Hanmi Financial (HAFC) - 2025 Q1 - Quarterly Report

Part I – Financial Information Financial Statements The company's unaudited statements show asset growth to $7.73 billion and a net income increase to $17.7 million Consolidated Balance Sheets Total assets grew to $7.73 billion, driven by increases in net loans and total deposits Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Total Assets | $7,729,035 | $7,677,925 | | Loans receivable, net | $6,211,592 | $6,181,230 | | Securities available for sale | $907,011 | $905,798 | | Liabilities & Equity | | | | Total Deposits | $6,619,475 | $6,435,776 | | Borrowings | $117,500 | $262,500 | | Total Stockholders' Equity | $751,485 | $732,174 | Consolidated Statements of Income Q1 2025 net income rose to $17.7 million, driven by higher net interest income and lower noninterest expenses Q1 2025 vs. Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $55,092 | $50,655 | | Credit Loss Expense | $2,721 | $227 | | Noninterest Income | $7,726 | $7,733 | | Noninterest Expense | $34,984 | $36,445 | | Net Income | $17,672 | $15,164 | | Diluted EPS | $0.58 | $0.50 | Notes to Consolidated Financial Statements The notes detail accounting policies, including a new methodology for estimating the allowance for credit losses (ACL) - Effective January 1, 2025, the Company changed its methodology for estimating expected credit losses on its loan portfolio from a Probability of Default / Loss Given Default (PD/LGD) model to a historical loss rate approach[24][25] - The company and its subsidiary bank exceeded all minimum regulatory capital requirements to be considered 'well capitalized' as of March 31, 2025[83][86] Securities Available for Sale (in thousands) | Security Type | Fair Value (Mar 31, 2025) | Fair Value (Dec 31, 2024) | | :--- | :--- | :--- | | U.S. government agency and sponsored agency obligations | $752,823 | $751,860 | | U.S. Treasury securities | $89,631 | $88,929 | | Municipal bonds-tax exempt | $64,557 | $65,009 | | Total | $907,011 | $905,798 | Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total real estate loans | $4,955,187 | $4,900,924 | | Commercial and industrial loans | $854,406 | $863,431 | | Equipment financing agreements | $472,596 | $487,022 | | Total Loans Receivable | $6,282,189 | $6,251,377 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis highlights a 16.4% net income increase, expanded net interest margin, and a rise in nonperforming loans - Net income for Q1 2025 was $17.7 million, up from $15.2 million for Q1 2024, driven by higher net interest income and lower noninterest expense[177] - Nonperforming assets increased significantly to $35.7 million (0.46% of total assets), primarily due to a $20.0 million commercial real estate office loan being designated as nonaccrual[212][215][217] - The company adopted a new Allowance for Credit Losses (ACL) methodology, transitioning to a historical loss rate approach adjusted for economic forecasts from Moody's[160][224][228] Key Performance Ratios | Ratio | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Return on average assets | 0.94% | 0.81% | | Return on average stockholders' equity | 8.92% | 7.90% | | Net interest margin (taxable equivalent) | 3.02% | 2.78% | Quantitative and Qualitative Disclosures About Market Risk The company demonstrates asset sensitivity, with Net Interest Income projected to rise with increasing interest rates Interest Rate Sensitivity Analysis (as of March 31, 2025) | Change in Rates (bps) | 1-12 Month NII % Change | EVE % Change | | :--- | :--- | :--- | | +300 | 8.30% | 10.31% | | +200 | 5.52% | 7.75% | | +100 | 2.98% | 4.83% | | -100 | (3.57%) | (7.68%) | | -200 | (7.23%) | (17.79%) | | -300 | (10.48%) | (29.75%) | Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[258] - No material changes in internal control over financial reporting occurred during the quarter, and the change in CECL model methodology did not impact these controls[259] Part II – Other Information Legal Proceedings Routine litigation is not expected to have a material adverse impact on the company's financial condition - Hanmi Financial and its subsidiaries are involved in routine litigation, which management believes will not have a material adverse financial impact[262] Risk Factors No material changes were reported to the risk factors disclosed in the 2024 Annual Report - No material changes in risk factors have occurred since the company's 2024 Annual Report on Form 10-K[263] Issuer Purchases of Equity Securities The company repurchased 50,000 shares in Q1 2025, with 1.18 million shares remaining under the buyback program - As of March 31, 2025, 1,180,500 shares remained available for future purchases under the company's stock repurchase program[264] Common Stock Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | March 1-31, 2025 | 50,000 | $22.49 | | Total Q1 2025 | 50,000 | $22.49 | Exhibits Filed exhibits include amendments to executive employment agreements and required officer certifications - Filed exhibits include amendments to employment agreements for Bonita I. Lee and Romolo C. Santarosa, as well as CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906[269]