What Hanmi Financial (HAFC) Said on Its Q3 Earnings Call

Key Points

• Strong third-quarter performance: Hanmi Financial reported $23.7 million in net income, or $0.80 per diluted share. Net interest income rose 5.8% sequentially, net interest margin expanded to 3.40%, and pre-provision net revenue increased 10.8%.
• Loan production and deposits improved: Loan originations jumped 46.2% to $544 million, while total deposits rose 1.4% and Corporate Korea deposits reached a record $1.3 billion. Elevated loan payoffs limited portfolio growth, leading management to expect low-single-digit loan growth in 2026.
• Credit remained sound but costs increased: Credit loss expense rose to $4.5 million, primarily due to a $3.2 million partial charge-off on a commercial real estate loan and downgrades tied to New York multifamily exposure. Delinquent loans remained low at 0.20% of total loans, while Hanmi strengthened capital through debt restructuring, share repurchases and shareholder returns.

Hanmi Financial NASDAQ: HAFC reported third-quarter 2026 net income of $23.7 million, or $0.80 per diluted share, as higher net interest income, loan production and deposit growth supported a 10.8% sequential increase in pre-provision net revenue.

President and Chief Executive Officer Bonnie Lee said the quarter reflected “excellent deposit growth, robust loan production, strong asset quality, and prudent capital management.” Net interest income rose 5.8% from the prior quarter, while net interest margin expanded 8 basis points to 3.40%. The company’s efficiency ratio improved by more than 200 basis points to 52%.

Loan Production Increased, Though Payoffs Limited Portfolio Growth

Third-quarter loan originations totaled $544 million, up $172 million, or 46.2%, from the preceding quarter. The weighted average interest rate on new loans was 6.61%, compared with 6.59% in the second quarter. Chief Banking Officer Anthony Kim said every loan-production category increased during the quarter, led by commercial and industrial, commercial real estate and residential lending.

• Commercial and industrial loan production was $170 million, with activity across industries including manufacturing and wholesale.
• Commercial real estate production was $227 million, up 33.4% from the prior quarter.
• Residential mortgage production rose 54% sequentially to $77 million.
• SBA loan production increased to $41 million, while the company sold approximately $34 million of SBA loans during the quarter.

Despite strong production, elevated payoffs constrained overall loan growth. Payoffs reached $283 million during the quarter, with more than one-third attributed to borrowers refinancing with other lenders offering terms Hanmi determined did not meet its underwriting and risk standards. About one-quarter came from property sales or borrowers using their own cash, while just under 10% resulted from Hanmi’s decision to exit loan relationships.

During the question-and-answer session, Lee said year-to-date loan production was up 4% from the year-earlier period, but payoffs had increased 65%, or more than $250 million. She said the company expects low-single-digit loan growth for 2026 and projected low- to mid-single-digit growth for 2027, assuming production remains at current levels and payoffs moderate.

Corporate Korea Deposits Reached a Record

Total deposits increased 1.4% sequentially, while core deposits increased 1.9%. Noninterest-bearing deposits remained 30% of total bank deposits at quarter-end.

Hanmi’s Corporate Korea, or USKC, initiative continued to contribute to deposit gathering. Deposits from those clients increased $145 million, or 12%, during the quarter to more than $1.3 billion, representing 19% of total deposits. USKC loan balances were $780 million, down $46 million from the previous quarter, and represented approximately 12% of the loan portfolio.

Kim said the Corporate Korea deposit growth was broad-based across industries, with clients bringing in funds in preparation for potential capital expenditures and manufacturing-facility investments.

Regarding funding costs, Chief Financial Officer Ron Santarosa said average interest-bearing deposit costs were 3.19% in September and about 3.22% in October to date. More than $1 billion of certificates of deposit are scheduled to mature in the fourth quarter at a rate of about 3.69%, Kim said, adding that renewal and new CD rates in October had been roughly comparable.

Credit Costs Reflected CRE Charge-Off and Portfolio Review

Credit loss expense increased to $4.5 million from $1.2 million in the second quarter, primarily reflecting a $3.2 million partial charge-off tied to a previously identified commercial real estate loan. Hanmi has entered an agreement to sell that loan, with closing expected in the fourth quarter, according to Lee.

The company also downgraded two current multifamily loan relationships following changes to rent-control regulations in New York City. Lee said the reassessment was intended to address the evolving risk environment proactively. Excluding those two relationships, she said most of the bank’s remaining New York multifamily exposure consisted of about a half-dozen smaller loans, with the majority of the properties not subject to rent control.

At quarter-end, delinquent loans were 0.20% of total loans and nonperforming loans were 0.14%. Nonperforming assets were 0.12% of total assets. The commercial real estate portfolio, which comprised 61% of total loans, had a weighted average loan-to-value ratio of about 47% and a weighted average debt-service coverage ratio of 2.27 times, Kim said.

Margin Benefits and Capital Actions

Santarosa said several items added about $700,000 to third-quarter net interest income, contributing roughly 4 basis points of margin expansion. These included an interest reversal from a nonaccrual loan, accelerated deferred fee income and prepayment fees from loan payoffs, a special Federal Home Loan Bank of San Francisco dividend, and overlapping interest expense associated with subordinated debt issuance and redemption.

Hanmi issued $55 million of fixed-to-floating subordinated notes due in 2036 during July and used the proceeds, along with parent-company resources, to redeem $110 million of fixed-to-floating subordinated notes due in 2031 on Sept. 1. Santarosa said the transaction reduced ongoing annual interest expense by $550,000 and avoided additional floating-rate debt exposure.

The company also obtained a two-year interest-rate cap on $26 million of floating-rate trust preferred securities and a two-year interest-rate swap covering $180 million of State of California time deposits.

Hanmi repurchased $4.9 million of shares during the quarter and said 1.84 million shares remained available under its existing authorization. It returned 55.6% of third-quarter net income to shareholders through dividends and share repurchases. Tangible common equity to tangible assets stood at 9.93%, while the company’s common equity tier 1 ratio was 12.3%.

About Hanmi Financial (NASDAQ:HAFC)

Hanmi Financial Corporation is the holding company for Hanmi Bank, a commercial bank headquartered in Los Angeles, California. Founded in 1982, Hanmi Bank was established to serve Korean American and other small-business communities and has developed into a full-service regional bank serving individuals, businesses, and professional organizations.

Hanmi Bank offers commercial and consumer deposit accounts, business and personal lending, commercial real estate financing, small business loans, construction loans, and trade finance services.

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