 %
 
   
     
     
     
 
Loan Mix
                               
Real estate loans
    39.47 %     37.58 %                
Commercial loans
    56.19 %     57.93 %                
Consumer loans
    4.34 %     4.49 %                
 
   
     
                 
   
Total gross loans
    100.00 %     100.00 %                
 
   
     
                 
                                     
        As of   As of   Change
        December 31, 2003   December 31, 2002   Amount   Percentage
       
 
 
 
Deposit Portfolio
                               
Non-interest bearing
  $ 475,100     $ 412,060     $ 63,040       15.3 %
Money market checking
    206,086       190,314       15,772       8.3 %
Savings
    96,869       98,121       (1,252 )     -1.3 %
Time certificates of deposit $100,000 or more
    388,944       323,544       65,400       20.2 %
Other time deposits
    278,836       259,940       18,896       7.3 %
   
Total deposits
  $ 1,445,835     $ 1,283,979     $ 161,856       12.6 %
 
   
     
     
     
 
Deposit Mix
                               
Non-interest bearing
    32.86 %     32.09 %                
Money market checking
    14.25 %     14.82 %                
Savings
    6.70 %     7.64 %                
Time certificates of deposit $100,000 or more
    26.90 %     25.20 %                
Other time deposits
    19.29 %     20.24 %                
 
Total deposits
    100.00 %     100.00 %                
 
   
     
                 
         
Contact:   Hanmi Financial Corporation    
    Michael J. Winiarski, CFO   (213) 368-3200
    Stephanie Yoon, Investor Relations   (213) 427-5631

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