HAFC

Hanmi Financial Corp. Q1 2026 Filing Summary

Business Context and Reporting Period

This summary covers the Form 10-Q for Hanmi Financial Corporation (HAFC) for the quarterly period ended March 31, 2026. Hanmi Financial is a bank holding company whose primary subsidiary is Hanmi Bank, a Delaware corporation. The company operates primarily in traditional banking activities, including deposit acceptance and lending, with a significant focus on commercial real estate and commercial and industrial loans.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Growth: Net income increased 27.6% year-over-year to $22.6 million, driven by a $8.1 million increase in net interest income and a $0.8 million increase in noninterest income.
• Net Interest Income Expansion: Net interest income rose to $63.2 million, with the Net Interest Margin (NIM) expanding to 3.38% from 3.02% in Q1 2025. This was primarily due to a decrease in the cost of interest-bearing liabilities (down 50 basis points) outpacing a slight decrease in loan yields.
• Deposit Growth: Total deposits increased by $123.0 million (1.8%) from the prior quarter, driven by growth in time deposits and money market accounts.
• Debt Reduction: The company paid off all outstanding Federal Home Loan Bank (FHLB) advances, reducing borrowings from $150.0 million at year-end 2025 to $0 at March 31, 2026.
• Asset Quality Improvement: Nonperforming loans decreased by 31.5% to $12.4 million, largely due to a $9.7 million payment on a previously nonaccrual commercial real estate office loan.
• Expense Increase: Noninterest expenses rose 9.7% to $38.4 million, primarily due to a $1.3 million increase in professional fees and a $1.0 million increase in salaries and benefits.

Guidance, Outlook, and Risks

• Capital Position: Both Hanmi Financial and Hanmi Bank remain "well capitalized," exceeding all regulatory minimums. The Bank's Tier 1 leverage ratio was 11.74%, and the Company's was 10.93%.
• Shareholder Returns: The company repurchased 185,707 shares of common stock during the quarter at an average price of $25.89. A quarterly cash dividend of $0.28 per share was declared on April 23, 2026.
• Interest Rate Risk: Management utilizes simulation modeling to monitor interest rate risk. A 300 basis point increase in rates is projected to increase net interest income by 12.67% over the next 12 months, while a 300 basis point decrease would reduce it by 10.71%.
• Risk Factors: Key risks include general economic conditions, volatility in credit and equity markets, changes in interest rates affecting margins, and potential impacts of geopolitical events or government shutdowns on SBA loan sales.
• Unusual Items: The company recognized a $0.9 million gain on the sale of other real estate owned (OREO) properties, which reduced noninterest expense. Additionally, a special dividend on FHLB stock contributed to higher interest income.

Investor Verification Checklist

• Loan Concentration: Verify the exposure to the "Lessor of nonresidential buildings" industry, which represents 23.9% of the loan portfolio, and the Hospitality sector at 13.2%.
• Nonperforming Loan Trends: Monitor the specific allowance coverage for the remaining $12.4 million in nonperforming loans, which currently has a specific allowance of $3.2 million.
• Deposit Composition: Review the stability of the $3.0 billion in uninsured deposits, noting that $1.44 billion is in accounts with balances of $5.0 million or more.
• Expense Management: Assess the sustainability of the 89% year-over-year increase in professional fees ($1.3 million increase) and whether this is a one-time or recurring cost.
• Securities Portfolio: Note the $66.1 million in gross unrealized losses on the available-for-sale securities portfolio and management's intent to hold these to maturity.