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HANMI FINANCIAL CORP (HAFC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 EPS was $0.50, down from $0.58 in Q1, as higher credit loss expense ($7.6M) offset solid core performance; net interest margin expanded 5 bps to 3.07% and pre-provision net revenue rose 3.7% .
  • Wall Street consensus (S&P Global) expected $0.61 EPS and ~$65.7M revenue; HAFC missed both on EPS and revenue, primarily due to the $8.6M charge-off on a syndicated CRE office loan and higher qualitative loss rates in the allowance* .
  • Asset quality improved markedly: criticized loans fell 72% q/q to 0.74% of loans, nonaccruals declined to 0.41% of loans, and delinquencies dropped to 0.17% of loans .
  • Deposits grew 1.7% q/q to $6.73B with healthy mix (31.3% noninterest-bearing); loans grew 0.4% to $6.31B, with strong C&I and residential mortgage production .
  • Management expects further NIM improvement but at a diminishing rate; expenses should remain relatively stable for the year, and quarterly SBA production targets were increased for H2 2025 .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expansion and PPNR growth: NIM rose to 3.07% (+5 bps q/q), and pre-provision net revenue increased 3.7%, driven by lower funding costs and higher net interest income .
  • Deposit and loan growth with improved mix: deposits rose 1.7% q/q to $6.73B, noninterest-bearing demand deposits were 31.3% of total; loans increased 0.4% with solid C&I and residential mortgage production .
  • Sharp asset quality improvement: criticized loans to total loans fell to 0.74% (from 2.62%), nonperforming assets to assets decreased to 0.33%, and delinquencies dropped to 0.17% .
  • CEO quote: “We further expanded our net interest margin to 3.07%, and grew preprovision net revenue by 3.7%, primarily driven by lower funding costs.” .

What Went Wrong

  • EPS and revenue miss vs consensus (S&P Global): Q2 2025 EPS $0.50 vs $0.61*; revenue ~$57.6M actual vs ~$65.7M consensus*, reflecting elevated credit loss expense *.
  • Credit-driven headwinds: credit loss expense rose to $7.6M (from $2.7M), due to $11.4M net charge-offs including an $8.6M charge-off on a syndicated CRE office loan .
  • Noninterest expense uptick: total noninterest expense increased 3.9% q/q to $36.3M, largely from salaries/benefits (+$1.1M), professional fees, and advertising tied to branch opening (partially offset by $0.6M OREO gain) .

Financial Results

Income statement and profitability (prior year and prior quarter comparisons)

MetricQ2 2024Q1 2025Q2 2025
Net Interest Income ($M)$48.620 $55.092 $57.139
Noninterest Income ($M)$8.057 $7.726 $8.071
Operating Revenue ($M)$56.7 $62.8 $65.2
Credit Loss Expense ($M)$0.961 $2.721 $7.631
Net Income ($M)$14.451 $17.672 $15.117
Diluted EPS ($)$0.48 $0.58 $0.50
Net Interest Margin (%)2.69% 3.02% 3.07%
Efficiency Ratio (%)62.24% 55.69% 55.74%
ROAA (%)0.77% 0.94% 0.79%
ROAE (%)7.50% 8.92% 7.48%

Balance sheet and asset quality

MetricQ2 2024Q1 2025Q2 2025
Loans Receivable ($B)$6.176 $6.282 $6.306
Deposits ($B)$6.329 $6.619 $6.729
Total Assets ($B)$7.586 $7.729 $7.862
Loan-to-Deposit Ratio (%)97.1% (Q4 ref) 94.9% 93.7%
Nonperforming Assets / Assets (%)0.26% 0.46% 0.33%
Criticized Loans / Total Loans (%)1.15% 2.62% 0.74%
Delinquencies (30–89 days) / Loans (%)0.22% 0.28% 0.17%
ACL / Loans (%)1.10% 1.12% 1.06%
TCE / TA (%)9.19% 9.59% 9.58%

Estimates vs Actuals (S&P Global consensus)

MetricPeriodConsensusActual
Primary EPS ($)Q1 20250.574*0.58
Primary EPS ($)Q2 20250.61*0.50
Revenue ($M)Q1 202563.43*60.097*
Revenue ($M)Q2 202565.70*57.579*

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (trajectory)2025Continuing expansion; pace to slow (Q1 commentary) Expect NIM to increase further, but rate of increase will continue to slow Maintained (refined)
Expenses (run-rate)2025Q2 salaries/benefits +3–4%; others generally in line with inflation Expenses relatively stable through year; normal seasonality (ads Q4, payroll tax Q1) Maintained
Effective Tax Rate2025~29.6% in Q1 ~29.5% run-rate for year; drifts up into year-end Maintained
SBA Production (quarterly)H1 2025$42–$45M per quarter Increased to “$45M–$40M” quarterly target for H2 2025 Raised
BuybacksOngoingBoard-driven; historical range 25–75k shares per quarter Same approach; range 25–75k shares cited Maintained
DividendQ2 2025$0.27 per share (Q1) $0.27 per share declared April 24, paid May 21 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
NIM trajectory and funding costsNIM up 17 bps in Q4; further expansion in Q1 with deposit repricing tailwinds NIM up to 3.07%; management expects continued improvement but slower pace Improving, pace slowing
Credit quality and office CRE exposureQ1: one syndicated office CRE moved to nonaccrual; $6.2M specific reserve; maturities ~$200M monitored with no major issues expected Q2: $8.6M charge-off on that syndicated office loan; overall criticized/nonaccruals improved; no major office portfolio issues anticipated Isolated resolution; broader metrics improving
US-Korea Corporate (USKC) initiativeQ1: deposits up strongly; loan balances ~15% of portfolio; branch opened in metro Atlanta Q2: customers in “wait-and-see” due to tariffs; USKC deposits ~14% of total; continued relationship additions Strategic build, cautious near-term
Tariffs/macroQ1: customers prepared; limited impact expected; 90-day hold observed Q2: USKC customers largely waiting for tariff clarity; optimistic long term Watchful
Operating expenses disciplineQ4/Q1: efficiency improved; seasonal patterns noted Q2: expenses up on merits/promotions and branch ads; run-rate stable Stable with seasonality
SBA programQ1: strong production and gains; guidance $42–$45M/quarter Q2: gains $2.2M; production $46.8M; quarterly target increased for H2 Scaling up

Management Commentary

  • Bonnie Lee (CEO): “We further expanded our net interest margin to 3.07%, and grew preprovision net revenue by 3.7%, primarily driven by lower funding costs.”
  • Bonnie Lee (CEO): “Asset quality remained excellent with significant improvement from the prior quarter. Criticized loans, nonaccrual loans and delinquent loans all declined notably.”
  • Ron Santarosa (CFO): “I would continue to expect net interest margin to increase. However, the rate of increase… will continue to slow given the proportion of time deposits to the total portfolio.”
  • Anthony Kim (CBO): “C&I pipeline… much higher than that of the second quarter… C&I, along with mortgage and SBA, will drive the growth.”
  • Bonnie Lee (CEO) on syndicated office loan: “We recorded the $8.6 million charge-off for the collateral shortfall… the best course of action on a collateral-dependent loan.”

Q&A Highlights

  • NIM trajectory: CFO expects continued NIM improvement but with a diminishing rate of increase; maturing CDs in Q3 average 4.12%, offering ~10–11 bps repricing tailwind .
  • Credit outlook: Large $8.6M charge-off recognized on a syndicated office CRE; otherwise, office maturities and broader credit metrics remain constructive, criticized assets down meaningfully .
  • Growth drivers: C&I pipeline strengthened; SBA production and mortgage activity remain healthy, with quarterly SBA targets increased for H2 .
  • Expenses: Run-rate expected to be relatively stable, with typical seasonal patterns (ads/promotions Q4, payroll taxes Q1) .
  • Tax rate: Effective tax rate approximated at ~29.5% for FY 2025, drifting up toward year-end .

Estimates Context

  • EPS missed consensus: Q2 2025 EPS $0.50 vs S&P Global consensus $0.61*, driven by higher credit loss expense and the $8.6M charge-off .
  • Revenue missed consensus: Q2 2025 revenue ~$57.6M actual vs ~$65.7M consensus*, reflecting lower-than-expected topline versus estimates*; note operating revenue reported by company was $65.2M *.
  • Potential estimate revisions: Given credit costs and net charge-offs, near-term EPS estimates likely adjust lower; NIM expansion guidance supports revenue/NII outlook, but at a slowing pace .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Core spread income is improving: NIM reached 3.07% and should continue to rise, though at a slower pace, as CDs reprice lower and deposit costs moderate .
  • Asset quality reset is constructive: Despite one-off $8.6M office loan charge-off, criticized, nonaccrual, and delinquency metrics improved sharply, lowering portfolio risk .
  • Earnings leverage from SBA/C&I: SBA gains ($2.2M) and increased quarterly production targets, plus a stronger C&I pipeline, support fee and loan growth into H2 .
  • Expense discipline intact: Efficiency ratio held at ~55.7%; expenses expected stable with normal seasonality, supporting operating leverage .
  • Deposit franchise is a strength: 31.3% noninterest-bearing mix and 1.7% q/q growth underpin funding stability and NIM trajectory .
  • Capital remains robust: CET1 12.12% (company) and well-capitalized bank ratios; TCE/TA ~9.58% and TBVPS $24.91 support optionality (dividends/buybacks) .
  • Near-term stock drivers: Resolution of credit event, visible NIM progression, and SBA/C&I execution; watch tariff clarity for USKC deposit/loan momentum .