Hanmi Financial Navigates Steady Growth Amid a Challenging Landscape

Hanmi Financial Corporation’s Q1 2025 results underscore a blend of resilience and strategic focus, even as the banking sector faces headwinds from elevated interest rates and macroeconomic uncertainties. With net income holding steady at $17.7 million and a 3.1% sequential rise in net interest income, the Los Angeles-based bank demonstrates the benefits of disciplined balance sheet management and a niche-driven growth strategy. However, lingering risks tied to commercial real estate (CRE) concentrations and rising classified loans highlight the need for caution as the Federal Reserve’s policy path remains in flux.

A Margin Lifted by Deposit Costs
The quarter’s standout performance came from net interest margin (NIM), which expanded 11 basis points to 3.02%. This improvement was fueled by a 27-basis-point decline in the average cost of interest-bearing deposits to 3.69%, reflecting Hanmi’s success in attracting lower-cost funding. . Noninterest income also grew 5% to $7.7 million, driven by higher gains from Small Business Administration (SBA) loan sales. This diversification is critical, as noninterest revenue now accounts for 14% of total income—a sign of progress in reducing reliance on net interest income alone.

Loan Growth Modest, but Strategic Shifts Matter
Total loans rose just 0.5% sequentially to $6.28 billion, with CRE loans still dominating at 63% of the portfolio. While Hanmi has made strides in diversifying—C&I lending grew to 14% of loans—the dominance of CRE remains a vulnerability, particularly as rising classified loans (up $20.8 million) signal potential stress in this segment. A $20 million nonaccrual CRE loan underscores the sector’s risks, but Hanmi’s allowance for credit losses (1.12% of total loans) and low net charge-offs (0.13%) suggest resilience for now.

The real亮点 lies in niche markets. The U.S.-Korea Corporate (USKC) portfolio—targeting the Korean-American community—now accounts for 15% of loans and deposits, with 2024 growth of 23%. This relationship-driven strategy is paying off, as Q1 residential mortgage production surged 37% to $55 million, reflecting both strong execution and demand in specialized segments.

Deposits and Capital: A Solid Foundation
Deposits grew 2.9% to $6.62 billion, with noninterest-bearing demand deposits at 31.2% of the total—a healthy ratio that reduces funding costs. Business deposits, which make up 55% of the base, are a testament to Hanmi’s corporate banking strengths. Capital metrics remain robust: CET1 ratio at 12.13% and tangible book value per share rising to $24.49 provide ample buffers for potential shocks.

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Strategic Priorities and Risks Ahead
Hanmi’s forward guidance points to low-to-mid-single-digit loan growth in 2025, supported by C&I lending and its USKC franchise. Management’s emphasis on disciplined underwriting and deposit growth positions the bank to benefit from potential Fed rate cuts, which could ease pressure on net interest margins. Meanwhile, share repurchases and a $0.25 dividend per share (declared in Q1 2024) reflect confidence in its capital position.

Yet risks persist. The CRE portfolio’s outsized role—alongside rising classified loans—requires close monitoring. A would reveal Hanmi’s position within industry norms, but its 63% CRE concentration exceeds many peers’. Additionally, while the stock’s 4.36% post-earnings rise to $22.52 reflects investor optimism, valuation multiples remain modest compared to broader banking indices.

Conclusion: A Balanced Outlook for Niche Resilience
Hanmi Financial’s Q1 results paint a picture of a bank that is both steady and strategic. Its ability to stabilize net income, diversify noninterest revenue, and capitalize on niche markets like the Korean-American community offers compelling growth avenues. The USKC portfolio’s momentum and strong capital metrics are particularly reassuring, as they suggest the bank can navigate a slowdown without sacrificing profitability.

However, the CRE concentration remains a double-edged sword: while it has historically fueled growth, rising defaults in this sector could test balance sheet resilience. Investors should monitor classified loan trends closely and assess whether Hanmi’s risk management keeps pace with its ambitions.

For now, Hanmi’s fundamentals—stable margins, robust capital, and focused execution—support a cautiously optimistic stance. With a forward price-to-tangible-book ratio of ~0.9 (based on $24.49 tangible book value and a $22.52 stock price), the stock offers upside potential if macro conditions stabilize or if CRE risks subside. The bank’s story is far from perfect, but for investors seeking a regional lender with a clear niche and defensive strengths, Hanmi merits consideration.