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What: Shares of California bank holding company Hanmi Financial
So what: When your shareholders have endured a two-year earnings drought, reporting a profit can elicit a pretty strong reaction. Hanmi has been racked by losses for the past eight quarters but managed to turn that around this quarter as its provision for loan losses fell drastically from both the prior quarter and last year. That allowed the bank to report a $0.04-per-share profit, which was well above the $0.07-per-share loss that Wall Street expected. The bank also saw other credit measures improve -- nonperforming assets as a percentage of total assets declined from 7.76% a year ago to 5.95%, while the company's allowance for credit losses as a percentage of its problem loans expanded from 66.2% a year ago to 86.4%.
Now what: Hanmi's provision for credit losses dropped off by a shocking amount, so it'll be important for investors to keep an eye on that number in the coming quarters. If the company is able to keep it at this level or lower it will be very impressive. Meanwhile, the bank has been subject of takeover rumors as it seeks new funds to further bolster its capital base. As it noted in its quarterly release, the bank is still waiting to see whether regulators will approve a transaction with Woori Finance
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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.