UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
HANMI FINANCIAL CORPORATION
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value
HAFC
Nasdaq Global Select Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of April 30, 2026, there were 29,766,435 outstanding shares of the Registrant’s Common Stock.
Hanmi Financial Corporation and Subsidiaries Quarterly Report on Form 10-Q
Three Months Ended March 31, 2026
Table of Contents
Part I – Financial Information
Item 1.
Financial Statements
3
Consolidated Balance Sheets at March 31, 2026 (unaudited) and December 31, 2025
Consolidated Statements of Income for the three months ended March 31, 2026 and 2025 (unaudited)
4
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2026 and 2025 (unaudited)
5
Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2026 and 2025 (unaudited)
6
Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 (unaudited)
7
Notes to Consolidated Financial Statements (unaudited)
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
39
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
55
Item 4.
Controls and Procedures
Part II – Other Information
Legal Proceedings
56
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
57
Signatures
58
2
Item 1. Financial Statements
Hanmi Financial Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
March 31,
December 31,
2026
2025
(Unaudited)
Assets
Cash and due from banks
$
254,045
212,841
Securities available for sale, at fair value (amortized cost of $900,018 and $941,760 as of March 31, 2026 and December 31, 2025, respectively)
835,725
880,624
Loans held for sale, at the lower of cost or fair value
4,932
7,403
Loans, net of allowance for credit losses of $70,468 and $69,903 as of March 31, 2026 and December 31, 2025, respectively
6,474,998
6,493,465
Accrued interest receivable
23,320
24,466
Premises and equipment, net
20,015
20,378
Customers' liability on acceptances
—
125
Servicing assets
6,535
6,459
Goodwill
11,031
Federal Home Loan Bank ("FHLB") stock, at cost
16,385
Income tax assets
37,537
40,467
Bank-owned life insurance
56,534
56,697
Prepaid expenses and other assets
98,170
98,844
Total assets
7,839,227
7,869,185
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing
2,030,743
2,015,212
Interest-bearing
4,769,879
4,662,438
Total deposits
6,800,622
6,677,650
Accrued interest payable
30,592
34,783
Bank's liability on acceptances
Borrowings
150,000
Subordinated debentures
130,618
130,463
Accrued expenses and other liabilities
74,576
79,778
Total liabilities
7,036,408
7,072,799
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of March 31, 2026 and December 31, 2025
Common stock, $0.001 par value; authorized 62,500,000 shares; issued 34,426,691 shares (29,806,694 shares outstanding) and 34,287,779 shares (29,894,757 shares outstanding) as of March 31, 2026 and December 31, 2025, respectively
34
Additional paid-in capital
595,374
594,667
Accumulated other comprehensive loss, net of tax benefit of $18,717 and $17,822 as of March 31, 2026 and December 31, 2025, respectively
(45,553
)
(43,175
Retained earnings
408,327
394,335
Less treasury stock; 4,619,997 shares and 4,393,022 shares as of March 31, 2026 and December 31, 2025, respectively
(155,363
(149,475
Total stockholders’ equity
802,819
796,386
Total liabilities and stockholders’ equity
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
Consolidated Statements of Income (Unaudited)
(in thousands, except share and per share data)
Three Months Ended
Interest and dividend income:
Interest and fees on loans
93,866
90,887
Interest on securities
5,959
6,169
Dividends on FHLB stock
831
360
Interest on deposits in other banks
1,496
1,841
Total interest and dividend income
102,152
99,257
Interest expense:
Interest on deposits
36,738
40,559
Interest on borrowings
676
2,024
Interest on subordinated debentures
1,535
1,582
Total interest expense
38,949
44,165
Net interest income before credit loss expense
63,203
55,092
Credit loss expense
2,892
2,721
Net interest income after credit loss expense
60,311
52,371
Noninterest income:
Service charges on deposit accounts
2,127
2,217
Trade finance and other service charges and fees
1,501
1,396
Gain on sale of Small Business Administration ("SBA") loans
2,102
2,000
Gain on sale of residential mortgage loans
485
175
Other operating income
2,324
1,938
Total noninterest income
8,539
7,726
Noninterest expense:
Salaries and employee benefits
21,956
20,972
Occupancy and equipment
4,414
4,450
Data processing
4,386
3,787
Professional fees
2,780
1,468
Supplies and communications
556
517
Advertising and promotion
688
585
Other operating expenses
3,588
3,205
Total noninterest expense
38,368
34,984
Income before tax
30,482
25,113
Income tax expense
7,925
7,441
Net income
22,557
17,672
Basic earnings per share
0.76
0.59
Diluted earnings per share
0.75
0.58
Weighted-average shares outstanding:
Basic
29,629,130
29,937,660
Diluted
29,808,999
30,058,248
(in thousands)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss):
Unrealized holding gain (loss) on available for sale securities
(3,157
14,542
Unrealized gain (loss) on cash flow hedges
(57
190
Unrealized gain (loss)
(3,214
14,732
Income tax benefit (expense) related to other comprehensive income items
879
(4,183
Other comprehensive income (loss)
(2,335
10,549
Reclassification adjustment for (gains) losses included in net income
(60
245
Income tax benefit (expense) related to reclassification adjustment
17
(73
Reclassification adjustment for (gains) losses included in net income, net of tax
(43
172
Other comprehensive income (loss), net of tax
(2,378
10,721
Total comprehensive income
20,179
28,393
Common Stock - Number of Shares
Stockholders' Equity
Accumulated
Additional
Other
Treasury
Total
Shares
Common
Paid-in
Comprehensive
Retained
Stock,
Stockholders'
Issued
Outstanding
Stock
Capital
Loss
Earnings
at Cost
Equity
Balance at January 1, 2026
34,287,779
(4,393,022
29,894,757
Change in unrealized gain (loss) on securities available for sale, net of income taxes
(2,293
Change in unrealized gain (loss) on cash flow hedge, net of income taxes
(85
Cash dividends paid (common stock, $0.28/share)
(8,565
Repurchase of common stock
(185,707
(4,808
Issuance of awards pursuant to equity incentive plans, net of forfeitures
138,912
Share-based compensation expense
707
Shares surrendered to satisfy tax liability upon vesting of equity awards
(41,268
(1,080
Balance at March 31, 2026
34,426,691
(4,619,997
29,806,694
Balance at January 1, 2025
34,151,464
(3,955,465
30,195,999
591,069
(70,723
350,869
(139,075
732,174
10,411
310
Cash dividends paid (common stock, $0.27/share)
(8,252
(50,000
(1,124
113,566
873
(26,051
(579
Balance at March 31, 2025
34,265,030
(4,031,516
30,233,514
591,942
(60,002
360,289
(140,778
751,485
Three Months Ended March 31,
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
862
801
Amortization of servicing assets - net
612
668
Gain on sales of other real estate owned
(850
Gain on sales of SBA loans
(2,102
(2,000
Origination of loans held for sale
(62,542
(35,420
Proceeds from sales of loans
67,749
45,007
Gain on sales of residential mortgage loans
(485
(175
Change in bank-owned life insurance
163
(308
Change in prepaid expenses and other assets
(211
1,157
Change in income tax assets
3,808
2,660
Change in accrued interest payable and other liabilities
(9,283
(7,298
Net cash provided by operating activities
23,877
26,358
Cash flows from investing activities:
Purchases of securities available for sale
(35,715
(32,466
Proceeds from matured, called and repayment of securities
76,846
45,141
Purchases of loans
(34,301
Purchases of premises and equipment
(499
(263
Proceeds from disposition of premises and equipment
14
Proceeds from sales of other real estate owned ("OREO")
2,830
Change in loans, excluding purchases and sales
15,155
(9,122
Net cash provided by (used in) investing activities
58,617
(30,997
Cash flows from financing activities:
Change in deposits
122,972
183,699
Change in open FHLB advances
(145,000
Repayments of FHLB term advances
(150,000
Cash paid for surrendered employee vested shares due to tax liability
(4,812
(1,125
Cash dividends paid
(8,370
(8,153
Net cash provided by (used in) financing activities
(41,290
28,842
Net increase in cash and due from banks
41,204
24,203
Cash and due from banks at beginning of year
304,800
Cash and due from banks at end of period
329,003
Supplemental disclosures of cash flow information:
Interest paid
43,140
49,343
Income taxes paid
336
550
Non-cash activities:
896
(4,256
Right-of-use asset obtained in exchange for lease liability
(3,722
(4,442
Note 1 — Organization and Basis of Presentation
Hanmi Financial Corporation (“Hanmi Financial,” the “Company,” “we,” “us” or “our”) is a bank holding company whose primary subsidiary is Hanmi Bank (the “Bank”). Our primary operations are related to traditional banking activities, including the acceptance of deposits and the lending and investing of money by the Bank.
In management’s opinion, the accompanying unaudited consolidated financial statements of Hanmi Financial and its subsidiaries reflect all adjustments of a normal and recurring nature that are necessary for a fair presentation of the results for the interim period ended March 31, 2026. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. The unaudited consolidated financial statements are prepared in conformity with GAAP and in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Operating results for the three-month period ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ended December 31, 2026 or for any other period. The interim information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report on Form 10-K”).
The preparation of interim unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions affect the amounts reported in the unaudited financial statements and disclosures provided, and actual results could differ.
Descriptions of our significant accounting policies are included in Note 1 - Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the 2025 Annual Report on Form 10-K.
The Company has not adopted any accounting standards in 2026.
ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software: In September 2025, the FASB issued ASU 2025-06 to simplify the accounting for internal-use software by replacing the existing project-stage-based model with a principles-based approach to determine capitalizable versus non-capitalizable costs. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The adoption of ASU 2025-06 is not expected to have a material effect on the Company’s operating results or financial condition.
ASU 2025-08, Financial Instruments - Credit Losses (Topic 316): Purchased Loans: In November 2025, the FASB issued ASU 2025-08 to improve the accounting for acquired financial assets by expanding the gross-up approach to all purchased loans and eliminating the previous duplication inherent in Day 1 credit loss measurement. ASU 2025-08 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The adoption of ASU 2025-08 is not expected to have a material effect on the Company's operating results or financial condition.
ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements: In November 2025, the FASB issued ASU 2025-09 to more closely align hedge accounting with the economics of an entity's risk management activities by enabling entities to achieve and maintain hedge accounting for highly effective economic hedges of forecasted transactions. ASU 2025-09 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The adoption of ASU 2025-08 is not expected to have a material effect on the Company's operating results or financial condition.
The following is a summary of securities available for sale as of the dates indicated:
Gross
Estimated
Amortized
Unrealized
Fair
Cost
Gain
Value
March 31, 2026
U.S. Treasury securities
128,708
107
(224
128,591
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities - residential
399,917
608
(39,165
361,360
Mortgage-backed securities - commercial
74,289
75
(11,466
62,898
Collateralized mortgage obligations
169,268
1,008
(6,117
164,159
Debt securities
53,062
(779
52,283
Total U.S. government agency and sponsored agency obligations
696,536
1,691
(57,527
640,700
Municipal bonds-tax exempt
74,774
(8,340
66,434
Total securities available for sale
900,018
1,798
(66,091
December 31, 2025
128,569
298
(157
128,710
411,223
926
(38,741
373,408
71,751
116
(11,295
60,572
188,120
1,768
(5,933
183,955
67,059
(1,105
65,954
738,153
2,810
(57,074
683,889
75,038
(7,013
68,025
941,760
3,108
(64,244
The amortized cost and estimated fair value of securities as of March 31, 2026 and December 31, 2025, by contractual or expected maturity, are shown below. Collateralized mortgage obligations are included in the table shown below based on their expected maturities. All other securities are included based on their contractual maturities. Mortgage-backed securities included in the table below may mature before their contractual maturities.
Available for Sale
Fair Value
Within one year
155,672
155,029
159,050
158,399
Over one year through five years
52,718
51,631
65,994
64,919
Over five years through ten years
269,806
243,477
234,306
213,596
Over ten years
421,822
385,588
482,410
443,710
9
The following table summarizes debt securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded at March 31, 2026 or December 31, 2025, aggregated by major security type and length of time in a continuous unrealized loss position:
Holding Period
Less than 12 Months
12 Months or More
Number
of
Securities
(in thousands, except number of securities)
(108
43,060
13
(116
10,389
53,449
16
(246
17,161
(38,919
309,753
114
326,914
119
(88
4,697
(11,378
48,831
15
53,528
(33
13,942
(6,084
43,879
21
57,821
25
52,284
10
(367
35,800
11
(57,160
454,747
160
490,546
171
19
(475
78,860
24
(65,616
531,570
182
610,429
206
4,999
1
10,351
15,350
(46
4,629
(38,695
322,912
327,541
54,316
50,264
(57,028
493,446
167
498,075
169
9,628
(64,198
571,822
189
581,450
192
The Company evaluates its available for sale securities portfolio for impairment on a quarterly basis. The Company did not recognize unrealized losses in income because it has the ability and the intent to hold and does not expect to be required to sell these securities until the recovery of their cost basis. The quarterly impairment assessment takes into account the changes in the credit quality of these debt securities since acquisition and the likelihood of a credit loss occurring over the life of the securities. If a credit loss is expected to occur, an allowance is established and a corresponding credit loss is recognized. Based on this analysis, the Company determined that no credit losses are expected to be realized on the tax-exempt municipal bond portfolio. The remainder of the securities portfolio consists of U.S. Treasury obligations, U.S. government agency securities, and U.S. government sponsored agency securities, all of which have the backing of the U.S. government, and are therefore not expected to incur credit losses.
There were no sales of securities during the three months ended March 31, 2026 or March 31, 2025.
As of March 31, 2026 and December 31, 2025, there were no securities available for sale that were pledged to secure advances or other borrowings.
At March 31, 2026, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.
Loans, net of allowance for credit losses, consisted of the following as of the dates indicated:
Real estate loans:
Commercial property
Retail
1,167,739
1,132,439
Hospitality
865,202
847,989
Office
486,537
503,268
Other (1)
1,464,915
1,532,667
Total commercial property loans
3,984,393
4,016,363
Construction
13,751
13,742
Residential (2)
1,002,223
1,049,872
Total real estate loans
5,000,367
5,079,977
Commercial and industrial loans
1,152,544
1,074,908
Equipment financing agreements
392,555
408,483
Total loans
6,545,466
6,563,368
Allowance for credit losses
(70,468
(69,903
Total loans, net of allowance for credit losses
Accrued interest on loans was $20.1 million and $20.7 million at March 31, 2026 and December 31, 2025, respectively.
At March 31, 2026 and December 31, 2025, loans with carrying values of $2.26 billion and $2.40 billion, respectively, were pledged to secure advances from the FHLB, and loans with carrying values of $515.7 million and $528.1 million, respectively, were pledged to the Federal Reserve Bank of San Francisco Discount Window.
Activity in loans held for sale is presented below for the following periods:
Real Estate
Commercial and Industrial
Three months ended March 31, 2026
Balance at beginning of period
4,985
2,418
Originations and transfers
51,624
10,918
62,542
Sales
(53,127
(11,117
Principal paydowns and amortization
(768
(1
(769
Balance at end of period
2,714
2,218
Three months ended March 31, 2025
3,994
4,585
8,579
18,615
16,805
35,420
(17,594
(14,570
(32,164
(4
5,015
6,816
11,831
Loan Purchases
The following table presents loans purchased by portfolio segment for the following periods:
Commercial real estate
15,113
Commercial and industrial
9,203
Residential real estate
9,985
34,301
Allowance for Credit Losses
The following table details the information on the allowance for credit losses by portfolio segment for the following periods:
Equipment Financing Agreements
51,670
7,792
10,441
69,903
Charge-offs
(132
(127
(2,912
(3,171
Recoveries
45
489
573
Credit loss expense (recovery)
(1,475
1,107
3,531
3,163
Ending balance
50,108
8,811
11,549
70,468
45,099
10,006
15,042
70,147
(169
(222
(2,798
(3,189
424
36
783
1,243
5,948
(3,578
26
2,396
51,302
6,242
13,053
70,597
The table below presents the allowance for credit losses by portfolio segment as a percentage of the total allowance for credit losses and loans by portfolio segment as a percentage of the total investment in loans as of:
Allowance
Loans
Amount
%
(dollars in thousands)
9,623
13.7
17.8
9,999
14.3
17.3
8,098
11.5
13.2
8,737
12.5
12.9
5,253
7.5
7.4
5,700
8.2
7.7
13,629
19.4
22.4
14,078
20.1
23.4
36,603
51.9
60.9
38,514
55.1
61.3
201
0.3
0.2
208
Residential
13,304
18.9
15.3
12,948
18.5
16.0
71.2
76.5
73.9
77.5
12.4
17.6
11.1
16.4
6.0
15.0
6.1
100.0
12
The following table represents the amortized cost basis of collateral-dependent loans by class, for which repayment is expected to be obtained through the sale or operation of the underlying collateral, as of:
436
596
3,175
337
10,159
1,156
671
5,104
11,426
2,005
1,113
7,109
12,539
Loan Quality Indicators
As part of the on-going monitoring of the quality of our loans portfolio, we utilize an internal loan grading system to identify credit risk and assign an appropriate grade (from 1 to 8) for each loan in our portfolio. Third-party loan reviews are conducted annually on a sample basis. Additional adjustments are made when determined to be necessary. The loan grade definitions are as follows:
Pass and Pass-Watch: Pass loans, grades (1-4), are in compliance with the Bank’s credit policy and regulatory requirements and do not exhibit any potential or defined weaknesses as defined under “Special Mention”, “Substandard” or “Doubtful.” This category is the strongest level of the Bank’s loan grading system. It consists of all performing loans with no identified credit weaknesses. It includes cash and stock/security secured loans or other investment grade loans. Pass-Watch loans, grade (4), require enhanced attention due to financial or other circumstances facing the borrowers, which may adversely affect future financial performance.
Special Mention: A Special Mention loan, grade (5), has potential weaknesses that deserve management’s close attention. If not corrected, these potential weaknesses may result in deterioration of the repayment of the debt and result in a Substandard classification. Loans that have significant actual, not potential, weaknesses are considered more severely classified.
Substandard: A Substandard loan, grade (6), has a well-defined weakness that jeopardizes the liquidation of the debt. A loan graded Substandard is not protected by the sound worth and paying capacity of the borrower, or of the value and type of collateral pledged. With a Substandard loan, there is a distinct possibility that the Bank will sustain some loss if the weaknesses or deficiencies are not corrected.
Doubtful: A Doubtful loan, grade (7), is one that has critical weaknesses that would make the collection or liquidation of the full amount due improbable. However, there may be pending events which may work to strengthen the loan, and therefore the amount or timing of a possible loss cannot be determined at the current time.
Loss: A loan classified as Loss, grade (8), is considered uncollectible and of such little value that their continuance as active bank assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be possible in the future. Loans classified as Loss will be charged off in a timely manner.
Under regulatory guidance, loans graded special mention or worse are considered criticized loans, and loans graded substandard or worse are considered classified loans.
Loans by Vintage Year and Risk Rating
Term Loans
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
Prior
RevolvingLoansAmortizedCost Basis
Risk Rating
Pass / Pass-Watch
393,929
935,164
382,505
404,811
799,378
924,146
55,860
3,895,793
Special Mention
811
54,758
21,762
1,650
79,577
Classified
3,771
1,347
3,905
9,023
Total commercial property
394,740
993,693
426,573
801,321
929,701
YTD gross charge-offs
40
92
132
YTD net charge-offs (recoveries)
(2
41
50
89
9,753
3,998
Total construction
29,143
225,155
68,357
132,608
313,940
221,289
6,180
996,672
2,416
682
892
1,114
447
3,135
Total residential
69,039
133,500
317,470
221,736
423,072
1,170,072
454,860
537,419
1,113,318
1,145,435
62,040
4,906,216
3,012
81,993
2,461
4,352
12,158
423,883
1,228,601
455,542
560,073
1,118,791
1,151,437
48
87
Commercial and industrial loans:
211,962
318,176
147,703
37,688
32,825
25,923
360,845
1,135,122
253
11,399
11,688
5,105
43
136
31
400
5,734
Total commercial and industrial loans
212,215
318,195
152,844
37,731
44,360
25,954
361,245
76
51
127
(24
37
88
Equipment financing agreements:
41,008
129,519
77,544
72,870
52,847
13,922
387,710
945
772
1,062
1,415
651
4,845
Total equipment financing agreements
130,464
78,316
73,932
54,262
14,573
1,124
301
512
799
176
2,912
259
461
678
(99
2,423
Total loans:
676,042
1,617,767
680,107
647,977
1,198,990
1,185,280
422,885
6,429,048
1,064
14,411
93,681
4,735
6,559
1,997
4,012
5,034
22,737
677,106
1,677,260
686,702
671,736
1,217,413
1,191,964
423,285
377
839
319
3,171
1,122
335
695
(14
2,598
2021
1,181,833
402,354
472,027
808,330
735,411
285,598
54,824
3,940,377
55,029
148
1,371
56,846
3,846
11,225
4,069
19,140
1,240,708
819,703
736,782
289,965
8,820
392
9,212
(8
8,547
8,515
9,745
3,997
258,847
84,457
142,926
326,126
132,510
97,076
4,154
1,046,096
2,417
250
2,667
1,109
329,656
97,072
4,404
1,450,425
490,808
614,953
1,134,456
867,921
382,674
58,978
5,000,215
2,565
59,513
12,338
4,065
20,249
1,509,300
1,149,359
869,292
387,037
59,228
(28
8,511
426,520
168,307
40,485
44,797
19,772
16,931
345,975
1,062,787
11,600
352
521
56,545
16,952
346,327
373
59
853
82
322
1,708
366
54
750
46
(2,723
(1,406
144,142
87,819
85,652
65,042
19,188
1,529
403,372
506
726
1,202
1,962
583
5,111
144,648
88,545
86,854
67,004
19,771
1,661
875
2,728
4,658
1,706
159
10,126
2,297
3,579
(234
7,302
2,021,087
746,934
741,090
1,244,295
906,881
401,134
404,953
6,466,374
14,165
71,113
14,448
4,218
25,881
2,080,468
747,660
742,292
1,272,908
908,835
405,650
405,555
1,248
2,787
14,331
1,788
21,046
1,197
2,351
12,876
913
(216
(2,725
14,407
Loans by Vintage Year and Payment Performance
Payment performance
Performing
989,922
800,880
928,336
3,978,816
Nonperforming
441
1,365
5,577
316,357
221,740
1,000,222
2,001
1,224,830
559,181
1,117,237
1,150,076
4,992,789
1,554
1,361
7,578
152,753
44,323
1,152,416
91
128
129,571
52,886
13,963
387,842
893
1,376
610
4,713
1,672,596
685,839
669,782
1,214,446
1,189,993
6,533,047
4,664
863
1,954
2,967
1,971
12,419
1,240,037
809,391
289,102
4,004,517
10,312
11,846
328,543
1,048,763
1,508,629
1,137,934
386,178
5,067,022
11,425
859
12,955
56,499
1,074,862
2,079,291
1,259,475
908,252
404,659
6,545,256
1,177
13,433
991
18,112
The following is an aging analysis of loans, including loans on nonaccrual status, disaggregated by loan class, as of:
30-59DaysPast Due
60-89DaysPast Due
90 Daysor MorePast Due
TotalPast Due
Current
1,524
1,960
1,165,779
3,365
861,837
486,200
1,050
540
1,590
1,463,325
2,764
4,488
7,252
3,977,141
4,743
1,082
7,826
994,397
7,507
6,489
15,078
4,985,289
627
1,151,917
3,541
1,442
2,907
7,890
384,665
11,675
2,524
9,396
23,595
6,521,871
2,002
590
154
2,746
1,129,693
844,854
493,109
325
657
982
1,531,685
5,462
1,247
10,313
17,022
3,999,341
4,311
1,259
6,679
1,043,193
9,773
2,506
11,422
23,701
5,056,276
788
1,074,120
4,604
2,956
9,348
399,135
15,165
4,294
14,378
33,837
6,529,531
18
Nonaccrual Loans and Nonperforming Assets
The following tables represent the amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of:
Nonaccrual LoansWithNo Allowance forCredit Losses
Nonaccrual LoansWithAllowance forCredit Losses
LoansPast Due90 Days StillAccruing
TotalNonperformingLoans
466
902
3,133
68
3,201
1,136
5,042
534
5,576
888
5,930
1,647
7,577
4,715
6,490
12,420
589
376
965
(39
83
44
11,380
12,489
(6
5,117
12,483
5,629
The Company recognized $1,000 and $346,000 of interest income on nonaccrual loans for the three months ended March 31, 2026 and 2025, respectively.
The following table details nonperforming assets as of the dates indicated:
Nonaccrual loans
Loans 90 days or more past due and still accruing
Total nonperforming loans
Other real estate owned (“OREO”)
1,980
Total nonperforming assets*
20,092
* Excludes repossessed personal property of $0.3 million and $0.6 million as of March 31, 2026 and December 31, 2025, respectively.
There was no OREO as of March 31, 2026. As of December 31, 2025, OREO consisted of two properties with combined carrying values of $2.0 million. OREO is included in prepaid expenses and other assets in the accompanying Consolidated Balance Sheets.
Loan Modifications
The following table presents the amortized cost of loans that were modified to borrowers experiencing financial difficulty during the period indicated:
Interest Only/Principal Deferment
Amortized Cost Basis
% of Total Class of Loans
Financial Effect
4,998
0.4
One loan with 12-month interest-only modification
The modified loan above was current at March 31, 2026. The Company has not committed to lend any additional amounts to the borrower included in the table above as of March 31, 2026. During the three months ended March 31, 2026 and 2025, there were no payment defaults on loans that were modified within the preceding 12 months.
No loans were modified to borrowers experiencing financial difficulty during the three months ended March 31, 2025.
The activity in servicing assets was as follows for the periods indicated:
6,457
Addition related to sale of loans
687
Amortization
(611
(692
6,422
20
At March 31, 2026 and December 31, 2025, we serviced loans sold by the Bank to unaffiliated parties of $561.8 million and $615.9 million, respectively. These loans are maintained off-balance sheet and are not included in loans, net of allowance for credit losses on the consolidated balance sheets. At March 31, 2026 and December 31, 2025, all loans serviced were SBA loans, except for $57.9 million and $62.5 million, respectively, of residential mortgage loans.
The Company recorded servicing fee income of $1.4 million and $1.3 million for three months ended March 31, 2026 and 2025, respectively. Servicing fee income, net of amortization of servicing assets, is included in other operating income in the consolidated statements of income. Amortization expense was $0.6 million and $0.7 million for the three months ended March 31, 2026 and 2025, respectively.
The fair value of servicing rights was $8.8 million at March 31, 2026, which was determined using discount rates ranging from 7.4% to 20.9% and prepayment speeds ranging from 13.2% to 28.7%, depending on the stratification of the specific right. The fair value of servicing rights was $8.5 million at December 31, 2025, which was determined using discount rates ranging from 9.7% to 18.9% and prepayment speeds ranging from 20.2% to 28.0%, depending on the stratification of the specific right.
The Company’s income tax expense was $7.9 million and $7.4 million, representing effective tax rates of 26.0% and 29.6% for the three months ended March 31, 2026 and 2025, respectively.
Management concluded that as of both March 31, 2026 and December 31, 2025, a valuation allowance of $1.5 million was appropriate against certain state net operating loss carry forwards. For all other deferred tax assets, management believed it was more likely than not that these deferred tax assets will be realized principally through future taxable income and reversal of existing taxable temporary differences. Net deferred tax assets were $37.5 million and $37.4 million as of March 31, 2026 and December 31, 2025, respectively.
As of March 31, 2026, the Company was subject to examination by federal and various state tax authorities for the years ended December 31, 2021 through 2024. During the three months ended March 31, 2026, there were no material changes to the Company’s uncertain tax positions. The Company does not expect its unrecognized tax positions to change significantly over the next twelve months.
Note 6 — Goodwill
The Company had goodwill with a carrying amount of $11.0 million at March 31, 2026 and December 31, 2025. The Company performed an impairment analysis in the first quarter of 2026 and determined there was no impairment as of March 31, 2026. No triggering event occurred as of, or subsequent to March 31, 2026, that would require a reassessment of goodwill.
Note 7 — Deposits
The scheduled maturities of time deposits are as follows for the periods indicated:
TimeDeposits MoreThan $250,000
Other TimeDeposits
At March 31, 2026
1,037,174
1,151,092
2,188,266
2027
131,270
238,130
369,400
2028
16,844
2029
313
2030 and thereafter
269
642
1,168,713
1,406,752
2,575,465
At December 31, 2025
1,136,877
1,285,988
2,422,865
390
62,900
63,290
16,473
183
341
1,137,536
1,365,885
2,503,421
Borrowings consisted of FHLB advances, which represent collateralized obligations with the FHLB. The following is a summary of contractual maturities of FHLB advances:
OutstandingBalance
WeightedAverage Rate
Open advances
Advances due within 12 months
4.20
Advances due over 12 months through 24 months
Outstanding advances
4.02
22
The following is financial data pertaining to FHLB advances:
Weighted-average interest rate at end of period
0.00
Weighted-average interest rate during the period
3.94
4.52
Average balance of FHLB advances
68,944
82,390
Maximum amount outstanding at any month-end
90,000
We have pledged loans with carrying values of $2.26 billion and $2.40 billion as collateral with the FHLB as of March 31, 2026 and December 31, 2025, respectively. The total borrowing capacity available from pledged collateral was $1.66 billion and $1.76 billion at March 31, 2026 and December 31, 2025, respectively. The remaining available borrowing capacity from pledged collateral was $1.51 billion and $1.46 billion at March 31, 2026 and December 31, 2025, respectively.
We have also pledged loans with carrying values of $515.7 million and $528.1 million as collateral with the Federal Reserve Bank of San Francisco Discount Window as of March 31, 2026 and December 31, 2025, respectively. The borrowing capacity available through the Discount Window based on pledged loans was $411.8 million and $424.5 million as of March 31, 2026 and December 31, 2025, respectively. There was no balance outstanding as of March 31, 2026 or December 31, 2025.
Interest expense on FHLB advances for the three months ended March 31, 2026 and 2025 was $0.7 million and $2.0 million, respectively.
On August 20, 2021, the Company issued $110.0 million of Fixed-to-Floating Subordinated Notes (“2031 Notes”) with a maturity date of September 1, 2031. The 2031 Notes have an initial fixed interest rate of 3.75% per annum, payable semiannually in arrears on March 1 and September 1 of each year, up to but excluding September 1, 2026. From and including September 1, 2026 and thereafter, the 2031 Notes will bear interest at a floating rate per annum equal to the Three-Month Term SOFR plus 310 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year. If the then current three-month term SOFR rate is less than zero, the three-month SOFR will be deemed to be zero. Debt issuance cost was $2.1 million, which is being amortized through the 2031 Notes’ maturity date. At March 31, 2026 and December 31, 2025, the balance of the 2031 Notes included in the Company’s Consolidated Balance Sheet, net of issuance cost, was $108.8 million and $108.7 million, respectively.
The Company assumed Junior Subordinated Deferrable Interest Debentures (“Subordinated Debentures”) as a result of an acquisition in 2014 with an unpaid principal balance of $26.8 million and an estimated fair value of $18.5 million. The $8.3 million discount is being amortized to interest expense through the debentures’ maturity date of March 15, 2036. A trust was formed in 2005 which issued $26.0 million of Trust Preferred Securities (“TPS”) at a 6.26% fixed rate for the first five years and a variable rate of three-month LIBOR plus 140 basis points thereafter and invested the proceeds in the Subordinated Debentures. Beginning September 15, 2023, the variable rate on the TPS changed to three-month SOFR plus 166 basis points, representing the credit spread of 140 basis points and a 26 basis point adjustment to convert three-month LIBOR to three-month SOFR.
The rate on the TPS at March 31, 2026 was 5.34%. The Company may redeem the Subordinated Debentures at an earlier date if certain conditions are met. The TPS will be subject to mandatory redemption if the Subordinated Debentures are repaid by the Company. Interest is payable quarterly, and the Company has the option to defer interest payments on the Subordinated Debentures from time to time for a period not to exceed five consecutive years. At March 31, 2026 and December 31, 2025, the balance of Subordinated Debentures included in the Company’s Consolidated Balance Sheets, net of discount of $4.2 million and $4.3 million, was $22.6 million and $22.5 million, respectively. Amortization of the discount was $104,000 and $112,000 for the three month periods ended March 31, 2026 and 2025, respectively.
Earnings per share (“EPS”) is calculated on both a basic and a diluted basis. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, or resulted from the issuance of common stock that then shared in earnings. Both basic and diluted EPS exclude common shares in treasury. For diluted EPS, the weighted-average number of common shares outstanding was diluted only by unvested performance stock units (“PSUs”) under the treasury method for the three month periods ended March 31, 2026 and 2025.
23
Unvested restricted stock awards contain rights to non-forfeitable dividends and are therefore considered participating securities prior to vesting. As a result, they have been included in the earnings allocation in computing basic and diluted EPS under the two-class method.
The following table is a reconciliation of the components used to derive basic and diluted EPS for the periods indicated:
(dollars in thousands, except per share and unit amounts)
Basic EPS
Less: income allocated to unvested restricted stock
181
Income allocated to common shares
22,376
17,524
Weighted-average shares for basic EPS
Basic EPS (1)
Effect of dilutive PSUs
179,869
120,588
Diluted EPS
Weighted-average shares for diluted EPS
Diluted EPS (1)
There were no options outstanding during the three months ended March 31, 2026. On a weighted-average basis, options to purchase 3,000 shares of common stock were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2025 because their effect would have been anti-dilutive. Options with an exercise price greater than the average market price of the common shares are considered anti-dilutive. There were no anti-dilutive unvested PSUs outstanding for the three months ended March 31, 2026 or 2025.
During the three months ended March 31, 2026, 57,754 PSUs were awarded to executive officers from the 2021 Equity Compensation Plan, with a fair value of $1.5 million on the grant date of March 13, 2026. These units have a three-year cliff vesting period and include dividend equivalent rights. During the three months ended March 31, 2025, 52,526 PSUs were awarded to executive officers from the 2021 Equity Compensation Plan, with a fair value of $1.2 million on the grant date of March 26, 2025. These units also have a three-year cliff vesting period and include dividend equivalent rights. Total PSUs outstanding as of March 31, 2026 were 197,417 with an aggregate grant fair value of $3.8 million. Total PSUs outstanding as of March 31, 2025 were 194,820 with an aggregate grant fair value of $3.6 million.
Federal bank regulatory agencies require bank holding companies and banks to maintain a minimum ratio of qualifying total capital to risk-weighted assets of 8.0% and a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%. In addition to the risk-based guidelines, federal bank regulatory agencies require bank holding companies and banks to maintain a minimum ratio of Tier 1 capital to average assets, referred to as the leverage ratio, of 4.0%.
In order for banks to be considered “well capitalized,” federal bank regulatory agencies require a minimum ratio of qualifying total capital to risk-weighted assets of 10.0% and a minimum ratio of Tier 1 capital to risk-weighted assets of 8.0%. In addition to the risk-based guidelines, federal bank regulatory agencies require depository institutions to maintain a minimum ratio of Tier 1 capital to average assets, referred to as the leverage ratio, of 5.0%.
At March 31, 2026, the Bank’s capital ratios exceeded the minimum requirements for the Bank to be considered “well capitalized” and the Company exceeded all of its applicable minimum regulatory capital ratio requirements.
A capital conservation buffer of 2.5% must be met to avoid limitations on the ability of the Bank and the Company to pay dividends, repurchase shares or pay discretionary bonuses. The Bank's capital conservation buffer was 6.45% and 6.25% and the Company’s capital conservation buffer was 6.52% and 6.37% as of March 31, 2026 and December 31, 2025, respectively.
The capital ratios of Hanmi Financial and the Bank as of March 31, 2026 and December 31, 2025 were as follows:
Minimum
Minimum to Be
Regulatory
Categorized as
Actual
Requirement
“Well Capitalized”
Ratio
Total capital (to risk-weighted assets):
Hanmi Financial
1,030,325
15.22
541,435
8.00
N/A
Hanmi Bank
977,985
14.45
541,456
676,820
10.00
Tier 1 capital (to risk-weighted assets):
847,283
12.52
406,076
6.00
904,943
13.37
406,092
Common equity Tier 1 capital (to risk-weighted assets)
825,453
12.20
304,557
4.50
304,569
439,933
6.50
Tier 1 capital (to average assets):
10.93
310,153
4.00
11.74
308,220
385,275
5.00
1,020,898
15.06
542,150
965,543
14.25
542,197
677,747
838,150
12.37
406,612
892,795
13.17
406,648
816,424
12.05
304,959
304,986
440,535
10.70
313,270
11.47
311,425
389,281
ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three-level fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are defined as follows:
Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a non-recurring basis to evaluate assets or liabilities for impairment or for disclosure purposes.
We record securities available for sale at fair value on a recurring basis. Certain other assets, such as loans held for sale, impaired loans, OREO, and core deposit intangible, are recorded at fair value on a non-recurring basis. Non-recurring fair value measurements typically involve assets that are periodically evaluated for impairment and for which any impairment is recorded in the period in which the re-measurement is performed.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument below:
Securities available for sale - The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges. If quoted prices are not available, fair values are measured using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities, or other model-based valuation techniques requiring observable inputs other than quoted prices such as yield curve, prepayment speeds, and default rates. Level 1 securities include U.S. Treasury securities that are traded on an active exchange or by dealers or brokers in active over-the-counter markets. The fair value of these securities is determined by quoted prices on an active exchange or over-the-counter market. Level 2 securities primarily include U.S. government agency and sponsored agency mortgage-backed securities, collateralized mortgage obligations and debt securities as well as municipal bonds in markets that are active. In determining the fair value of the securities categorized as Level 2, we obtain reports from nationally recognized broker-dealers detailing the fair value of each investment security held as of each reporting date. The broker-dealers use prices obtained from nationally recognized pricing services to value our fixed income securities. The fair value of the municipal securities is determined based on pricing data provided by nationally recognized pricing services. We review the prices obtained for reasonableness based on our understanding of the marketplace, and also consider any credit issues related to the bonds. As we have not made any adjustments to the market quotes provided to us and as they are based on observable market data, they have been categorized as Level 2 within the fair value hierarchy. Level 3 securities are instruments that are not traded in the market. As such, no observable market data for the instrument is available, which necessitates the use of significant unobservable inputs.
Derivatives – The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.
Loans held for sale - Loans held for sale includes the guaranteed portion of SBA 7(a) loans carried at the lower of cost or fair value. Management obtains quotes, bids or pricing indication sheets on all or part of the loans directly from the purchasing financial institutions. Premiums received or to be received on the quotes, bids or pricing indication sheets are indicative of the fact that cost is lower than fair value. At March 31, 2026 and December 31, 2025, the SBA 7(a) loans held for sale were recorded at its cost. We record SBA 7(a) loans held for sale at fair value on a nonrecurring basis with Level 2 inputs.
Nonperforming loans – Nonaccrual loans and loans 90 days past due and still accruing interest are considered nonperforming for reporting purposes. All nonperforming loans with a carrying balance over $250,000 are individually evaluated for the amount of impairment, if any. Nonperforming loans with a carrying balance of $250,000 or less are evaluated collectively. However, from time to time, nonrecurring fair value adjustments to collateral dependent nonperforming loans, for which repayment is expected to be obtained through the sale of the underlying collateral, are recorded based on either the current appraised value of the collateral, or management’s judgment, that are then adjusted based on recent market trends. When the fair value of the collateral is less than the book value, a valuation allowance is established to carry the loan at the fair value of the collateral, and results in a Level 3 measurement.
OREO - Fair value of OREO is based primarily on third party appraisals, less costs to sell and result in a Level 3 classification of the inputs for determining fair value. Appraisals are required annually and may be updated more frequently as circumstances require and the fair value adjustments are made to OREO based on the updated appraised value of the property.
Servicing assets - On a quarterly basis, the Company utilizes a third party service to evaluate servicing assets related to loans sold to unaffiliated parties with servicing retained, and result in a Level 3 classification. Servicing assets are assessed for impairment or increased obligation based on fair value at each reporting date.
Other repossessed assets – Fair value of equipment from equipment financing agreements is based primarily on a third party valuation service, less costs to sell and result in a Level 3 classification of the inputs for determining fair value. Valuations are required at the time the asset is repossessed and may be subsequently updated periodically due to the Company’s short-term possession of the asset prior to sale or as circumstances require and the fair value adjustments are made to the asset based on its value prior to sale.
27
As of March 31, 2026 and December 31, 2025, assets and liabilities measured at fair value on a recurring basis are as follows:
Level 1
Level 2
Level 3
Significant
Observable
Quoted Prices in
Inputs with No
Active Markets
Active Market
for Identical
with Identical
Unobservable
Characteristics
Inputs
Total Fair Value
Assets:
Securities available for sale:
707,134
Derivative financial instruments
2,377
2,318
751,914
2,719
2,568
28
As of March 31, 2026 and December 31, 2025, assets and liabilities measured at fair value on a non-recurring basis are as follows:
Inputs With No
With Identical
Collateral dependent loans (1)
1,104
Repossessed personal property
294
Collateral dependent loans (2)
Other real estate owned
588
The following table represents quantitative information about Level 3 fair value assumptions for assets measured at fair value on a non-recurring basis at March 31, 2026 and December 31, 2025:
ValuationTechniques
UnobservableInput(s)
Range (WeightedAverage)
Collateral dependent loans:
Market approach
Adjustments to market data
(13)% to 1% / (5)%
(1)
(2)
(26)% to 20% / (8)%
(26)% to (4)% / (14)%
(6)% to 1% / (3)%
(13)% to 1% / (5%)
(10)% to 5% / 0%
29
ASC 825, Financial Instruments, requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured on a recurring basis or non-recurring basis are discussed above.
The estimated fair value of financial instruments has been determined by using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825), among other provisions, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. Other than certain financial instruments for which we had concluded that the carrying amounts approximate fair value, the fair value estimates shown below were based on an exit price notion as of March 31, 2026, as required by Topic 825. The financial instruments for which we had concluded that the carrying amounts approximate fair value include cash and due from banks, accrued interest receivable and payable, and noninterest-bearing deposits.
The estimated fair values of financial instruments were as follows:
Carrying
Financial assets:
Securities available for sale
Loans held for sale
5,179
Loans, net of allowance for credit losses
6,512,774
Financial liabilities:
Interest-bearing deposits
4,769,082
Borrowings and subordinated debentures
138,545
30
7,715
6,532,980
4,664,018
280,463
149,761
137,296
The methods and assumptions used to estimate the fair value of each class of financial instruments for which it was practicable to estimate that value are explained below:
Cash and due from banks – The carrying amounts of cash and due from banks approximate fair value due to the short-term nature of these instruments (Level 1).
Securities – The fair value of securities, consisting of securities available for sale, is generally obtained from market bids for similar or identical securities, from independent securities brokers or dealers, or from other model-based valuation techniques described above (Level 1 and 2).
Loans held for sale – Loans held for sale are carried at the lower of aggregate cost or fair market value, as determined based upon quotes, bids or sales contract prices (Levels 1 and 2).
Loans, net of allowance for credit losses – The fair value of loans is estimated based on the discounted cash flow approach. To estimate the fair value of the loans, certain loan characteristics such as account types, remaining terms, annual interest rates or coupons, interest types, past delinquencies, timing of principal and interest payments, current market rates, loan-to-value ratios, loss exposures, and remaining balances are considered. Additionally, the Company’s prior charge-off rates and loss ratios as well as various other assumptions relating to credit, interest, and prepayment risks are used as part of valuing the loan portfolio. Subsequently, the loans were individually evaluated by sorting and pooling them based on loan types, credit risk grades, and payment types. Consistent with the requirements of ASU 2016-01, the fair value of the Company’s loans is considered to be an exit price notion as of March 31, 2026 (Level 3).
The fair value of collateral dependent loans is estimated based on the net realizable fair value of the collateral or the observable market price of the most recent sale or quoted price from loans held for sale. The Company does not record loans at fair value on a recurring basis. Nonrecurring fair value adjustments to collateral dependent loans are recorded based on the current appraised value of the collateral (Level 3).
Accrued interest receivable – The carrying amount of accrued interest receivable approximates its fair value (Level 1).
Interest-bearing deposits – The fair value of interest-bearing deposits, such as savings accounts, money market checking, and certificates of deposit, is estimated based on discounted cash flows. The cash flows for non-maturity deposits, including savings accounts and money market checking, are estimated based on their historical decaying experiences. The discount rate used for fair valuation is based on interest rates currently being offered by the Bank on comparable deposits as to amount and term (Level 3).
Borrowings and subordinated debentures – Borrowings consist of FHLB advances, subordinated debentures and other borrowings. Discounted cash flows based on current market rates for borrowings with similar remaining maturities are used to estimate the fair value of borrowings (Level 2 and 3).
Accrued interest payable – The carrying amount of accrued interest payable approximates its fair value (Level 1).
Note 12 — Off-Balance Sheet Commitments
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk similar to the risk involved with on-balance sheet items.
The Bank’s exposure to losses in the event of non-performance by the other party to commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for extending loan facilities to customers. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon an extension of credit, was based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, premises and equipment, and income-producing or borrower-occupied properties.
Some of the commitments to fund existing loans, lines of credit and letters of credit are expected to expire without being drawn upon. Therefore, the total commitments do not necessarily represent future cash requirements. As of March 31, 2026, the Bank was obligated on $150.0 million of letters of credit to the FHLB of San Francisco, which were being used as collateral for $150.0 million in public fund deposits from the State of California.
The following table shows the distribution of total loan commitments as of the dates indicated:
Unused commitments to extend credit
891,594
930,122
Standby letters of credit
177,459
163,071
Commercial letters of credit
8,165
5,761
Total commitments
1,077,218
1,098,954
The allowance for credit losses related to off-balance sheet items was maintained at a level believed to be sufficient to absorb current expected lifetime losses related to these unfunded credit facilities. The determination of the allowance adequacy was based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities.
Activity in the allowance for credit losses related to off-balance sheet items was as follows for the periods indicated:
2,349
2,074
(271
2,078
2,399
The Company enters into leases in the normal course of business primarily for bank branch offices, back-office operations locations, business development offices, information technology data centers and information technology equipment. At March 31, 2026, the Company’s leases had remaining terms ranging from one month to eight years, some of which include renewal or termination options to extend the lease for up to ten years.
The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company’s balance sheet.
Leases are classified as operating or finance leases at the lease commencement date. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the term of the lease. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
32
Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease term.
As of March 31, 2026, the outstanding balances for our right-of-use asset and lease liability were $34.0 million and $38.0 million, respectively. As of December 31, 2025, the outstanding balances of the right-of-use asset and lease liability were $32.0 million and $36.0 million, respectively. The right-of-use asset is reported in prepaid expenses and other assets, and the lease liability is reported in accrued expenses and other liabilities on the Consolidated Balance Sheets.
In determining the discount rates, since most of our leases do not provide an implicit rate, we used our incremental borrowing rate provided by the FHLB of San Francisco based on the information available at the commencement date to calculate the present value of lease payments.
At March 31, 2026, future minimum rental commitments under these non-cancelable operating leases, with initial or remaining terms of one year or more, were as follows:
6,395
8,469
7,978
7,222
2030
5,471
Thereafter
6,573
Remaining lease commitments
42,108
Interest
(4,108
Present value of lease liability
38,000
Net lease expense recognized for the three months ended March 31, 2026 and 2025 was $2.4 million and $2.1 million, respectively. Sublease income was immaterial for both periods.
Weighted average remaining lease terms for the Company’s operating leases were 5.33 years and 5.59 years as of March 31, 2026 and December 31, 2025, respectively. Weighted average discount rates used for the Company’s operating leases were 3.84% and 3.85% as of March 31, 2026 and December 31, 2025, respectively.
Cash paid and included in cash flows from operating activities for amounts used in the measurement of the lease liability of the Company’s operating leases was $2.1 million for the three months ended March 31, 2026, and $2.2 million for the three months ended March 31, 2025.
Note 14 — Liquidity
As of March 31, 2026, Hanmi Financial had $1.3 million in cash on deposit with its bank subsidiary and $48.6 million of U.S. Treasury securities at fair value. As of December 31, 2025, the Company had $8.8 million in cash on deposit with its bank subsidiary and $46.2 million of U.S. Treasury securities at fair value. Management believes that Hanmi Financial, on a stand-alone basis, had adequate liquid assets to meet its current debt obligations.
The principal objective of our liquidity management program is to maintain the Bank’s ability to meet the day-to-day cash flow requirements of its customers who wish either to withdraw funds or to draw upon credit facilities to meet their cash needs. Management believes that the Bank, on a stand-alone basis, has adequate liquid assets to meet its current obligations. The Bank’s primary funding source will continue to be deposits originating from its branch platform. The Bank’s wholesale funds historically consisted of FHLB advances, brokered deposits, and State of California time deposits. As of March 31, 2026, the Bank had no outstanding FHLB advances. As of December 31, 2025, the Bank had $150.0 million of outstanding FHLB advances. The Bank had $88.5 million of brokered deposits at March 31, 2026 and December 31, 2025, and $150.0 million of State of California time deposits at March 31, 2026 and December 31, 2025.
We monitor the sources and uses of funds on a regular basis to maintain an acceptable liquidity position. The Bank’s primary source of borrowings is the FHLB, from which the Bank is eligible to borrow up to 30% of its assets. As of March 31, 2026 and
33
December 31, 2025, the total borrowing capacity, based on pledged collateral was $1.66 billion and $1.76 billion, respectively, while the remaining available borrowing capacity was $1.51 billion and $1.46 billion, respectively.
The amount that the FHLB is willing to advance differs based on the quality and character of qualifying collateral pledged by the Bank, and the FHLB may adjust the advance rates for qualifying collateral upwards or downwards from time to time. To the extent deposit renewals and deposit growth are not sufficient to fund maturing and withdrawable deposits, repay maturing borrowings, fund existing and future loans, equipment financing agreements and securities, and otherwise fund working capital needs and capital expenditures, the Bank may utilize the remaining borrowing capacity from its FHLB borrowing arrangement.
As a means of augmenting its liquidity, the Bank also had an available borrowing source of $411.8 million from the Federal Reserve Bank of San Francisco Discount Window, to which the Bank pledged loans with a carrying value of $515.7 million, with no borrowings outstanding as of March 31, 2026. At December 31, 2025, the available borrowing capacity through the Federal Reserve Bank of San Francisco Discount Window was $424.5 million on pledged loans with carrying values of $528.1 million, with no borrowings outstanding. The Bank maintains other source of liquidity, including a line of credit for repurchase agreements up to $100.0 million and four unsecured federal funds lines of credit totaling $140.0 million. These sources had no outstanding balances as of March 31, 2026 or December 31, 2025.
Note 15 — Derivatives and Hedging Activities
Risk Management Objective of Using Derivative
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.
Derivatives Designated as Hedging Instruments - Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount. Such derivatives were used to hedge the variable cash flows associated with existing variable-rate assets. During the fourth quarter of 2023, the Company entered into a $100.0 million notional interest rate swap designated as a cash flow hedge, with an effective date of May 1, 2024 and a maturity date of May 1, 2026, to hedge a pool of Prime-indexed loans against falling rates. The principal balance of the loan pool designated for the Prime-indexed loans was $134.0 million as of March 31, 2026. During the first quarter of 2024, the Company entered into a $75.0 million notional interest rate swap designated as a cash flow hedge, with an effective date of May 1, 2024 and a maturity date of May 1, 2026, to hedge a pool of one-month SOFR-indexed loans against falling rates. The principal balance of the loan pool designated for the SOFR-indexed loans was $115.8 million as of March 31, 2026.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest income in the same period(s) during which the hedged transaction affects earnings. Management evaluated the effectiveness of the Company’s derivatives designated as cash flow hedges at inception and at the balance sheet date and determined they are effective. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income as interest payments are received on the Company’s variable-rate asset. During the next 12 months, the Company estimates that an additional $22 thousand will be reclassified as an increase to interest income.
Derivatives Not Designated as Hedging Instruments
The Company also enters into interest rate swap agreements between the Company and its customers and other third-party counterparties. The Company enters into “back to back swap” arrangements whereby the Company executes interest rate swap agreements with its customers and acquires an offsetting swap position from a third-party counterparty. These derivative financial statements are accounted for at fair value, with changes in fair value recognized in the Company’s Consolidated Statements of Income.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025.
As of March 31, 2026
Derivative Assets
Derivative Liabilities
Notional Amount
Balance Sheet Location
Derivatives not designated as hedging instruments
Interest rate products
60,614
Other Assets
2,334
Other Liabilities
Total derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
175,000
Total derivatives designated as hedging instruments
As of December 31, 2025
61,350
2,579
140
The table below presents the effect of cash flow hedge accounting on Accumulated Other Comprehensive Income for the three months ended March 31, 2026 and 2025.
Derivatives in Subtopic 815-20 Hedging Relationships
Amount of Gain or (Loss) Recognized in OCI on Derivative
Amount of Gain or (Loss)Recognized in OCI IncludedComponent
Amount of Gain or (Loss)Recognized in OCI ExcludedComponent
Location of Gain or (Loss) Recognized from Accumulated Other Comprehensive Income into Income
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income Included Component
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income Excluded Component
Derivatives in Cash Flow Hedging Relationships
Interest Rate Products
Interest Income
60
Three Months Ended March 31, 2025
191
(245
35
The table below presents the effect of cash flow hedge accounting on the Consolidated Statements of Income for the three months ended March 31, 2026 and 2025.
Location and Amount of Gain or (Loss) Recognized in Income on Cash Flow Hedging Relationship
Interest Expense
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20
Interest contracts
Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income
Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income - included component
The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Consolidated Statements of Income for the three months ended March 31, 2026 and 2025.
Derivatives Not Designated as HedgingInstruments under Subtopic 815-20
Location of Gain or (Loss) Recognized in Income on Derivative
Amount of Gain or (Loss)Recognized in Income on Derivative
Other income
(15
No fee income was recognized from the Company’s derivative financial instruments for the three months ended March 31, 2026 or 2025.
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of March 31, 2026 and December 31, 2025. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The derivative assets are located within the prepaid and other assets line item on the Consolidated Balance Sheets and the derivative liabilities are located within the accrued expenses and other liabilities line item on the Consolidated Balance Sheets.
Offsetting of Derivative Assets
Gross Amounts Not Offset in the Consolidated Balance Sheets
Gross Amounts of Recognized Assets
Gross Amounts Offset in the Statement of Financial Position
Net Amounts of Assets presented in the Statement of Financial Position
Financial Instruments
Cash Collateral Received
Net Amount
Derivatives
144
2,097
Offsetting of Derivative Liabilities
Gross Amounts of Recognized Liabilities
Cash Collateral Provided
2,174
397
384
2,171
The Company has agreements with each of its derivative counterparties that contain a provision stating if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in
default on its derivative obligations. In addition, these agreements may also require the Company to post additional collateral should it fail to maintain its status as a well- or adequately- capitalized institution.
As of March 31, 2026 and December 31, 2025, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $0. As of March 31, 2026 and December 31, 2025, no collateral was provided related to these agreements.
Note 16 — Segment Reporting
The Company has one reportable segment, Banking, as determined by the Chief Financial Officer, who is designated the chief operating decision maker, based upon information provided about the Company’s products and services offered, which are primarily banking operations. The Banking segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business. The chief operating decision maker uses net interest income, net interest margin, non-interest income, non-interest expense, credit loss expense, and net income to assess performance and in the determination of allocating resources. These metrics, coupled with monitoring of budget to actual results, are used in assessment performance and in establishing compensation. Loans, investments, and deposits provide the revenues in our banking operations. Interest expense, provisions for credit losses, and salaries and benefits provide the significant expenses in our banking operations.
The following table presents information reported internally for performance assessment by the chief operating decision maker for the following periods:
Banking Segment
Quarter Ended March 31,
Net interest income
Noninterest income
Segment revenues
71,742
62,818
Other revenues
Total consolidated revenues
Less:
Noninterest expenses
Segment net income
Reconciliation of profit:
Adjustments and reconciling items
Consolidated net income
Segment assets
7,729,035
Other assets
Consolidated assets
Note 17 — Subsequent Events
On April 23, 2026, the Company announced that the Board of Directors of the Company declared a quarterly cash dividend of $0.28 per share to be paid on May 20, 2026 to stockholders of record as of the close of business on May 4, 2026.
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The following is management’s discussion and analysis of our results of operations and financial condition as of and for the three months ended March 31, 2026. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report on Form 10-K”) and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the period ended March 31, 2026 (this “Report”).
Some of the statements contained in this Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this Report other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial condition and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital and strategic plans and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, financial condition, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statements. These factors include the following:
For additional information concerning risks we face, see “Part II, Item 1A. Risk Factors” in this Report and “Item 1A. Risk Factors” in Part I of the 2025 Annual Report on Form 10-K. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.
We have established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to the consolidated financial statements in the 2025 Annual Report on Form 10-K. We had no significant changes in what constituted our accounting policies since the filing of the 2025 Annual Report on Form 10-K.
Certain accounting policies require us to make significant estimates and assumptions that have a material impact on the carrying value of certain assets and liabilities, and we consider these to be critical accounting policies. For a description of these critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in the 2025 Annual Report on Form 10-K. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods. Management has discussed the development and selection of these critical accounting policies with the Audit Committee of the Company’s Board of Directors.
Our primary source of revenue is net interest income, which is the difference between interest derived from assets, and interest paid on liabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on loans are affected principally by changes to market interest rates, the demand for loans, the supply of money available for lending purposes, and other competitive factors. Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve.
The following table shows the average balance of assets, liabilities and stockholders’ equity; the amount of interest income, and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin on a taxable-equivalent basis for the periods indicated. All average balances are daily average balances.
March 31, 2025
Average
Income /
Yield /
Balance
Expense
Rate
Interest-earning assets:
Loans:
Commercial real estate (1)
3,964,174
55,836
5.71
3,938,099
54,861
5.65
Residential mortgage
1,035,929
14,035
5.42
960,862
12,750
5.38
Commercial and industrial (1)
1,024,117
16,970
6.72
797,524
15,252
7.76
Consumer
5,295
84
6.40
6,893
7.01
Equipment finance
404,801
6,941
6.86
486,153
7,905
Loans (1)
6,434,316
5.90
6,189,531
5.95
Securities (2)
921,065
2.62
1,001,499
2.49
FHLB stock
20.56
8.92
Interest-bearing deposits in other banks
171,953
3.53
176,028
4.24
Total interest-earning assets
7,543,719
5.48
7,383,443
5.45
Noninterest-earning assets:
52,668
53,670
(69,284
(69,648
247,771
249,148
7,774,874
7,616,613
Interest-bearing liabilities:
Demand: interest-bearing
74,963
0.15
79,369
0.14
Money market and savings
2,063,186
13,082
2.57
2,037,224
16,437
3.27
Time deposits
2,522,505
23,629
3.80
2,345,346
24,095
4.17
Total interest-bearing deposits
4,660,654
3.20
4,461,939
3.69
69,388
675
179,444
4.57
130,541
1,536
4.70
130,718
4.84
Total interest-bearing liabilities
4,860,583
3.25
4,772,101
3.75
Noninterest-bearing liabilities and equity:
Demand deposits: noninterest-bearing
1,937,628
1,895,953
Other liabilities
134,153
144,654
Stockholders’ equity
842,510
803,905
Cost of deposits (3)
2.26
2.59
Net interest spread (taxable equivalent basis) (4)
2.23
1.70
Net interest margin (taxable equivalent basis) (5)
3.38
3.02
The table below shows changes in interest income and interest expense and the amounts attributable to variations in interest rates and volumes for the periods indicated. The variances attributable to simultaneous volume and rate changes have been allocated to the change due to volume and the change due to rate categories in proportion to the relationship of the absolute dollar amount attributable solely to the change in volume and to the change in rate.
March 31, 2026 vs March 31, 2025
Increases (Decreases) Due to Change In
Volume
3,457
(478
2,979
(501
291
(210
471
(302
(345
2,913
(18
2,895
209
(3,564
(3,355
1,820
(2,286
(466
(1,246
(103
(1,349
(44
780
(5,996
(5,216
Change in net interest income
2,133
5,978
8,111
For the three months ended March 31, 2026 and 2025, net interest income was $63.2 million and $55.1 million, respectively, reflecting an increase of $8.1 million, or 14.7%. This increase was primarily due to a $6.0 million effect from a decrease in interest rates and a $2.1 million effect from an increase in the average balance of interest-earning assets, net of the effect of an increase in the average balance of interest-bearing liabilities.
Interest expense decreased $5.2 million, or 11.8%, to $38.9 million for the three months ended March 31, 2026, from $44.2 million for the three months ended March 31, 2025. This decrease primarily resulted from $3.4 million of lower interest expense on money market and savings accounts and $1.3 million of lower interest expense on borrowings. Interest and dividend income increased $2.9 million, or 2.9%, to $102.2 million for the three months ended March 31, 2026 from $99.3 million for the same period in 2025. This increase was primarily due to $1.7 million and $1.3 million of higher interest income on commercial and industrial loans and residential loans, respectively, due to higher average loan balances, as well as a special dividend received on FHLB stock of $0.5 million during the three months ended March 31, 2026. On a taxable equivalent basis, net interest spread and net interest margin for the quarter ended March 31, 2026, were 2.23% and 3.38%, respectively, compared to 1.70% and 3.02%, respectively, for the same period in 2025.
The average balance of interest-earning assets increased $160.3 million, or 2.2%, to $7.54 billion for the three months ended March 31, 2026, from $7.38 billion for the three months ended March 31, 2025. This increase was primarily driven by growth in average loans, which increased $244.8 million, or 4.0%, partially offset by a decrease of $80.4 million, or 8.0%, in the average balance of securities. The decline in the average balance of securities was due to maturities exceeding purchases between the first quarter of 2025 and the first quarter of 2026, which aided the growth in loans and the decline in borrowings.
The average yield on interest-earning assets, on a taxable equivalent basis, increased three basis points to 5.48% for the three months ended March 31, 2026, from 5.45% for the three months ended March 31, 2025. The average yield on FHLB stock increased by 11.64% to 20.56% for the three months ended March 31, 2026, from 8.92% for the three months ended March 31, 2025, primarily
42
due to a $0.5 million special dividend received on FHLB stock. The average yield on securities, on a taxable equivalent basis, increased to 2.62% for the three months ended March 31, 2026, from 2.49% for the three months ended March 31, 2025. The average yield on loans decreased to 5.90% for the three months ended March 31, 2026, from 5.95% for the three months ended March 31, 2025.
The average balance of interest-bearing liabilities increased $88.5 million, or 1.9%, to $4.86 billion for the three months ended March 31, 2026 compared with $4.77 billion for the three months ended March 31, 2025. The average balances of time deposits and money market and savings accounts increased by $177.2 million and $26.0 million, respectively, offset partially by a decrease in the average balance of borrowings of $110.1 million and a decrease in the average balance of interest-bearing demand deposit accounts of $4.4 million.
The average cost of interest-bearing liabilities declined by 50 basis points to 3.25% for the three months ended March 31, 2026, from 3.75% for the three months ended March 31, 2025, primarily due to a decline of 49 basis points in the average cost of interest-bearing deposits, which was 3.20% for the three months ended March 31, 2026 and 3.69% for the three months ended March 31, 2025. Within interest-bearing deposits, the average cost of money market and savings accounts and time deposits decreased by 70 basis points and 37 basis points, respectively, due to a decline in market rates. The average cost of borrowings decreased by 63 basis points to 3.94% for the three months ended March 31, 2026 compared with 4.57% for the three months ended March 31, 2025.
For the first quarter of 2026, the Company recorded $2.9 million of credit loss expense, comprising a $3.2 million provision for loan losses and a $0.3 million recovery for off-balance sheet items. For the same period in 2025, the Company recorded $2.7 million of credit loss expense, comprising a $2.4 million provision for loan losses and a $0.3 million provision for off-balance sheet items. The $0.8 million increase in the provision for loan losses was primarily due to higher net charge-offs, which were $0.7 million higher in the three months ended March 31, 2026 than in the three months ended March 31, 2025.
See also “Allowance for Credit Losses and Allowance for Credit Losses Related to Off-Balance Sheet Items” for further details.
The following table sets forth the various components of noninterest income for the periods indicated:
Increase(Decrease)
Percent
(90
(4.06
)%
105
7.52
Servicing income
870
732
138
18.85
Bank-owned life insurance income
309
97.41
All other operating income
844
897
(53
(5.91
Service charges, fees & other
5,952
5,551
401
7.22
Gain on sale of SBA loans
102
5.10
177.14
813
10.52
For the three months ended March 31, 2026, noninterest income was $8.5 million, an increase of $0.8 million compared with noninterest income of $7.7 million for the three months ended March 31, 2025. The increase was due primarily to higher gain on the sale of residential mortgage loans, which increased by $0.3 million due to a higher volume of loans sold, and higher bank-owned life insurance income, which increased $0.3 million due to death benefit claims.
During the first quarter of 2026, the Company sold $31.7 million of residential loans, recognizing a net gain of $0.5 million, and sold $32.5 million of SBA loans, recognizing a net gain of $2.1 million. During the first quarter of 2025, the Company sold $10.0 million of residential loans, recognizing a net gain of $0.2 million, and sold $32.2 million of SBA loans, recognizing a net gain of $2.0 million. Trade premiums on SBA loan sales were 7.88% and 7.82% for the three months ended March 31, 2026 and 2025, respectively. Trade premiums on residential mortgage loan sales remained consistent at 2.50% for the first three months of both 2026 and 2025.
The following table sets forth the components of noninterest expense for the periods indicated:
984
4.69
(36
(0.81
599
15.82
1,312
89.37
7.54
103
17.61
All other operating expenses
3,849
674
21.23
Subtotal
38,629
34,954
3,675
10.51
Other real estate owned expense (income)
(386
(941.46
Repossessed personal property expense (income)
(11
95
(863.64
3,384
9.67
For the three months ended March 31, 2026, noninterest expense was $38.4 million, an increase of $3.4 million, or 9.7%, compared with $35.0 million for the same period in 2025. The increase was mainly attributed to a $1.3 million increase in professional fees, a $1.0 million increase in salaries and employee benefits, a $0.7 million increase in all other operating expenses, and a $0.6 million increase in data processing, partially offset by a $0.4 million reduction in other-real-estate-owned expense (income).
The $1.3 million increase in professional fees was due primarily to a $0.8 million increase in legal fees related to business activities and a $0.5 million increase in consulting and advisory fees for various corporate initiatives. The $1.0 million increase in salaries and employee benefits was due to merit increases and higher headcount. The $0.7 million increase in all other operating expenses was related to several administrative matters. The $0.6 million increase in data processing was due to higher software license and maintenance expenses and higher transaction processing fees. The $0.4 million decrease in other-real-estate-owned expense (income) was due primarily to a $0.9 million gain on the sales of two properties, partially offset by $0.3 million in property taxes paid for one of those properties at the time of sale during the first quarter of 2026.
Income tax expense was $7.9 million and $7.4 million, representing an effective income tax rate of 26.0% and 29.6% for the three months ended March 31, 2026 and 2025, respectively. The lower effective tax rate for the three months ended March 31, 2026 reflects the tax benefit arising from the first-quarter vesting of performance stock units, as well as a favorable change in the State of California's apportionment calculation.
As of March 31, 2026, our securities portfolio consisted of U.S. government agency and sponsored agency mortgage-backed securities, collateralized mortgage obligations and debt securities, tax-exempt municipal bonds and U.S. Treasury securities. Most of these securities carry fixed interest rates. Other than holdings of U.S. government agency and sponsored agency obligations, there were no securities of any one issuer exceeding 10% of stockholders’ equity as of March 31, 2026 or December 31, 2025.
Securities decreased $44.9 million to $835.7 million at March 31, 2026 from $880.6 million at December 31, 2025, mainly attributed to $76.8 million in payments and maturities as well as a $3.2 million decline in market value , partially offset by $35.7 million in purchases.
The following table summarizes the contractual or expected maturity schedule for securities, at amortized cost, and their cost-weighted average yield, as of March 31, 2026:
After OneYear But
After FiveYears But
Within OneYear
Within FiveYears
Within TenYears
After TenYears
Yield
107,119
3.79
21,589
3.58
3.76
1,861
3.29
190,111
1.40
207,945
2.54
2.00
0.88
2,977
3.39
3,335
4.23
67,953
2.53
2.64
459
5.07
21,299
2.98
3,723
1.75
143,787
4.43
4.19
48,070
1.25
4,992
1.00
1.23
48,553
1.29
31,129
2.72
197,169
1.46
419,685
3.18
72,637
1.33
2,137
1.34
3.01
3.07
1.42
As of March 31, 2026 and December 31, 2025, loans (excluding loans held for sale), net of deferred loan fees and costs, discounts and the allowance for credit losses, were $6.47 billion and $6.49 billion, respectively. For the three months ended March 31, 2026, there was $377.9 million in new loan production, offset by $263.6 million in loan sales and payoffs, and amortization and other reductions of $132.2 million. Loan production consisted of commercial real estate loans of $131.4 million, residential mortgage loans of $29.1 million, commercial and industrial loans of $134.7 million, equipment financing agreements of $40.7 million and SBA loans of $42.1 million.
The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses as of March 31, 2026. In addition, the table shows the distribution of such loans between those with floating or variable interest rates and those with fixed or predetermined interest rates.
After OneYear butWithinThreeYears
After ThreeYears butWithinFiveYears
After FiveYears butWithinFifteenYears
AfterFifteenYears
225,149
381,777
351,904
127,703
81,206
250,874
281,427
297,088
16,731
19,082
223,188
203,421
37,104
12,837
9,987
329,234
488,699
521,995
85,745
39,242
1,028,445
1,355,324
1,208,091
243,016
149,517
5,594
77
9,084
987,260
1,047,790
1,355,401
1,208,299
252,100
1,136,777
443,885
204,361
266,198
238,100
37,764
187,119
151,943
15,729
1,529,439
1,746,881
1,626,440
505,929
Loans with predetermined interest rates
993,046
876,834
654,630
26,785
252,137
2,803,432
Loans with variable interest rates
536,393
870,047
971,810
479,144
884,640
3,742,034
The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses, with fixed or predetermined interest rates, as of March 31, 2026.
After OneYear butWithin ThreeYears
After ThreeYears butWithin FiveYears
178,875
199,365
197,587
435
576,275
202,429
99,512
37,601
339,542
164,294
156,249
28,166
348,709
242,556
213,885
230,096
4,371
3,702
694,610
788,154
669,011
493,450
4,384
4,137
1,959,136
2,400
5,402
248,000
255,858
790,554
493,506
9,786
2,214,994
164,728
20,704
9,181
1,270
195,883
The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses, with floating or variable interest rates (including floating, adjustable and hybrids), as of March 31, 2026.
46,274
182,412
154,317
127,690
80,771
591,464
48,445
181,915
259,487
525,660
58,894
47,172
8,938
137,828
86,678
274,814
291,899
81,374
35,540
770,305
240,291
686,313
714,641
238,632
145,380
2,025,257
3,194
152
3,682
739,260
746,365
257,236
686,390
714,793
242,314
2,785,373
279,157
183,657
257,017
236,830
956,661
As of March 31, 2026, the loan portfolio included the following concentrations of loan types to borrowers in industries that represented greater than 10.0% of loans outstanding:
Percentage of
Balance as of
Loans Receivable
(in millions)
Lessor of nonresidential buildings
1,566,403
23.9
864,652
Criticized Loans
Activity in criticized loans was as follows for the three months ended March 31:
Downgrades from pass loans
23,206
Reductions:
Upgrades to pass loans
(20,502
Downgrades to classified loans
Payoffs and paydowns
(493
(879
(41
Increase (decrease)
22,569
(21,233
139,613
93,682
118,380
Downgrades
9,616
26,169
Upgrades
(188
(10,891
(2,106
(1,880
(3,039
(3,155
20,836
25,891
25,683
22,736
46,519
Special mention loans were $93.7 million and $71.1 million at March 31, 2026 and December 31, 2025, respectively. The $22.6 million increase in the first quarter of 2026 was primarily due to the downgrade of a $21.2 million commercial real estate loan in the retail industry.
Classified loans were $22.7 million and $25.9 million at March 31, 2026 and December 31, 2025, respectively. The $3.2 million decrease in classified loans for the three months ended March 31, 2026 resulted from $12.8 million of reductions and $9.6 million of additions. Included in reductions is a $9.7 million payment on a commercial real estate office loan that had a balance of $10.2 million at December 31, 2025. Included in additions is a $5.0 million commercial and industrial loan in the hospitality industry, which was modified during the first quarter of 2026 to allow for temporary interest-only payments.
Nonperforming Assets
Loans 30 to 89 days past due and still accruing were $13.3 million at March 31, 2026, compared with $19.9 million at December 31, 2025. There were no loans 90 or more days past due and still accruing at March 31, 2026 or December 31, 2025.
Nonperforming loans consist of nonaccrual loans and loans 90 days or more past due and still accruing interest. Nonperforming assets consist of nonperforming loans and OREO. Loans are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless we believe the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on nonaccrual status earlier, depending upon the individual circumstances surrounding the loan’s delinquency. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans may be restored to accrual status when principal and interest become current and full repayment is expected, which generally occurs after sustained payment of six months. Interest income is recognized on the accrual basis for loans not meeting the criteria for nonaccrual. OREO consists of properties acquired by foreclosure or similar means.
Except for nonaccrual loans, management is not aware of any other loans as of March 31, 2026 for which known credit problems of the borrower would cause serious doubts as to the ability of such borrowers to comply with their present loan repayment terms, or any known events that would result in a loan being designated as nonperforming at some future date.
47
Activity in nonperforming loans was as follows for the three months ended March 31:
Nonperforming Loans
Additions:
7,006
26,195
(2,961
(10,818
(1,766
(5,692
14,272
35,571
Nonperforming loans were $12.4 million and $18.1 million as of March 31, 2026 and December 31, 2025, respectively, representing a decrease of $5.7 million, or 31.5%. The decrease was primarily due to the previously mentioned $9.7 million payment received on a commercial real estate office loan, originally designated as nonaccrual during the first quarter of 2025. This was partially offset by the downgrades of several smaller loans during the first quarter of 2026. As of March 31, 2026 and December 31, 2025, 1.2% and 1.3% of equipment financing agreements were on nonaccrual status, respectively. At March 31, 2026 and December 31, 2025, there were no loans 90 days or more past due and still accruing interest.
The $12.4 million of nonperforming loans as of March 31, 2026 had specific allowances of $3.2 million, compared to $18.1 million of nonperforming loans with specific allowances of $3.4 million as of December 31, 2025.
Nonperforming assets were $12.4 million at March 31, 2026, or 0.16% of total assets, compared to $20.1 million, or 0.26%, at December 31, 2025. Additionally, not included in nonperforming assets was repossessed personal property associated with equipment finance agreements of $0.3 million and $0.6 million at March 31, 2026 and December 31, 2025, respectively.
Individually Evaluated Loans
The Company reviews loans on an individual basis when the loan does not share similar risk characteristics with loan pools. Individually evaluated loans are measured for expected credit losses based on the present value of expected cash flows discounted at the effective interest rate, the observable market price, or the fair value of collateral.
Individually evaluated loans were $12.4 million and $18.1 million as of March 31, 2026 and December 31, 2025, respectively, representing a decrease of $5.7 million, or 31.5%. Specific allowances associated with individually evaluated loans decreased $0.2 million to $3.2 million as of March 31, 2026, compared with $3.4 million as of December 31, 2025.
Loan Modifications to Borrowers Experiencing Financial Difficulty
A borrower is experiencing financial difficulties when there is a probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The Company may modify loans to borrowers experiencing financial difficulties by providing principal forgiveness, a term extension, an other-than-insignificant payment delay, or an interest rate reduction.
The following table presents loan modifications made to borrowers experiencing financial difficulty by type of modification, with related amortized cost balances, respective percentage shares of the total class of loans, and the related financial effect, as of the period indicated:
The modified loan above was current at March 31, 2026. The Company has not committed to lend any additional amounts to the borrower included in the table above as of March 31, 2026. During the three months ended March 31, 2026 and 2025, there were no payment defaults on loans modified within the preceding 12 months.
Allowance for Credit Losses and Allowance for Credit Losses Related to Off-Balance Sheet Items
The Company’s estimate of the allowance for credit losses at March 31, 2026 and December 31, 2025 reflected losses expected over the remaining contractual life of assets based on historical, current, and forward-looking information. The contractual term does not consider extensions, renewals or modifications.
Our allowance for credit losses incorporate a variety of risk considerations, both quantitative and qualitative, that management believes is appropriate to absorb lifetime credit losses at each reporting date. Quantitative factors include the general economic forecast in our markets, risk ratings, delinquency trends, collateral values, changes in nonperforming, criticized and classified loans, and other factors.
We use qualitative factors to adjust the allowance calculation for risks not considered by the quantitative calculations. Qualitative factors considered in our methodologies include concentrations of credit, changes in lending management and staff, and quality of the loan review system.
The Company reviews baseline and alternative economic scenarios from Moody’s (previously known as Moody’s Analytics, a subsidiary of Moody’s Corporation) for consideration in the quantitative portion of our analysis of the allowance for credit losses. Moody’s publishes a baseline forecast that represents the estimate of the most likely path for the United States economy through the current business cycle (50% probability that economic conditions will be worse and 50% probability that economic conditions will be better) as well as alternative scenarios to examine how different types of shocks will affect the future performance of the United States economy.
The Company utilizes a midpoint approach of multiple forward-looking scenarios to incorporate losses from a baseline, upside (stronger near-term growth) and downside (slower near-term growth) economy. As a result, the upside and downside scenarios each receive a weight of 30%, and the baseline receives a weight of 40%.
Certain quantitative and qualitative factors used to estimate credit losses and establish an allowance for credit losses are subject to uncertainty. The adequacy of our allowance for credit losses is sensitive to changes in current and forecasted economic conditions that may affect the ability of borrowers to make contractual payments as well as the value of the collateral securing such payments.
Although management believes it uses the best information available to establish the allowance for credit losses, future adjustments to the allowance for credit losses may be necessary and the Company’s results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
In addition, because future events affecting borrowers and collateral cannot be predicted without uncertainty, the existing allowance for credit losses may not be adequate or increases may be necessary should the quality of any loans deteriorate as a result of the factors discussed. Any material increase in the allowance for credit losses would adversely impact the Company’s financial condition and results of operations.
The following table reflects our allocation of the allowance for credit losses by loan category as well as the amount of loans in each loan category, including related percentages, as of the periods indicated:
49
The following table sets forth certain ratios related to our allowance for credit losses at the dates presented:
As of
Ratios:
Allowance for credit losses to loans
1.08
1.07
Nonaccrual loans to loans
0.19
0.28
Allowance for credit losses to nonaccrual loans
567.38
385.95
Balance:
Nonaccrual loans at end of period
Nonperforming loans at end of period
The allowance for credit losses was $70.5 million and $69.9 million at March 31, 2026 and December 31, 2025, respectively. The allowance attributed to individually evaluated loans was $3.2 million and $3.4 million as of March 31, 2026 and December 31, 2025, respectively. The allowance attributed to collectively evaluated loans was $67.3 million and $66.5 million as of March 31, 2026 and December 31, 2025, respectively.
As of March 31, 2026 and December 31, 2025, the allowance for credit losses related to off-balance sheet items, primarily unfunded loan commitments, was $2.1 million and $2.3 million, respectively. The Bank closely monitors each borrower’s repayment capabilities while funding existing commitments to ensure losses are minimized. Based on management’s evaluation and analysis of portfolio credit quality, prevailing economic conditions and economic forecasts, we believe these allowances were adequate for current expected lifetime losses in the loan portfolio and off-balance sheet exposure as of March 31, 2026.
The following table presents a summary of gross charge-offs and recoveries for the loan portfolio:
Gross charge-offs
Gross recoveries
Net (charge-offs) recoveries
(2,598
(1,946
For the three months ended March 31, 2026, gross charge-offs were consistent with the same period in 2025 at $3.2 million. Gross recoveries for the three months ended March 31, 2026 decreased $0.7 million from the same period in 2025. Gross charge-offs for the three months ended March 31, 2026 and 2025 primarily consisted of $2.9 million and $2.8 million of equipment financing agreements charge-offs, respectively. Gross recoveries for the three months ended March 31, 2026 and 2025 primarily consisted of $0.5 million and $0.8 million of recoveries on equipment financing agreements, respectively.
The following table presents a summary of net (charge-offs) recoveries for the loan portfolio:
Average Loans
Net (Charge-Offs) Recoveries
Net (Charge-Offs) Recoveries to Average Loans (1)
Commercial real estate loans
(89
(0.01
Residential loans
1,041,224
(0.03
(2,423
(2.39
(0.16
254
0.03
967,755
(186
(0.09
(2,015
(1.66
(0.13
Net loan charge-offs were $2.6 million, or 0.16% of average loans, and $1.9 million, or 0.13% of average loans, for the three months ended March 31, 2026 and 2025, respectively.
Deposits
The following table shows the composition of deposits by type as of the dates indicated:
Demand – noninterest-bearing
29.9
30.2
Interest-bearing:
Demand
78,341
1.1
74,799
2,116,073
31.1
2,084,218
31.2
Uninsured amount of time deposits more than $250,000:
Three months or less
343,661
5.1
317,086
4.7
Over three months through six months
292,354
4.3
276,791
4.1
Over six months through twelve months
173,038
2.5
156,750
2.3
Over twelve months
All other insured time deposits
1,766,253
26.0
1,752,635
26.4
Total deposits were $6.80 billion and $6.68 billion as of March 31, 2026 and December 31, 2025, respectively, representing an increase of $123.0 million, or 1.8%. While all deposit types increased, deposit growth was primarily driven by a $72.0 million increase in time deposits, a $31.9 million increase in money market and savings deposits, and a $15.5 million increase in noninterest-bearing demand deposits. At March 31, 2026, the loan-to-deposit ratio was 96.2% compared to 98.3% at December 31, 2025.
As of March 31, 2026, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $3.0 billion. The aggregate amount of uninsured time deposits was $809.2 million. Other uninsured deposits, such as demand and money market and savings deposits were $2.19 billion. At March 31, 2026, $1.44 billion of total uninsured deposits were in accounts with balances of $5.0 million or more. As of December 31, 2025, the aggregate amount of uninsured deposits was $2.92 billion. The aggregate amount of uninsured time deposits was $750.8 million. Other uninsured deposits, such as demand, money market and savings deposits, were $2.17 billion. At December 31, 2025, $1.34 billion of total uninsured deposits were in accounts with balances of $5.0 million or more.
The Bank’s wholesale funds historically consisted of FHLB advances, brokered deposits as well as State of California time deposits. As of March 31, 2026, the Bank had no outstanding FHLB advances. As of December 31, 2025, the Bank had $150.0 million of FHLB advances. The Bank had $88.5 million of brokered deposits at both March 31, 2026 and December 31, 2025. The Bank also had had $150.0 million of State of California time deposits as of both March 31, 2026 and December 31, 2025.
Borrowings mostly take the form of FHLB advances. At March 31, 2026, there were no outstanding FHLB advances. At December 31, 2025, FHLB advances were $150.0 million, all of which were term advances. Funds from deposit growth not used to fund loan production were used to pay off borrowings. The weighted-average interest rate of all FHLB advances at December 31, 2025 was 4.02%. The FHLB maximum amount outstanding at any month end during each of the year-to-date periods ended March 31, 2026 and December 31, 2025 was $90.0 million and $150.0 million, respectively. There were no contractual maturities of FHLB advances greater than twelve months at December 31, 2025.
Subordinated debentures were $131.4 million and $131.3 million as of March 31, 2026 and December 31, 2025, respectively. Subordinated debentures are comprised of fixed-to-floating subordinated notes of $108.8 million and $108.7 million as of March 31, 2026 and December 31, 2025, respectively, and junior subordinated deferrable interest debentures of $22.6 million and $22.5 million as of March 31, 2026 and December 31, 2025, respectively. See “Note 8 – Borrowings and Subordinated Debentures” to the consolidated financial statements for more details.
Stockholders’ equity was $802.8 million and $796.4 million as of March 31, 2026 and December 31, 2025, respectively. The $6.4 million increase included net income of $22.6 million and share-based compensation of $0.7 million, partially offset by $8.6 million of dividends paid, $4.8 million in share repurchases, a $2.3 million increase in unrealized after-tax losses on securities available for sale, a $0.1 million decrease in unrealized after-tax gains on cash flow hedges due to changes in interest rates, and $1.1 million of shares that were purchased to satisfy employees' tax liabilities for the vesting of stock compensation. The Company repurchased 185,707 shares of common stock during the period at an average share price of $25.89. At March 31, 2026, 2,151,495 shares remain under the Company’s share repurchase program.
Interest Rate Risk Management
The spread between interest income on interest-earning assets and interest expense on interest-bearing liabilities is the principal component of net interest income, and interest rate changes substantially affect our financial performance. We emphasize capital protection through stable earnings. In order to achieve stable earnings, we prudently manage our assets and liabilities and closely monitor the percentage changes in net interest income and equity value in relation to limits established within our guidelines.
The Company performs simulation modeling to estimate the potential effects of interest rate changes. The following table summarizes one of the stress simulations performed to forecast the impact of changing interest rates on net interest income and the value of interest-earning assets and interest-bearing liabilities reflected on our balance sheet (i.e., an instantaneous parallel shift in the yield curve of the magnitude indicated below) as of March 31, 2026. The Company compares this stress simulation to policy limits, which specify the maximum tolerance level for net interest income exposure over 1- to 12-month and 13- to 24- month horizons, given the basis point adjustment in interest rates reflected below.
Net Interest Income Simulation
1- to 12-Month Horizon
13- to 24-Month Horizon
Change in Interest
Dollar
Percentage
Rates (Basis Points)
Change
300
36,651
12.67
58,676
18.88
200
25,271
8.74
40,733
13.11
100
12,932
4.47
6.85
(100)
(13,151
(4.55
%)
(23,914
(7.70
(200)
(23,509
(8.13
(47,268
(15.21
(300)
(30,986
(10.71
(68,897
(22.17
52
Economic Value of Equity (EVE)
100,585
9.90
83,518
8.22
51,361
5.06
(70,026
(6.89
(152,943
(15.05
(245,658
(24.18
The estimated sensitivity does not necessarily represent our forecast, and the results may not be indicative of actual changes to our net interest income. These estimates are based upon a number of assumptions, including the timing and magnitude of interest rate changes, prepayments on loans and securities, pricing strategies on loans and deposits, and replacement of asset and liability cash flows.
The key assumptions, based upon loans, securities and deposits, are as follows:
Conditional prepayment rates*:
Loans receivable
Deposit rate betas*:
NOW, savings, money market demand
Time deposits, retail and wholesale
* Balance-weighted average
While the assumptions used are based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions, including how customer preferences or competitor influences might change.
Historically, our primary source of capital has been the retention of operating earnings. In order to ensure adequate capital levels, the Board regularly assesses projected sources and uses of capital, expected loan growth, anticipated strategic actions (such as stock repurchases and dividends), and projected capital thresholds under adverse and severely adverse economic conditions. In addition, the Board considers the Company’s access to capital from financial markets through the issuance of additional debt and securities, including common stock or notes, to meet its capital needs.
The Company’s ability to pay dividends to stockholders depends in part upon dividends it receives from the Bank. California law restricts the amount available for cash dividends to the lesser of a bank’s retained earnings or net income for its last three fiscal years (less any distributions to stockholders made during such period). Where the above test is not met, cash dividends may still be paid, with the prior approval of the Department of Financial Protection and Innovation (“DFPI”), in an amount not exceeding the greater of: (1) retained earnings of the Bank; (2) net income of the Bank for its last fiscal year; or (3) the net income of the Bank for its current fiscal year. The Company paid dividends of $8.4 million ($0.28 per share) for the three months ended March 31, 2026 and $32.6 million ($1.08 per share) for the year 2025. As of April 1, 2026, the Bank had the ability to pay dividends of approximately $68.4 million, after giving effect to the $0.28 dividend declared on April 23, 2026, for the second quarter of 2026, without the prior approval of the Commissioner of the DFPI.
At March 31, 2026, the Bank’s total risk-based capital ratio of 14.45%, Tier 1 risk-based capital ratio of 13.37%, common equity Tier 1 capital ratio of 13.37% and Tier 1 leverage capital ratio of 11.74% placed the Bank in the “well capitalized” category pursuant to capital rules, which is defined as institutions with a total risk-based capital ratio equal to or greater than 10.00%, Tier 1 risk-based capital ratio equal to or greater than 8.00%, common equity Tier 1 capital ratios equal to or greater than 6.50%, and Tier 1 leverage capital ratio equal to or greater than 5.00%.
53
At March 31, 2026, the Company’s total risk-based capital ratio was 15.22%, Tier 1 risk-based capital ratio was 12.52%, common equity Tier 1 capital ratio was 12.20% and Tier 1 leverage capital ratio was 10.93%.
For a discussion of the applicable capital adequacy framework, see "Regulation and Supervision - Capital Adequacy Requirements" in our 2025 Annual Report on Form 10-K.
For a discussion of off-balance sheet arrangements, see Note 12 - Off-Balance Sheet Commitments included in the notes to unaudited consolidated financial statements in this Report and “Item 1. Business - Off-Balance Sheet Commitments” in our 2025 Annual Report on Form 10-K.
For quantitative and qualitative disclosures regarding market risks, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk Management” in this Report.
Evaluation of Disclosure Controls and Procedures
Management is responsible for the disclosure controls and procedures of the Corporation. Disclosure controls and procedures are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of March 31, 2026.
Changes in Internal Control over Financial Reporting
There were no changes in the Corporation's internal control over financial reporting (as defined in Rule 13a-15(f)) during the quarter ended March 31, 2026 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
Item 1. Legal Proceedings
From time to time, Hanmi Financial and its subsidiaries are parties to litigation that arises in the ordinary course of business, such as claims to enforce liens, claims involving the origination and servicing of loans, and other issues related to the business of Hanmi Financial and its subsidiaries. In the opinion of management, the resolution of any such issues would not have a material adverse impact on the financial condition, results of operations, or liquidity of Hanmi Financial or its subsidiaries.
There have been no material changes in risk factors applicable to the Corporation from those described in “Risk Factors” in Part I, Item 1A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
On April 25, 2024, the Company announced that the Board of Directors has adopted a stock repurchase program under which the Company may repurchase up to 5% of its outstanding shares, or approximately 1.5 million shares of its common stock. On January 29, 2026, the Board of Directors authorized an expansion of the stock repurchase program, adding 1.5 million shares that may be repurchased under the current program. As of March 31, 2026, 2,151,495 shares remained available for future purchases under that stock repurchase program. The program has no scheduled expiration date and the Board of Directors has the right to suspend or discontinue the program at any time.
The following table represents information with respect to repurchases of common stock made by the Company during the three months ended March 31, 2026:
Purchase Date:
Total Number of Shares Purchased
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
January 1, 2026 - January 31, 2026
2,337,202
February 1, 2026 - February 28, 2026
37,060
26.46
2,300,142
March 1, 2026 - March 31, 2026
148,647
25.75
2,151,495
185,707
25.89
The Company acquired 41,268 shares from employees in connection with the satisfaction of employee tax withholding obligations incurred through the vesting of Company stock awards for the three months ended March 31, 2026. Shares withheld to satisfy income taxes upon the vesting of stock awards are repurchased pursuant to the terms of the applicable plan and not under the Company’s repurchase program.
None.
Not applicable.
Securities Trading Plans of Directors and Executive Officers
During the three months ended March 31, 2026, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Hanmi securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
Exhibit
Document
Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document *
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents *
104
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, formatted in Inline XBRL
* Attached as Exhibit 101 to this report are documents formatted in Inline XBRL (Extensible Business Reporting Language).
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
Hanmi Financial Corporation
Date:
May 8, 2026
By:
/s/ Bonita I. Lee
Bonita I. Lee
President and Chief Executive Officer (Principal Executive Officer)
/s/ Romolo C. Santarosa
Romolo C. Santarosa
Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)