Hanmi Financial Corporation Q3 FY2025 earnings call

• Net income increased due to higher net interest income and lower credit loss expense. Net interest margin expanded to 3.22%.
• Total loans grew 3.5% QoQ with strong loan production, particularly in C&I loans. CRE and residential loan production also saw increases.
• Deposits grew 0.6% QoQ driven by new commercial accounts and new branches, with noninterest-bearing demand deposits stable.
• Asset quality improved with proactive management reducing criticized loans and non-performing assets, and net charge-offs decreased.
• USKC initiative continued to grow, with loan and deposit portfolios reaching mid-teens as a percentage of total loans and deposits. Executives visited Korea to expand relationships.
• Operational efficiency improved with efficiency ratio declining to 52.65%, showing better operating leverage.

Net income for the third quarter was $22.1 million or $0.73 per diluted share, up from $15.1 million or $0.50 in the second quarter. Net interest margin expanded by 15 basis points to 3.22% driven by higher average yields on loans and lower funding costs. Total loans increased to $6.53 billion, a 3.5% QoQ increase with loan production up 73% to $571 million. C&I loans saw $211 million in new loans. Deposits increased 0.6% QoQ, driven by new commercial accounts and new markets, with noninterest-bearing demand deposits stable at ~31% of total deposits. Asset quality improved with reduction in criticized and non-performing loans. USKC loan balances increased 8.2% to $910 million, representing ~14% of total loan portfolio.

• Hanmi expects mid-single-digit loan growth for the year.
• Continued focus on driving loan growth, scaling C&I, residential, and SBA loan portfolios.
• Broadening core deposit base and maintaining solid credit metrics.

• Factors affecting results differing from forward-looking statements, including risks in the financial industry and macro environment.
• Potential impact of interest rate changes on funding costs and loan growth.
• Competition in lending and deposit markets.

Q: Kelly Ann Motta asked about loan growth, pull forward, and funding.

A: Bonita I. Lee discussed loan growth as a function of production and payoffs, expecting mid-single-digit growth. Romolo C. Santarosa talked about funding needs and deposit cost trends.

Q: Adam Kroll asked about deposit rate reductions, competition, and share repurchases.

A: Romolo C. Santarosa spoke about deposit rate reduction expectations and competition in lending and deposits. Anthony I. Kim mentioned manageable competition. Romolo C. Santarosa stated share repurchases are likely to continue.

Q: Ahmad Jamal Hasan asked about fee income from mortgage loans, USKC business sentiment, and NDFI exposure.

A: Romolo C. Santarosa said fee income from mortgage loans could continue. Bonita I. Lee discussed positive business sentiment in Korea regarding US expansion. Romolo C. Santarosa stated NDFI exposure is very small.