Safe and Sound

Hanmi Bank

Los Angeles, CA
5
Star Rating
Hanmi Bank is a Los Angeles, CA-based, FDIC-insured bank dating back to 1982. As of December 31, 2017, the bank had equity of $666.4 million on $5.21 billion in assets.

With 642 full-time employees in 41 offices in multiple states, the bank has amassed loans and leases worth $4.28 billion, including real estate loans of $3.61 billion. U.S. bank customers currently have $4.36 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Hanmi Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is valuable. It acts as a buffer against losses and as protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, Hanmi Bank scored 16 out of a possible 30 points, beating out the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Hanmi Bank's Tier 1 capital ratio was 14.47 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Hanmi Bank held equity amounting to 12.79 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

Having large numbers of these kinds of assets suggests a bank could eventually have to use capital to cover losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

Hanmi Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.37 percent of Hanmi Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Hanmi Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's earnings test, Hanmi Bank scored 18 out of a possible 30, above the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Hanmi Bank was 9.08 percent, above the national average of 8.10 percent.

The bank earned net income of $57.7 million on total equity of $666.4 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.16 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.