Hanmi Is Selling the Loan It Twice Said Wouldn't Cost a Dime
A $544 million origination quarter, an 8bp margin gain, and a trimmed loan-growth guide — with New York rent control entering the vocabulary for the first time
HAFC · Earnings Call · 2026-10-27
The production paradox
Hanmi Financial's third quarter looks like a clean beat on the surface. Net interest income rose 5.8% sequentially, net interest margin expanded 8 basis points to 3.44%, pre-provision net revenue climbed 10.8% linked-quarter, and the efficiency ratio improved more than 200 basis points. Net income of $23.7 million ($0.80 per diluted share) produced a 1.17% return on assets and 10.90% return on equity. Deposits grew 1.4%, core deposits 1.9%, and non-interest-bearing balances held at 30% of the total — a genuinely strong funding mix for a $7 billion deposit franchise that has roughly doubled over nine years.
Deposits have compounded from ~$3.8B in 2016 to $7.0B
And then the number that matters: loan production of $544 million, up $172 million or 46.2% from the prior quarter, with every single category increasing. “Third quarter loan production was $544 million, up $172 million or 46.2% from the prior quarter, with a weighted average interest rate of 6.61%” — Anthony I. Kim, Executive/Management (likely CFO or similar financial officer) · 2026-10-27
Yet the loan book was flat year to date. The culprit is payoffs — $283 million in the quarter alone, and up 65% year-over-year cumulatively. The result is a guidance trim that management slipped in almost casually: from "low to mid-single-digit" growth for the year to something lower.
If we would have stayed-- if the payoffs had remained at the same level as the last year, obviously our loan growth would have been 4%, which is in the mid-single-digit growth... we are probably looking at probably low single digit growth in the loan for the year.
Roughly a third of those payoffs were borrowers refinancing elsewhere on terms Hanmi declined to match; a quarter were property sales or borrowers writing checks; under 10% were exits Hanmi chose. That is a defensible, disciplined answer. It is also the third consecutive year in which the payoff line has quietly eaten the franchise's origination muscle.
What the rent-control downgrade actually is
Buried in the credit discussion is the most consequential new item of the quarter. Following changes to New York City rent regulations, Hanmi proactively reassessed two multifamily relationships and downgraded both. They remain current. The bank holds about $84 million of New York multifamily in total.
“Excluding the 2 loans that we called out, the rest of the portfolio is composed of about a half a dozen smaller loans, and most of them are current” — Bonita I. Lee, Executive/Management (likely CEO or President) · 2026-10-27
New York and rent control are genuinely new entries in this company's thematic record — the geographic risk map for the prior year ran through Los Angeles, Atlanta, Duluth, and the Alabama corridor. The CRE loan book is still 61% of total loans at a 47% weighted-average LTV and 2.27x debt service coverage, so this is not a solvency question. It is a recognition question: rent regulation is a *policy* risk on a $84 million slice that no amount of underwriting discipline addresses.
More revealing is the other credit. For two straight quarters, Hanmi defended a retail CRE loan that had lost its anchor tenant in confident language. In April: “we do not expect any loss from this particular credit” — Bonita Lee, Chief Executive Officer · 2026-04-21. In July, after it went past due and was downgraded: “we feel the property is well collateralized at this point” — Bonita Lee, CEO · 2026-07-21. This quarter the bank took a $3.2 million partial charge-off on that same loan and put it under contract to sell, closing in Q4. Provision for credit losses jumped to $4.5 million from $1.2 million; annualized net charge-offs went to 27 basis points, or 7 basis points excluding that single credit.
That is a real, if modest, credibility cost. The net charge line — which had been running near zero for a year, with provisioning of just $1M as recently as the June quarter — is the tell that the benign-credit era is no longer free.
A bank positioning for higher rates, not lower
The most under-appreciated part of this call is the balance-sheet engineering. In late July Hanmi issued $55 million of fixed-to-floating subordinated notes due 2036 and used the proceeds, plus parent resources, to redeem $110 million of notes due 2031. “the company reduced its ongoing interest expense by $550 thousand annually and avoided the burden of floating rate debt” — Romolo C. Santarosa, Executive/Management (likely CFO or similar financial officer) · 2026-10-27
It also bought a two-year cap on $26 million of trust preferreds (SOFR + 166bp, capped at 5.66%) and a two-year swap fixing $180 million of California time deposits at 4.46%. That is a company explicitly hedging against the rising rate environment rather than waiting for cuts. Only about 25% of the loan book truly reprices with rates.
floating rate is, for the first time, the single highest-momentum theme in Hanmi's own keyword record this quarter — an artifact of this refi-and-hedge activity, and a fair one.
This is where Hanmi most sharply departs from its peers. Dozens of regional banks reporting in the last five days — Customers Bancorp, Cascade, FIBK, Huntington, WSFS — all clustered around the same deposit cost and funding-cost vocabulary. HAFC's message is sector consensus: September spot interest-bearing deposit cost of 3.19%, October at 3.22%, only 4 basis points of pass-through on a 25bp Fed rate hike. The differentiation is the hedging stack and the fact that $1 billion-plus of CDs maturing in Q4 at a 3.69% weighted rate reprice to roughly the same level — no benefit, but no damage.
Where the earnings leverage actually comes from
With net interest margin roughly flat-to-up and the loan book stalled, the incremental earnings are coming from fee and gain-on-sale activity plus capital return. SBA was the standout: $34 million sold at an 8.1% premium versus $20.9 million at 7.92% in the prior quarter, with production guided to $45–50 million per quarter. Non-interest income, however, remains structurally challenged — roughly $8M a quarter versus $12M in 2015.
Capital return is where management is most consistent. Buybacks ran $4.9 million in Q3, 55.6% of net income went back to shareholders, and the CFO pre-committed to the same dollar run rate in Q4. With tangible common equity at 9.93% of assets and $27.03 per share, the stock at 1.18x book, up 21% year-over-year and 10.8x earnings, the buyback math is not subtle.
The honest read: this was a very good quarter for a bank that has concluded it cannot out-lend its own borrowers' desire to leave. Production is real, the core deposits franchise is real, and the rate hedging shows a management team thinking two moves ahead. But the franchise story that carried the last year of calls — core deposits from Corporate Korea clients reaching an all-time high of $1.3 billion, 19% of total deposits — has stopped being news, and Corporate Korea loan balances actually fell 5% to $780 million as those clients sit on cash. What is new, and what the market has not yet had to price, is a New York rent-regulation variable and a credit file that finally produced a loss after two quarters of confident assurances.