Detailed Narrative
Strong Financial Performance
Hanmi Financial reported a net income of $23.5 million, or $0.79 per diluted share, for Q2 FY26, an increase from $22.6 million, or $0.75 per diluted share, in the prior quarter. The company achieved a return on average assets of 1.2% and an improved return on average equity of 11.1%. Operating efficiency remained a key strength, with an efficiency ratio of 54.1% and noninterest expense representing 1.99% of average assets on an annualized basis.
Deposit Growth and Mix Improvement
Total deposits increased by 2.3% linked quarter, primarily driven by a 5.2% increase in noninterest-bearing accounts, particularly from commercial clients. Noninterest-bearing deposits now constitute a healthy 31% of total deposits. Deposits from Corporate Korea clients grew 6.2% during the quarter to $1.2 billion, representing approximately 17% of total deposits, highlighting the success of this strategic initiative.
Loan Portfolio Diversification
New loan originations totaled $372 million in Q2 FY26, with year-to-date originations up 11% compared to the first half of 2025. The portfolio diversification strategy continues to gain traction, with Commercial and Industrial (C&I) loans increasing 1.6% sequentially and 28% year-over-year, now representing 18% of total loans, up from 14% a year ago. Commercial Real Estate (CRE) production was $171 million, and CRE loans remain 61% of total loans with a weighted average loan-to-value ratio of 47% and a debt service coverage ratio of 2.2x.
Asset Quality and Risk Management
Credit quality remains excellent, with nonperforming loans improving to 0.15% of total loans and nonperforming assets to 0.12% of total assets. Net charge-offs were minimal, and credit loss expense was $1.2 million. While a $21.2 million CRE credit was downgraded to classified due to delinquency, an updated appraisal and property condition report confirmed the collateral is in good condition, and the bank is well secured on this loan.
Capital and Shareholder Returns
The company's capital position remains strong, with tangible common equity per share increasing 1.8% to $27.04 and the tangible common equity ratio at 10.03%. Hanmi returned $13.2 million to shareholders through dividends and share repurchases during the quarter, including repurchasing 160,000 shares at an average price of $30.24. Approximately 1.99 million shares remain available under the current authorization.