Hanmi Financial (HAFC) - 2025 Q2 - Quarterly Report

Part I – Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements of Hanmi Financial Corporation and its subsidiaries for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, income statements, comprehensive income statements, statements of changes in stockholders' equity, and cash flow statements, along with detailed notes explaining accounting policies, financial instrument specifics, and other relevant disclosures Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change (2025 vs 2024) | Percentage Change | | :-------------------------------- | :------------ | :------------------ | :-------------------- | :------------------ | | Total assets | $7,862,363 | $7,677,925 | $184,438 | 2.40% | | Loans receivable, net | $6,239,201 | $6,181,230 | $57,971 | 0.94% | | Total deposits | $6,729,122 | $6,435,776 | $293,346 | 4.56% | | Borrowings | $127,500 | $262,500 | $(135,000) | -51.43% | | Total liabilities | $7,099,529 | $6,945,751 | $153,778 | 2.21% | | Total stockholders' equity | $762,834 | $732,174 | $30,660 | 4.19% | Consolidated Statements of Income Consolidated Statements of Income Highlights (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest and dividend income | $101,333 | $98,660 | $200,589 | $198,253 | | Total interest expense | $44,194 | $50,040 | $88,358 | $98,979 | | Net interest income before credit loss expense | $57,139 | $48,620 | $112,231 | $99,274 | | Credit loss expense | $7,631 | $961 | $10,352 | $1,188 | | Total noninterest income | $8,071 | $8,057 | $15,796 | $15,790 | | Total noninterest expense | $36,347 | $35,276 | $71,330 | $71,720 | | Net income | $15,117 | $14,451 | $32,789 | $29,615 | | Basic earnings per share | $0.50 | $0.48 | $1.09 | $0.98 | | Diluted earnings per share | $0.50 | $0.48 | $1.08 | $0.97 | Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income Highlights (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $15,117 | $14,451 | $32,789 | $29,615 | | Other comprehensive income (loss), net of tax | $5,491 | $(1,110) | $16,212 | $(6,072) | | Total comprehensive income | $20,608 | $13,341 | $49,001 | $23,543 | Consolidated Statements of Changes in Stockholders' Equity Changes in Stockholders' Equity (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total stockholders' equity (beginning of period) | $732,174 | $701,891 | | Net income | $32,789 | $29,615 | | Cash dividends paid | $(16,407) | $(15,271) | | Change in unrealized gain (loss) on securities available for sale, net of income taxes | $15,892 | $(4,298) | | Change in unrealized gain (loss) on cash flow hedge, net of income taxes | $320 | $(1,774) | | Total stockholders' equity (end of period) | $762,834 | $707,059 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Net cash provided by operating activities | $6,853 | $32,034 | | Net cash used in investing activities | $(69,850) | $(17,429) | | Net cash provided by (used in) financing activities | $138,247 | $(3,850) | | Net increase in cash and due from banks | $75,250 | $10,755 | | Cash and due from banks at end of period | $380,050 | $313,079 | Notes to Consolidated Financial Statements Note 1 — Organization and Basis of Presentation - Hanmi Financial Corporation is a bank holding company with Hanmi Bank as its primary subsidiary, focusing on traditional banking activities like deposits and lending[22] - Effective January 1, 2025, the Company changed its methodology for estimating expected credit losses on its loan portfolio to a historical loss rate approach, adjusted for current conditions and forecasts, from a PD/LGD model, with an immaterial impact on operating results and financial condition[26][27] Note 2 — Securities Securities Available for Sale (in thousands) | Category | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | Change | | :--------------------------------------- | :--------------------------- | :----------------------------- | :----- | | U.S. Treasury securities | $119,821 | $88,929 | $30,892 | | U.S. government agency and sponsored agency obligations | $733,196 | $751,860 | $(18,664) | | Municipal bonds-tax exempt | $65,077 | $65,009 | $68 | | Total securities available for sale | $918,094 | $905,798 | $12,296 | - The Company evaluates its available-for-sale securities portfolio for impairment quarterly and determined no credit losses were expected as of June 30, 2025, due to the backing of the U.S. government for most of the portfolio[32] - Securities with market values of $27.9 million (June 30, 2025) and $29.4 million (December 31, 2024) were pledged to secure borrowings from the Federal Reserve Bank Discount Window[33] Note 3 — Loans Loans Receivable Composition (in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | Change | | :------------------------------ | :------------ | :---------------- | :----- | | Real estate loans | $4,942,791 | $4,900,924 | $41,867 | | Commercial and industrial loans | $917,995 | $863,431 | $54,564 | | Equipment financing agreements | $445,171 | $487,022 | $(41,851) | | Loans receivable, net | $6,239,201 | $6,181,230 | $57,971 | - Loans with carrying values of $2.40 billion (June 30, 2025) and $2.46 billion (December 31, 2024) were pledged to secure advances from the FHLB[36] Allowance for Credit Losses by Portfolio Segment (in thousands) | Portfolio Segment | June 30, 2025 | December 31, 2024 | Change | | :------------------------------ | :------------ | :---------------- | :----- | | Real estate loans | $48,021 | $45,099 | $2,922 | | Commercial and industrial loans | $6,935 | $10,006 | $(3,071) | | Equipment financing agreements | $11,800 | $15,042 | $(3,242) | | Total allowance for credit losses | $66,756 | $70,147 | $(3,391) | Nonperforming Loans and Assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------- | :------------ | :---------------- | :----- | | Nonaccrual loans | $25,967 | $14,272 | $11,695 | | Total nonperforming loans receivable | $25,967 | $14,272 | $11,695 | | Total nonperforming assets | $25,967 | $14,389 | $11,578 | - Two retail commercial loans totaling $13.5 million were modified with a three-month principal and interest deferment during the six months ended June 30, 2025[57] - One commercial and industrial loan was modified with a six-year term extension[58] Note 4 — Servicing Assets Servicing Assets Activity (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | | :------------------------------ | :----- | :----- | | Balance at beginning of period | $6,457 | $7,070 | | Addition related to sale of loans | $1,335 | $1,132 | | Amortization | $(1,372) | $(1,366) | | Balance at end of period | $6,420 | $6,836 | - The Company serviced $565.7 million in loans sold to unaffiliated parties as of June 30, 2025, primarily SBA loans, which are maintained off-balance sheet[61] - Servicing fee income was $2.6 million for the six months ended June 30, 2025, compared to $2.7 million for the same period in 2024[62] Note 5 — Income Taxes Income Tax Expense and Effective Rate | Period | Income Tax Expense (in thousands) | Effective Income Tax Rate | | :------------------------------- | :------------------------------ | :------------------------ | | Three months ended June 30, 2025 | $6,115 | 28.8% | | Three months ended June 30, 2024 | $5,989 | 29.3% | | Six months ended June 30, 2025 | $13,556 | 29.3% | | Six months ended June 30, 2024 | $12,541 | 29.7% | - A valuation allowance of $1.5 million was maintained against certain state net operating loss carryforwards as of June 30, 2025, and December 31, 2024[65] Note 6 — Goodwill - Goodwill remained at $11.0 million as of June 30, 2025, and December 31, 2024, with no impairment identified during the second quarter of 2025[67] Note 7 — Deposits Scheduled Maturities of Time Deposits (in thousands) | Maturity Year | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | 2025 | $1,452,680 | $2,256,970 | | 2026 | $914,940 | $19,376 | | 2027 | $58,522 | $48,630 | | 2028 | $14,119 | $130 | | 2029 and thereafter | $473 | $177 | | Total | $2,440,734 | $2,325,283 | - Accrued interest payable on deposits decreased to $30.6 million at June 30, 2025, from $34.8 million at December 31, 2024[68] Note 8 — Borrowings and Subordinated Debentures FHLB Advances (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Outstanding advances | $127,500 | $262,500 | | Weighted average rate | 4.62% | 4.75% | | Remaining available borrowing capacity | $1,520,000 | $1,690,000 | - The Bank had $110.0 million of Fixed-to-Floating Subordinated Notes (2031 Notes) with an initial fixed interest rate of 3.75% per annum, maturing September 1, 2031[73] - Junior Subordinated Deferrable Interest Debentures had a balance of $22.3 million at June 30, 2025, with a variable rate tied to three-month SOFR plus 166 basis points (5.98% at June 30, 2025)[74] Note 9 — Earnings Per Share Basic and Diluted EPS (Six Months Ended June 30) | Item | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Income allocated to common shares (in thousands) | $32,517 | $29,393 | | Weighted-average shares for basic EPS | 29,943,279 | 30,089,341 | | Basic EPS | $1.09 | $0.98 | | Weighted-average shares for diluted EPS | 30,048,704 | 30,166,181 | | Diluted EPS | $1.08 | $0.97 | - Unvested restricted stock with non-forfeitable dividends are considered participating securities and included in EPS calculation under the two-class method[76] Note 10 — Regulatory Matters - As of June 30, 2025, Hanmi Bank's capital ratios exceeded the minimum requirements to be considered 'well capitalized'[82] Capital Ratios (June 30, 2025) | Capital Ratio | Hanmi Financial | Hanmi Bank | Minimum Regulatory Requirement | Minimum to Be 'Well Capitalized' | | :------------------------------------ | :-------------- | :--------- | :----------------------------- | :----------------------------- | | Total capital (to risk-weighted assets) | 15.20% | 14.39% | 8.00% | 10.00% | | Tier 1 capital (to risk-weighted assets) | 12.46% | 13.32% | 6.00% | 8.00% | | Common equity Tier 1 capital (to risk-weighted assets) | 12.12% | 13.32% | 4.50% | 6.50% | | Tier 1 capital (to average assets) | 10.63% | 11.43% | 4.00% | 5.00% | - The capital conservation buffer for Hanmi Bank was 6.39% and for Hanmi Financial was 6.46% as of June 30, 2025, exceeding the 2.5% requirement[83] Note 11 — Fair Value Measurements - The Company categorizes fair value measurements into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[86][91] Assets Measured at Fair Value on a Recurring Basis (June 30, 2025, in thousands) | Asset Type | Level 1 | Level 2 | Level 3 | Total Fair Value | | :--------------------------------------- | :-------- | :-------- | :-------- | :--------------- | | U.S. Treasury securities | $119,821 | $— | $— | $119,821 | | U.S. government agency and sponsored agency obligations | $— | $733,196 | $— | $733,196 | | Municipal bonds-tax exempt | $— | $65,077 | $— | $65,077 | | Total securities available for sale | $119,821 | $798,273 | $— | $918,094 | | Derivative financial instruments | $— | $3,283 | $— | $3,283 | Assets Measured at Fair Value on a Non-Recurring Basis (June 30, 2025, in thousands) | Asset Type | Total | Level 1 | Level 2 | Level 3 | | :-------------------------- | :------ | :------ | :------ | :------ | | Collateral dependent loans | $18,269 | $— | $— | $18,269 | | Repossessed personal property | $605 | $— | $— | $605 | Note 12 — Off-Balance Sheet Commitments Total Loan Commitments (in thousands) | Commitment Type | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Unused commitments to extend credit | $915,847 | $782,291 | | Standby letters of credit | $118,290 | $97,463 | | Commercial letters of credit | $14,629 | $18,324 | | Total commitments | $1,048,766 | $898,078 | - The allowance for credit losses related to off-balance sheet items increased to $2.5 million at June 30, 2025, from $2.1 million at December 31, 2024[118] Note 13 — Leases - The Company's leases, primarily for offices and equipment, have remaining terms from one month to nine years, with some renewal options up to ten years[119] Lease Balances (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Right-of-use asset | $34,600 | $35,600 | | Lease liability | $38,700 | $39,800 | - Net lease expense for the six months ended June 30, 2025, was $4.2 million, down from $4.7 million in the prior year[124] Note 14 — Liquidity - Hanmi Financial had $8.9 million in cash and $43.2 million in U.S. Treasury securities as of June 30, 2025, indicating adequate liquid assets[127] - Hanmi Bank's primary funding sources are deposits, FHLB advances ($127.5 million at June 30, 2025), brokered deposits ($85.5 million), and State of California time deposits ($150.0 million)[128][129] - The Bank had $1.52 billion in remaining available borrowing capacity from the FHLB and $26.1 million from the Federal Reserve Discount Window as of June 30, 2025[130][132] Note 15 — Derivatives and Hedging Activities - The Company uses interest rate swaps as cash flow hedges to manage interest rate risk, specifically hedging variable cash flows from Prime Rate-indexed and one-month SOFR-indexed loan pools against falling rates[134] Fair Value of Derivative Financial Instruments (June 30, 2025, in thousands) | Derivative Type | Notional Amount | Fair Value (Assets) | Notional Amount | Fair Value (Liabilities) | | :------------------------------------ | :-------------- | :------------------ | :-------------- | :----------------------- | | Derivatives not designated as hedging instruments (Interest rate products) | $100,485 | $3,283 | $100,485 | $3,274 | | Derivatives designated as hedging instruments (Interest rate products) | $— | $— | $175,000 | $165 | - The Company estimates an additional $0.1 million will be reclassified as a decrease to interest income from cash flow hedges over the next 12 months[135] Note 16 — Segment Reporting - Hanmi Financial operates as a single reportable segment, 'Banking,' with performance assessed using metrics like net interest income, non-interest income/expense, credit loss expense, and net income[152] Banking Segment Revenues and Net Income (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Segment revenues | $65,210 | $56,677 | $128,027 | $115,064 | | Segment net income | $15,117 | $14,451 | $32,789 | $29,615 | Note 17 — Subsequent Events - On July 24, 2025, the Company declared a quarterly cash dividend of $0.27 per share, payable on August 20, 2025[155] - President Trump signed the 'One Big Beautiful Bill' on July 4, 2025, and the Company is evaluating its income tax implications, not expecting a material impact[156] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the prior year, covering key financial highlights, detailed analysis of net interest income, credit loss expense, noninterest income and expense, income taxes, and an in-depth review of the financial condition including securities, loans, deposits, borrowings, equity, and risk management Executive Overview Net Income and EPS Performance | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $15.1 million | $14.5 million | $32.8 million | $29.6 million | | Diluted EPS | $0.50 | $0.48 | $1.08 | $0.97 | - Loans receivable increased by $58.0 million (0.94%) to $6.24 billion as of June 30, 2025, driven by $0.7 billion in new loan production[166] - Deposits increased by $293.3 million to $6.73 billion at June 30, 2025, with growth in money market, savings, and time deposits[166] Results of Operations Net Interest Income Net Interest Income and Margin (Taxable Equivalent Basis) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net interest income | $57.1 million | $48.6 million | $112.2 million | $99.3 million | | Net interest spread | 1.76% | 1.16% | 1.73% | 1.22% | | Net interest margin | 3.07% | 2.69% | 3.05% | 2.74% | - The increase in net interest income was primarily due to a decrease in interest expense, driven by lower deposit rates, and an increase in interest and dividend income from higher average loan balances[175][185] - The average cost of interest-bearing liabilities decreased to 3.68% for the three months ended June 30, 2025 (from 4.30% in 2024) and to 3.72% for the six months ended June 30, 2025 (from 4.24% in 2024)[179][190] Credit Loss Expense Credit Loss Expense (in thousands) | Period | Credit Loss Expense | | :------------------------------- | :------------------ | | Three months ended June 30, 2025 | $7,631 | | Three months ended June 30, 2024 | $961 | | Six months ended June 30, 2025 | $10,352 | | Six months ended June 30, 2024 | $1,188 | - The $6.6 million increase in credit loss expense for the three months ended June 30, 2025, was due to increased net charge-offs and higher estimated loss rates, including an $8.6 million charge-off on a syndicated commercial real estate office loan[191] Noninterest Income Noninterest Income Components (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service charges, fees & other | $5,911 | $6,048 | $11,460 | $11,856 | | Gain on sale of SBA loans | $2,160 | $1,644 | $4,161 | $3,126 | | Gain on sale of residential mortgage loans | $— | $365 | $175 | $808 | | Total noninterest income | $8,071 | $8,057 | $15,796 | $15,790 | - Gain on sale of SBA loans increased by $0.5 million for the three months and $1.0 million for the six months ended June 30, 2025, while gain on sale of residential mortgage loans decreased significantly[194][196] Noninterest Expense Noninterest Expense Components (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Salaries and employee benefits | $22,069 | $20,434 | $43,041 | $42,019 | | Occupancy and equipment | $4,344 | $4,607 | $8,794 | $8,843 | | Data processing | $3,727 | $3,686 | $7,514 | $7,237 | | Total noninterest expense | $36,347 | $35,276 | $71,330 | $71,720 | - Noninterest expense increased by $1.1 million (3.0%) for the three months ended June 30, 2025, primarily due to a $1.6 million increase in salaries and employee benefits[199] - For the six months ended June 30, 2025, noninterest expense decreased by $0.4 million (0.5%), mainly due to decreases in professional fees and advertising, partially offset by increased salaries and benefits[200] Income Tax Expense Income Tax Expense and Effective Rate | Period | Income Tax Expense (in thousands) | Effective Income Tax Rate | | :------------------------------- | :------------------------------ | :------------------------ | | Three months ended June 30, 2025 | $6,115 | 28.8% | | Three months ended June 30, 2024 | $5,989 | 29.3% | | Six months ended June 30, 2025 | $13,556 | 29.3% | | Six months ended June 30, 2024 | $12,541 | 29.7% | Financial Condition Securities - The securities portfolio increased by $12.3 million to $918.1 million at June 30, 2025, primarily due to $101.0 million in purchases and a $15.9 million decrease in unrealized losses, partially offset by $109.6 million in payments and maturities[203] - The portfolio consists mainly of U.S. government agency and sponsored agency mortgage-backed securities, collateralized mortgage obligations, debt securities, tax-exempt municipal bonds, and U.S. Treasury securities[202] Loans Receivable - Loans receivable, net of allowance for credit losses, increased to $6.24 billion at June 30, 2025, from $6.18 billion at December 31, 2024[205] - New loan production for the six months ended June 30, 2025, was $675.5 million, including commercial real estate ($258.6 million), residential mortgages ($138.8 million), and SBA loans ($102.1 million)[205] Loan Portfolio by Interest Rate Type (June 30, 2025, in thousands) | Interest Rate Type | Total Loans Receivable | | :------------------------- | :--------------------- | | Loans with predetermined interest rates | $2,807,561 | | Loans with variable interest rates | $3,498,396 | Loan Quality Indicators - Loans 30 to 89 days past due decreased to $11.0 million at June 30, 2025, from $18.5 million at December 31, 2024[212] Criticized and Classified Loans (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Special Mention | $12,700 | $139,613 | | Classified | $33,857 | $25,683 | - Nonaccrual loans increased by $11.7 million (82.6%) to $26.0 million at June 30, 2025, primarily due to a commercial real estate office loan[218] Allowance for Credit Losses and Allowance for Credit Losses Related to Off-Balance Sheet Items - The allowance for credit losses was $66.8 million at June 30, 2025, down from $70.1 million at December 31, 2024, primarily due to a change in ACL methodology[236] Allowance for Credit Losses Ratios | Ratio | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Allowance for credit losses to loans receivable | 1.06% | 1.12% | | Nonaccrual loans to loans | 0.41% | 0.23% | | Allowance for credit losses to nonaccrual loans | 257.08% | 491.50% | Net Charge-offs (Recoveries) (Six Months Ended June 30, in thousands) | Loan Portfolio | 2025 | 2024 | | :------------------------------ | :----- | :----- | | Commercial real estate loans | $(8,169) | $— | | Commercial and industrial loans | $(799) | $(24) | | Equipment financing agreements | $(4,345) | $(3,379) | | Total | $(13,311) | $(3,385) | Deposits Composition of Deposits (in thousands) | Deposit Type | June 30, 2025 (Balance) | June 30, 2025 (Percent) | December 31, 2024 (Balance) | December 31, 2024 (Percent) | | :--------------------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Demand – noninterest-bearing | $2,105,369 | 31.3% | $2,096,634 | 32.6% | | Interest-bearing (Demand, Money market and savings, Time) | $4,623,753 | 68.7% | $4,339,142 | 67.4% | | Total deposits | $6,729,122 | 100.0% | $6,435,776 | 100.0% | - Total deposits increased by $293.3 million (4.6%) to $6.73 billion at June 30, 2025, driven by increases in money market, savings, and time deposits[243] - The loan-to-deposit ratio improved to 93.7% at June 30, 2025, from 97.1% at December 31, 2024[243] Borrowings and Subordinated Debentures - FHLB advances decreased to $127.5 million at June 30, 2025, from $262.5 million at December 31, 2024, with the weighted-average interest rate decreasing to 4.62% from 4.75%[246][247] - Subordinated debentures totaled $131.0 million at June 30, 2025, comprising fixed-to-floating notes and junior subordinated deferrable interest debentures[249] Stockholders' Equity - Stockholders' equity increased to $762.8 million at June 30, 2025, from $732.2 million at December 31, 2024[250] - The increase was driven by net income, share-based compensation, and a decrease in unrealized after-tax losses on securities and cash flow hedges, partially offset by $16.4 million in dividends paid and $2.8 million in common stock repurchases[250] Interest Rate Risk Management - The Company uses simulation modeling to estimate the potential effects of interest rate changes on net interest income (NII) and Economic Value of Equity (EVE)[252] Estimated Sensitivity to Interest Rate Changes (June 30, 2025, in thousands) | Change in Interest Rates (Basis Points) | NII 1- to 12-Month Horizon (Dollar Change) | NII 13- to 24-Month Horizon (Dollar Change) | EVE (Dollar Change) | | :-------------------------------------- | :----------------------------------------- | :------------------------------------------ | :------------------ | | 300 | $22,761 | $46,198 | $70,160 | | 200 | $15,500 | $31,253 | $55,651 | | 100 | $9,455 | $18,340 | $41,513 | | (100) | $(9,298) | $(19,331) | $(53,182) | | (200) | $(18,377) | $(40,210) | $(124,160) | | (300) | $(24,592) | $(59,708) | $(205,910) | Capital Resources and Liquidity - The Bank's capital ratios at June 30, 2025, placed it in the 'well capitalized' category, with a total risk-based capital ratio of 14.39% and a Tier 1 leverage capital ratio of 11.43%[259] - As of July 1, 2025, Hanmi Bank had the ability to pay approximately $83.1 million in dividends without prior DFPI approval, after accounting for the declared $0.27 dividend[258] Off-Balance Sheet Arrangements - The Company refers to Note 12 for a discussion of off-balance sheet arrangements, which include commitments to extend credit and standby letters of credit[262] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the market risk disclosures provided within the Management's Discussion and Analysis of Financial Condition and Results of Operations, specifically the 'Interest Rate Risk Management' subsection - Quantitative and qualitative disclosures about market risks are discussed in 'Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk Management' within this report[263] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, and there were no material changes in internal control over financial reporting during the quarter - The Corporation's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of June 30, 2025[264] - No material changes occurred in the Corporation's internal control over financial reporting during the quarter ended June 30, 2025[265] Part II – Other Information Item 1. Legal Proceedings The Company and its subsidiaries are involved in routine litigation, but management believes the resolution of these matters will not have a material adverse impact on their financial condition, results of operations, or liquidity - Management believes that the resolution of current legal proceedings will not have a material adverse impact on the financial condition, results of operations, or liquidity of Hanmi Financial or its subsidiaries[268] Item 1A. Risk Factors There have been no material changes to previously disclosed risk factors, except for a new risk related to potential tariffs imposed on South Korea, which could negatively impact customers with ties to South Korea and, consequently, the Company's financial performance - A new material risk factor is the potential impact of tariffs imposed on South Korea, which could negatively affect South Korean businesses and the South Korean economy, potentially impacting the Company's customers with ties to South Korea[271] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The Company repurchased 70,000 shares of common stock during the three months ended June 30, 2025, under its stock repurchase program, with 1,110,500 shares remaining available, and acquired 15,953 shares from employees to satisfy tax withholding obligations Common Stock Repurchases (Three Months Ended June 30, 2025) | Purchase Date | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Maximum Shares That May Yet Be Purchased Under the Program | | :-------------------------- | :--------------------------- | :----------------------------------------------------------- | :------------------------------------------------------- | | April 1, 2025 - April 30, 2025 | $22.77 | 5,000 | 1,175,500 | | May 1, 2025 - May 31, 2025 | $23.40 | 52,500 | 1,123,000 | | June 1, 2025 - June 30, 2025 | $22.88 | 12,500 | 1,110,500 | | Total | $23.26 | 70,000 | 1,110,500 | - As of June 30, 2025, 1,110,500 shares remained available for future purchases under the Company's stock repurchase program[272] - The Company acquired 15,953 shares from employees to satisfy tax withholding obligations upon the vesting of stock awards during the three months ended June 30, 2025[273] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[274] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable[275] Item 5. Other Information No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - None of the Company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[276] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including amendments to the certificate of incorporation, certifications of principal executive and financial officers, and Inline XBRL documents - The exhibits include an amendment to the Certificate of Incorporation, certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[277] Signatures The report is duly signed on behalf of Hanmi Financial Corporation by its President and Chief Executive Officer, Bonita I. Lee, and its Senior Executive Vice President and Chief Financial Officer, Romolo C. Santarosa, on August 8, 2025 - The report was signed by Bonita I. Lee, President and Chief Executive Officer, and Romolo C. Santarosa, Senior Executive Vice President and Chief Financial Officer, on August 8, 2025[282]