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Hanmi Financial NASDAQ: HAFC highlighted loan growth, net interest margin expansion, and stable credit quality during its fourth quarter and full-year 2025 earnings call, while noting that fourth-quarter earnings dipped slightly due to lower non-interest income. Management also outlined 2026 priorities centered on measured loan growth, deposit gathering, expense discipline, and conservative credit oversight.
Fourth-quarter results show margin improvement despite lower non-interest income
President and CEO Bonnie Lee said the company delivered “a solid performance” in the fourth quarter to cap “a strong year of growth.” Net income in the fourth quarter was $21.2 million, or $0.70 per diluted share, down 3.7% from the prior quarter due to lower non-interest income. Net interest income increased 2.9% sequentially, and net interest margin expanded by six basis points to 3.28%.
Lee reported return on average assets of 1.07% and return on average equity of 10.14% for the quarter.
CFO Ron Santarosa said fourth-quarter net interest income rose to $62.9 million as the average cost of interest-bearing deposits fell, while loan balances increased. Average loans increased 2.4% to $6.46 billion, with an average rate of 5.94%. He said Hanmi reduced deposit interest rates twice during the quarter following a 50 basis point reduction in the federal funds rate. The average rate on interest-bearing deposits was 3.36% with an average balance of $4.71 billion.
Non-interest income totaled $8.3 million and declined from the third quarter, primarily due to lower gains on sales of mortgage loans and the absence of bank-owned life insurance income. Santarosa noted the third quarter included death benefit payouts from the bank-owned life insurance portfolio, while the fourth quarter did not.
Full-year 2025: higher earnings, loan growth, and improved efficiency ratio
For full-year 2025, Lee said net income reached $76.1 million, or $2.51 per diluted share, up 22%, with a return on average equity of 9.32%. As previously guided, Hanmi generated loan growth of $312 million, or 5%.
Management emphasized that margin and revenue trends improved during the year. Lee said net interest margin expanded 37 basis points in 2025, citing a combination of lower interest-bearing deposit costs and higher average loan balances. She also said pre-provision net revenue increased 31.5%.
On expenses, Lee said non-interest expense rose 4.6% year over year, primarily from salaries and benefits tied to merit increases and investments in new banking talent. However, she said the efficiency ratio improved to 54.7% from 60.3% in the prior year. Santarosa put the fourth-quarter efficiency ratio at 54.95%.
Loan production, portfolio mix shifts, and SBA activity
Chief Banking Officer Anthony Kim said fourth-quarter loan production was $375 million, down $196 million, or 34%, from the third quarter, with a weighted average interest rate of 6.90%. Despite the sequential decline, he said full-year originations were “consistent across categories,” with continued strength in C&I, residential, and SBA lending, and that the bank maintained disciplined underwriting.
Kim provided detail by category:
- CRE production was $126 million, down 29% from the prior quarter. Kim said the CRE portfolio had a weighted average loan-to-value ratio of approximately 47.4% and a weighted average debt service coverage ratio of 2.2x.
- SBA production was approximately $44 million, consistent with the prior quarter. Hanmi sold about $29.9 million of SBA loans in the quarter and recognized a gain of $1.8 million.
- C&I production was $82 million, down $129 million, or 61%, from the third quarter. Kim said total commitments for commercial lines of credit were $1.3 billion, with $520 million outstanding, implying a 40% utilization rate.
- Residential mortgage production was $70 million, down 32% from the previous quarter. The bank sold $33.5 million of residential mortgages, generating a gain on sale of $0.6 million.
Lee said loan production increased 36% for the full year, aided by investments in the banking team. She said residential and C&I production increased 90% and 42%, respectively, and that the C&I portfolio expanded 25% as part of a diversification effort. She also said commercial real estate exposure fell to 61.3% of total loans from 63.1% a year earlier.
In response to an analyst question about payoffs and paydowns, Kim said payoffs were “a little bit elevated” versus the third quarter, and that on an annual comparison, payoffs and paydowns were 13% higher than the prior year.
Deposits, competition, and CD repricing
Deposits decreased 1.3% in the fourth quarter, driven by declines in demand deposits, money market, and savings accounts, partially offset by higher time deposits, according to Kim. Lee said deposits grew 3.8% for the full year, and management reiterated that non-interest-bearing deposits remained about 30% of total deposits.
Kim said USKC deposit balances decreased 1.5% sequentially but remained at roughly $1 billion and were up 24% year over year. He also noted the company opened a representative office in Seoul the prior year, which he said helped support customer relationships and contributed to reaching $1 billion in USKC deposits.
Discussion also focused on CD competition and repricing. Santarosa said brokered funding rates had not moved down as much as expected despite Fed rate cuts and noted the short end of the curve remained inverted. Kim added that competition for CDs remained intense, with some banks still offering “high threes, low fours” and promotional rates above 3.85%. He said Hanmi’s CD retention rate was around 90% historically but fell to 80% as the bank chose not to retain some CDs at what he called “irrational rates.”
Santarosa provided a repricing snapshot from the investor deck, saying approximately $1.8 billion of CDs mature in the first half of the year at “high threes and low fours,” and management was aiming to reprice maturing CDs in the 3.5% to 3.7% range, which he said should help lower deposit costs.
Credit metrics and 2026 priorities
Management characterized credit quality as strong. Lee said non-performing assets were 0.26% of total assets and the allowance for credit losses was 1.07% of total loans. Santarosa said net charge-offs were 10 basis points of loans, delinquent loans were 0.27% of loans, criticized loans were 1.48% of loans, and non-performing assets were 0.26% of total assets.
On a question about a hospitality credit moved to Special Mention, management said the downgrade was part of proactive monitoring. The company described it as a senior loan with a strong sponsor and high liquidity, while the Southern California property undergoes a property improvement plan in anticipation of World Cup and Olympic-related activity. Management said it did not foresee loss probability on the credit.
Looking ahead, Lee said the company’s 2026 priorities include low- to mid-single-digit loan growth with continued diversification; deposit growth to support loan expansion while maintaining a stable funding mix with emphasis on non-interest-bearing deposits; disciplined expense management while investing selectively in talent and technology; and prudent credit oversight through conservative underwriting and active monitoring.
Hanmi also discussed capital actions. Lee said the company returned $42 million to shareholders in 2025, including $9 million in share repurchases and $33 million in dividends. Santarosa said Hanmi repurchased 73,600 shares in the fourth quarter at an average price of $26.75, and tangible common equity per share rose 2.5% to $26.27, with tangible common equity at 9.99% of tangible common assets.
About Hanmi Financial NASDAQ: HAFC
Hanmi Financial Corporation is a bank holding company based in California, primarily operating through its wholly owned subsidiary, Hanmi Bank. Established in 1982 to serve the Korean‐American community in Los Angeles, the company has expanded its footprint to include branch locations throughout California as well as markets in Illinois, Texas and Washington State. Hanmi Bank offers a comprehensive suite of commercial and consumer banking products designed to meet the needs of small and medium‐sized businesses, professionals and individual clients.
On the commercial banking side, Hanmi Bank provides business checking and savings accounts, lines of credit, commercial real estate lending and SBA‐guaranteed loans.
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