Hanmi Financial NASDAQ: HAFC reported first-quarter 2026 results that management said reflected continued execution on loan diversification, deposit gathering, and expense discipline, even during what it described as a seasonally slower period for loan production.
Quarterly performance and profitability
President and CEO Bonnie Lee said the company “delivered strong financial results across key metrics” and highlighted seventh consecutive quarter of net interest margin expansion. Net income in the first quarter totaled $22.6 million, or $0.75 per diluted share, with Lee noting growth on both a sequential and year-over-year basis.
Net interest margin expanded 10 basis points to 3.38%, which Lee attributed to a lower cost of funds and “favorable spreads on new loan production relative to payoffs.” Return on average assets was 1.18% and return on average equity was 10.86%, according to management.
Chief Financial Officer Ron Santarosa said pre-provision net revenue rose to $33.4 million, up 4.1% from the fourth quarter, with contributions from net interest revenue, non-interest income, and lower expenses. Santarosa said net interest revenue increased 0.5% and that the quarter included a $1.6 million net benefit from lower interest rates, offset by impacts from fewer earning assets and two fewer days in the period.
Net interest margin drivers and outlook
Santarosa said the margin improvement was primarily driven by a 16-basis-point decline in the average cost of interest-bearing deposits. However, he cautioned that the company does not expect a similar deposit-cost decline in the second quarter, pointing to April month-to-date trends that suggested only modest additional improvement.
In response to analyst questions about upcoming certificate of deposit repricing, Santarosa said that while lower CD rates can help, time deposits represent a limited share of the overall interest-bearing deposit base, which may temper the overall benefit. He also pointed to potential tailwinds from reinvestment in the securities portfolio due to “substantial cash flow occurring here in 2026.”
Chief Banking Officer Anthony Kim added that roughly $1 billion of CRE loans are maturing over the next 12 months at a weighted average rate in the “high 4s,” which he said creates an opportunity to renew at higher rates. Lee also noted that first-quarter new loan yields averaged 6.5%, suggesting a potential pickup as maturing loans reprice.
Loans: C&I strength offset by elevated payoffs
Kim said first-quarter loan production was $378 million, up 0.8% from the prior quarter, with a weighted average interest rate of 6.54% versus 6.90% in the fourth quarter. Production increased in C&I and CRE, while residential mortgage, equipment finance, and SBA declined from fourth-quarter levels.
C&I production totaled $135 million, rising 64% sequentially, which Kim attributed to investments in C&I teams and efforts to expand the portfolio. On the call, Lee said the C&I growth was “fairly broad-based” across business types and industries, and she reiterated that C&I remains a focus as the company works to diversify the loan book.
CRE production was $131 million, up 4% from the prior quarter. Kim said CRE now represents 61% of total loans, which he described as the lowest level “in at least a decade.” He cited a weighted average loan-to-value ratio of approximately 47% and a weighted average debt service coverage ratio of 2.2 times for the CRE portfolio.
Despite the production, Lee said total loans declined slightly due to “higher than normal payoffs.” Kim also noted that U.S. KC loan balances were $818 million, down $44 million, or 5%, from the prior quarter.
In SBA, Kim said production was $41 million and that the bank sold approximately $33 million of SBA loans during the quarter. In response to a question about rule changes, Lee said the company is maintaining SBA production guidance of $45 million to $50 million per quarter.
Residential mortgage production was $29 million, down 59% from the prior quarter. Kim said the bank sold $32 million of residential mortgages, generating a $0.5 million gain on sale.
Deposits, Corporate Korea initiative, and funding mix
Management emphasized deposit growth and funding mix improvements. Lee said total deposits grew 7% on an annualized basis, while Kim reported deposits were up 2% from the prior quarter, driven primarily by interest-bearing deposits and a modest increase in non-interest-bearing demand deposits. Both executives said non-interest-bearing deposits remained around 30% of total deposits.
Corporate Korea and U.S. KC initiatives were again highlighted as contributors to deposit growth. Lee said Corporate Korea deposits increased 10% during the quarter. Kim said U.S. KC deposit balances increased by $107 million, or 11%, to over $1.1 billion, and that Corporate Korea deposits represented 17% of total deposits at quarter-end.
On client sentiment, Kim said some customers “no longer see tariff as an obstacle,” but cited ongoing economic uncertainty, rising energy prices, and inflation tied to war as factors making companies cautious about borrowing. He said customers are opting to use excess cash, contributing to subdued loan demand, while the bank continues to see an influx of deposits “for them to prepare for the investment in the U.S.”
Asset quality, expenses, and capital return
Management described asset quality as strong and improving. Lee said non-performing assets declined 38% to 0.16% of total assets. Kim said delinquencies fell to 0.20% of total loans from 0.27%, and non-performing loans declined to 0.19% from 0.28%, driven largely by a $9.7 million payment received on a $10.2 million non-accrual loan.
During the quarter, the company also sold two OREO properties for a net gain. Kim said the properties were sold for a $0.8 million net gain, and Lee cited the sales as contributing to lower non-interest expense.
Kim disclosed two downgrades during the quarter: a $21.2 million retail CRE loan moved to special mention and a $5 million C&I hospitality loan downgraded to classified. Lee said the retail CRE loan was downgraded due to the loss of a major tenant, but that the property continues to generate sufficient income to service debt and is supported by personal guarantees; she said the bank does not expect a loss at this time. On the hospitality credit, Lee said the business was impacted by renovation construction at a hotel where it is located and that performance is expected to improve now that construction is complete; the loan is paying as agreed under a modification, and the bank also does not expect a loss at this time.
On expenses, Lee said non-interest expense declined 2% and the efficiency ratio improved to 53.5%. Santarosa reported non-interest expense of $38.4 million, down 1.9%, and non-interest income of $8.5 million, up 2.9% largely due to higher SBA loan sale gains.
Hanmi returned capital to shareholders through dividends and repurchases totaling $13.4 million during the quarter, according to Lee. Santarosa said the company repurchased 185,707 shares for $4.8 million at an average price of $25.89, with 2.15 million shares remaining available under its authorization. Asked about the outlook for repurchases, Santarosa said it was “fair to anticipate” the board will likely continue buybacks in amounts “not too dissimilar” from the first quarter.
Looking ahead, Lee said the company’s 2026 priorities remain unchanged, including expectations for loan growth in the low- to mid-single-digit range, deposit growth to support lending while maintaining a balanced funding profile, continued expense discipline, and a conservative approach to credit management. She also said the company has not seen an impact from geopolitical conflicts on its business or clients at this point.
About Hanmi Financial NASDAQ: HAFC
Hanmi Financial Corporation is a bank holding company based in California, primarily operating through its wholly owned subsidiary, Hanmi Bank. Established in 1982 to serve the Korean‐American community in Los Angeles, the company has expanded its footprint to include branch locations throughout California as well as markets in Illinois, Texas and Washington State. Hanmi Bank offers a comprehensive suite of commercial and consumer banking products designed to meet the needs of small and medium‐sized businesses, professionals and individual clients.
On the commercial banking side, Hanmi Bank provides business checking and savings accounts, lines of credit, commercial real estate lending and SBA‐guaranteed loans.
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