Hanmi Financial Corporation Q4 FY2025 earnings call

Overview - Hanmi Financial Corporation had a solid Q4 and strong full year 2025, with teams executing well on priorities. ### Fourth Quarter Highlights - Net income for Q4 was $21.2 million or 70¢ per diluted share, down 3.7% due to lower noninterest income. Net interest income up 2.9%, net interest margin 3.28%. Return on average assets 1.07%, return on average equity 10.14%. ### Full Year Highlights - Full year net income $76.1 million or $2.51 per diluted share, up 22%. Loan growth $312 million or 5%. Net interest income up 16.5%, net interest margin up 37bps. Noninterest income up 7.6%. Pre-provision net revenue up 31.5%. ### Loan and Deposit Activities - Full year loan production up 36%, driven by investments in banking team. Deposits grew 3.8% in 2025, with noninterest-bearing deposits stable. Asset quality remained excellent with nonperforming assets 0.26% of total assets and allowance of credit losses 1.07% of total loans. Efficiency ratio for full year improved to 54.7% from 60.3% prior year. $42 million of capital returned to shareholders in 2025 through repurchases and dividends.

Loans: Fourth quarter loan production was $375 million, down $196 million or 34% from the prior quarter. Full year loan growth was $312 million or 5%. C&I loan production for the full year was up 42%, residential up 90%, and SBA consistent. CRE production in Q4 was $126 million, down 29% from prior quarter. USKC loan balances were $862 million, representing approximately 13% of total loan portfolio. Deposits: Fourth quarter deposits decreased 1.3% from prior quarter, driven by decline in demand deposits, money market, and savings, partially offset by increase in time deposits. Full year deposits grew 3.8%, with noninterest-bearing deposits representing 30% of total deposits.

2026 Priorities - Expect low to mid-single-digit loan growth with continued portfolio diversification. - Focus on growing deposits to support loan growth while maintaining stable funding mix, emphasizing noninterest-bearing deposits. - Sustain disciplined expense management while investing selectively in talent and technology. - Prudently manage credit to maintain strong asset quality through conservative underwriting and robust risk analysis.

• Competitive banking environment could impact market share. - Economic changes may affect asset quality and loan performance. - Forward-looking statements involve risks and uncertainties, actual results may differ from expectations as outlined in SEC filings.

Q: Can you provide color on the hospitality credit downgraded to special mention?

A: Periodically monitor significant loans; this loan is seasoned with strong sponsor and liquidity, property in Southern California undergoing PIP for World Cup and Olympics, no loss probability foreseen.

Q: Thoughts on expense outlook for 2026 and OREO costs?

A: OREO costs may continue depending on sale closure, mid-single-digit expense growth expected as 2025 had 4.6% increase, with healthcare and service fees factors.

Q: CD repricing schedule and roll-off rates?

A: Over $900 million CDs rolling off in first half at 4.01%, another ~$900 million in second quarter at 3.95%, aiming to reprice maturing CDs in first half at 3.5 - 3.6 to lower deposit cost.

Q: Why not more aggressive on buyback?

A: Board evaluates capital return quarterly; share prices above tangible book in Q4 had minimizing effect, will address in 2026 with continued repurchases.

Q: Commentary on CD book pricing power and competition?

A: Competition intense in declining rate environment, CD retention rate around 90% but some competitors offer higher rates, relationship-based rates provided.

Q: Expense seasonality and starting point for 2026?

A: Seasonality includes higher Q4 advertising, payroll tax in Q1, annual merits in Q2; jumping-off point involves considering seasonal factors like advertising fade, payroll pickup, and personnel mix.

Q: Yield on new loan production?

A: Focus on maintaining appropriate yield on new loans, being selective in originations to prioritize returns.

Q: Prepays and payoffs in the quarter compared to 3Q?

A: Payoffs were a bit elevated compared to 3Q, annually loan payoffs and paydowns 13% higher than prior year