Hanmi Financial ((HAFC)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Hanmi Financial Corporation painted a balanced picture of the company’s financial health and strategic direction. While the company showcased strong financial performance with notable deposit and loan growth, it also faced challenges such as a decline in Commercial & Industrial (C&I) loan production and a downgrade of a Commercial Real Estate (CRE) loan. Overall, the positive highlights and successful strategic expansions were somewhat offset by these operational challenges.
Strong Net Income Growth
Hanmi Financial reported a significant increase in net income for the first quarter of 2025, reaching $17.7 million or $0.58 per diluted share. This marks a 17% increase in net income and a 16% rise in earnings per share compared to the first quarter of 2024, indicating robust financial health.
Net Interest Margin Expansion
The company achieved its third consecutive quarter of net interest margin expansion, with an increase of 11 basis points to 3.02%. This growth was primarily driven by reduced funding costs, showcasing effective financial management.
Deposit and Loan Growth
Hanmi Financial saw its total loans grow to $6.28 billion, a 0.5% increase on a linked quarter basis. Deposits also grew by 3% in the first quarter, fueled by new commercial accounts and contributions from new branches, highlighting the company’s successful expansion efforts.
USKC Initiative Success
The USKC initiative proved to be a success, with deposits from this segment increasing significantly to represent 15% of total deposits, up from 13% at the end of 2024. This reflects the company’s strategic focus on diversifying its deposit base.
Opening of New Branch in Duluth, Georgia
Hanmi Financial successfully opened a new branch in Duluth, Georgia, marking its expansion into a rapidly growing market with a significant Korean community. This move aligns with the company’s strategy to tap into new growth opportunities.
C&I Loan Production Decline
Despite the overall positive performance, the company faced a decline in C&I loan production, which fell to $42 million, a decrease of $18 million or 30% from the previous quarter. This decline poses a challenge for the company’s growth in this segment.
CRE Loan Downgrade
A CRE loan was downgraded to nonperforming status, leading to an increase in the provision for operating loss expense. This highlights a potential risk area in the company’s loan portfolio.
Slight Increase in Nonperforming Assets
The ratio of nonperforming assets to total assets saw a slight increase during the first quarter, indicating a need for continued vigilance in asset quality management.
SBA Trade Premium Decline
Trade premiums for SBA loan sales declined by 71 basis points to 7.82%, which could impact noninterest income from this segment.
Forward-Looking Guidance
Looking ahead, Hanmi Financial remains focused on generating low to mid-single-digit loan growth, expanding its C&I portfolio, and maintaining strong asset quality. The company aims to continue its strategic initiatives, including the successful USKC initiative, while managing challenges in loan production and asset quality.
In summary, Hanmi Financial Corporation’s earnings call highlighted a strong financial performance with strategic expansions and initiatives. However, challenges such as the decline in C&I loan production and the downgrade of a CRE loan underscore the need for careful management. The company’s forward-looking guidance suggests a continued focus on growth and asset quality, setting the stage for future developments.