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What changed in HANMI FINANCIAL CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of HANMI FINANCIAL CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+341 added−317 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-28)

Top changes in HANMI FINANCIAL CORP's 2025 10-K

341 paragraphs added · 317 removed · 249 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

82 edited+11 added−18 removed119 unchanged
Biggest changeInvestor (nonowner- occupied) Owner-occupied Multifamily Construction Residential property December 31, 2024 Real estate loans by geography: California 69.0 % 54.1 % 49.8 % 48.7 % 92.2 % Texas 8.8 % 6.5 % 24.3 % — 1.6 % New York 5.7 % 1.0 % 19.5 % 22.0 % 1.7 % Illinois 3.0 % 1.6 % 2.9 % — 0.6 % All other states 13.5 % 36.8 % 3.5 % 29.3 % 3.9 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % The following table presents our commercial real estate loans by collateral: December 31, 2024 % of Total Loans December 31, 2023 % of Total Loans (dollars in thousands) Collateral type: Retail $ 1,068,978 17.1 % $ 1,107,360 17.9 % Hospitality 848,134 13.6 % 740,519 12.0 % Office 568,861 9.1 % 574,981 9.3 % Other (1) 1,385,051 22.2 % 1,366,534 22.1 % Total commercial property loans 3,871,024 3,789,394 Construction 78,598 1.2 % 100,345 1.6 % Total (2) $ 3,949,622 63.2 % $ 3,889,739 62.9 % (1) Includes, among other property types, mixed-use, gas station, multifamily, industrial, and faith-based facilities; the remaining real estate categories represent less than 1% of the Bank's total loans receivable.
Biggest changeInvestor (nonowner- occupied) Owner-occupied Multifamily Construction Residential property December 31, 2025 Real estate loans by geography: California 69.4 % 53.8 % 56.6 % 47.7 % 88.3 % Texas 9.7 5.3 21.4 — 2.8 New York 7.0 1.5 16.6 — 2.6 Illinois 2.9 1.5 2.4 — 0.5 All other states 11.0 37.9 3.0 52.3 5.8 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % The following table presents our commercial real estate loans by collateral: December 31, 2025 % of Total Loans December 31, 2024 % of Total Loans (dollars in thousands) Collateral type: Retail $ 1,132,439 17.3 $ 1,068,978 17.1 Hospitality 847,989 12.9 848,134 13.6 Office 503,268 7.7 568,861 9.1 Other (1) 1,532,678 23.3 1,385,051 22.2 Total commercial property loans 4,016,374 61.2 3,871,024 62.0 Construction 13,742 0.2 78,598 1.2 Total (2) $ 4,030,116 61.4 $ 3,949,622 63.2 (1) Includes, among other property types, mixed-use, gas station, multifamily, industrial, and faith-based facilities; the remaining real estate categories represent less than 1% of the Bank's total loans.
On a case-by-case basis, the Bank originates permanent loans on the commercial property under loan conditions that require strong project stability and debt service coverage. Construction loans involve additional risks compared to loans secured by existing improved real property.
On a case-by-case basis, the Bank originates permanent loans on commercial property under loan conditions that require strong project stability and debt service coverage. Construction loans involve additional risks compared to loans secured by existing improved real property.
When the Bank sells a SBA loan, it has an option to repurchase the loan if the loan defaults. If the Bank repurchases a defaulted loan, the Bank will make a demand for the guaranteed portion to the SBA.
When the Bank sells an SBA loan, it has an option to repurchase the loan if the loan defaults. If the Bank repurchases a defaulted loan, the Bank will make a demand for the guaranteed portion to the SBA.
If, as a result of an examination, the DFPI or FDIC, as applicable, determines that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the Bank’s operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation or engaged in unsafe or unsound practices, the DFPI and the FDIC have residual authority to: • Require affirmative action to correct any conditions resulting from any violation or practice; • Direct an increase in capital and the maintenance of higher specific minimum capital ratios, which could preclude the Bank from being deemed well capitalized and restrict its ability to accept certain brokered deposits; • Restrict the Bank’s growth geographically, by products and services, or by mergers and acquisitions, including bidding in FDIC receiverships for failed banks; • Enter into or issue supervisory requirements or informal or formal enforcement actions, including required Board resolutions, Matters Requiring Board Attention, written agreements, prompt corrective action orders, and cease and desist orders requiring cessation of certain practices or the taking of corrective action; • Require the sale of subsidiaries or assets; • Limit dividend and distributions; • Require prior approval of senior executive officer or director changes, or remove officers and directors; • Assess civil monetary penalties; and • Terminate FDIC insurance, revoke the charter and/or take possession of and close and liquidate the Bank or appoint the FDIC as receiver.
If, as a result of an examination, the DFPI or FDIC, as applicable, determines that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the Bank’s operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation or engaged in unsafe or unsound practices, the DFPI and the FDIC have residual authority to: • Require affirmative action to correct any conditions resulting from any violation or practice; • Direct an increase in capital and the maintenance of higher specific minimum capital ratios, which could preclude the Bank from being deemed well capitalized and restrict its ability to accept certain brokered deposits; • Restrict the Bank’s growth geographically, by products and services, or by mergers and acquisitions, including bidding in FDIC receiverships for failed banks; • Enter into or issue supervisory requirements or informal or formal enforcement actions, including required Board resolutions, Matters Requiring Board Attention, written agreements, prompt corrective action orders, and cease and desist orders requiring cessation of certain practices or the taking of corrective action; • Require the sale of subsidiaries or assets; • Limit dividend distributions; • Require prior approval of senior executive officer or director changes, or remove officers and directors; 16 • Assess civil monetary penalties; and • Terminate FDIC insurance, revoke the charter and/or take possession of and close and liquidate the Bank or appoint the FDIC as receiver.
Federal and state banking laws and regulations, among other things: • Require periodic reports and such additional reports of information as the Federal Reserve may require; • Limit the scope of bank holding companies’ activities and investments; • Require bank holding companies to meet or exceed certain levels of capital (See “Capital Adequacy Requirements” above); • Require that bank holding companies serve as a source of financial and managerial strength to subsidiary banks and commit resources as necessary to support each subsidiary bank; 14 • Limit dividends payable to shareholders and restrict the ability of bank holding companies to obtain dividends or other distributions from their subsidiary banks.
Federal and state banking laws and regulations, among other things: • Require periodic reports and such additional reports of information as the Federal Reserve may require; • Limit the scope of bank holding companies’ activities and investments; • Require bank holding companies to meet or exceed certain levels of capital (See “Capital Adequacy Requirements” above); • Require that bank holding companies serve as a source of financial and managerial strength to subsidiary banks and commit resources as necessary to support each subsidiary bank; • Limit dividends payable to shareholders and restrict the ability of bank holding companies to obtain dividends or other distributions from their subsidiary banks.
To determine whether potential weaknesses in the condition or operations of bank holding companies might pose a risk to the safety and soundness of their subsidiary banks, examinations focus on whether a bank holding company has adequate systems and internal controls in place to manage the risks inherent in its business, including credit risk, interest rate risk, market risk, liquidity risk, operational risk, legal risk and reputation risk.
To determine whether potential weaknesses in the condition or operations of bank holding companies might pose a risk to the safety and soundness of their subsidiary banks, examinations focus on whether a bank holding company has adequate systems and internal controls in place to manage the risks inherent in its business, including credit risk, interest rate risk, market risk, liquidity risk, operational risk and legal risk.
SBA loans are offered for business purposes such as owner-occupied commercial real estate, business acquisitions, start-ups, franchise financing, working capital, improvements and renovations, inventory and equipment, and debt-refinancing. SBA loans offer lower down payments and longer-term financing, which helps small business that are starting out, or about to expand.
SBA loans are offered for business purposes such as owner-occupied commercial real estate, business acquisitions, start-ups, franchise financing, working capital, improvements and renovations, inventory and equipment, and debt-refinancing. SBA loans offer lower down payments and longer-term financing, which helps small businesses that are starting out, or about to expand.
Declines in real estate values and cash flows can be caused by a number of factors, including a decline in general economic conditions, rising interest rates, inflation, changes in tax and other laws and regulations affecting the holding of real estate, environmental conditions, governmental and other use restrictions, development of competitive properties and increasing vacancy rates.
Declines in real estate values and cash flows can be caused by a number of factors, including a decline in general economic conditions, rising interest rates, inflation, tariffs, changes in tax and other laws and regulations affecting the holding of real estate, environmental conditions, governmental and other use restrictions, development of competitive properties and increasing vacancy rates.
(g) Deposit Insurance The FDIC is an independent federal agency that insures deposits, up to prescribed statutory limits, of federally insured banks and savings institutions, and safeguards the safety and soundness of the banking and savings and loan industries. The FDIC insures our customer deposits through the DIF up to prescribed limits for each depositor.
(g) Deposit Insurance The FDIC is an independent federal agency that insures deposits, up to prescribed statutory limits, of federally insured banks and savings institutions, and safeguards the safety and soundness of the banking and savings and loan industries. The FDIC insures our customer deposits through the Deposit Insurance Fund ("DIF") up to prescribed limits for each depositor.
In addition, the federal bank regulators are authorized to prohibit a bank or bank holding company from engaging in unsafe or unsound banking practices and, depending upon the circumstances, could find that paying a dividend or making a capital distribution would constitute an unsafe or unsound banking practice.
In addition, the federal bank regulators are authorized to prohibit a bank or bank holding company from engaging in unsafe or 17 unsound banking practices and, depending upon the circumstances, could find that paying a dividend or making a capital distribution would constitute an unsafe or unsound banking practice.
The guarantees on SBA loans and SBA express loans are generally 75% and 50% of the principal amount of the loan, respectively. The Bank typically requires that SBA loans be secured by business assets and by a first or second deed of trust on any available real property.
The guarantees on SBA loans and SBA express loans are generally 75% and 50% of the principal amount of the loan, respectively. The Bank typically requires that SBA loans be secured by business assets and by a first or second deed of trust on any available 9 real property.
The SEC maintains a website at www.sec.gov , which contains the reports, proxy and information statements and other information we file with the SEC. 10 We also maintain an Internet website at www.hanmi.com .
The SEC maintains a website at www.sec.gov , which contains the reports, proxy and information statements and other information we file with the SEC. We also maintain an Internet website at www.hanmi.com .
The Federal Reserve implements national monetary policies (with objectives such as curbing inflation and combating recession) through its open-market operations in U.S. government securities, by adjusting the required level of reserves for depository institutions subject to its reserve requirements, 12 and by varying the target federal funds and discount rates applicable to borrowings by depository institutions.
The Federal Reserve implements national monetary policies (with objectives such as curbing inflation and unemployment and combating recession) through its open-market operations in U.S. government securities, by adjusting the required level of reserves for depository institutions subject to its reserve requirements, and by varying the target federal funds and discount rates applicable to borrowings by depository institutions.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Capital Resources.” Management believes that, as of December 31, 2024, the Company and the Bank met all applicable capital requirements to which they were subject. Bank regulators may also continue their past policies of expecting banks to maintain additional capital beyond the new minimum requirements.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Capital Resources.” Management believes that, as of December 31, 2025, the Company and the Bank met all applicable capital requirements to which they were subject. Bank regulators may also continue their past policies of expecting banks to maintain additional capital beyond the new minimum requirements.
The Bank generally requires the borrower to provide, at least annually, current cash flow information in order for the Bank to re-assess the debt-coverage ratio. In addition, the Bank requires title insurance to ensure the status of its lien on real estate secured loans when a trust deed on the real estate is taken as collateral.
The Bank generally requires the borrower to provide, at least annually, current cash flow information in order for the Bank to re-assess the debt-coverage ratio. In addition, the Bank requires title insurance to ensure the status of its liens on real estate secured loans when a trust deed on the real estate is taken as collateral.
A copy of the Company’s clawback policy is included as an exhibit to this Annual Report on Form 10-K.
A copy of the Company’s clawback policy is included as an exhibit to this Annual Report on Form 10-K. 19
These banks compete for loans and deposits primarily through the interest rates and fees they charge, and the convenience and quality of service they provide to customers. Economic, Legislative and Regulatory Developments Future profitability, like that of most financial institutions, is primarily dependent on interest rates and credit quality.
These banks compete for loans and deposits primarily through the interest rates and fees they charge, and the convenience and quality of service they provide to customers. 12 Economic, Legislative and Regulatory Developments Profitability, like that of most financial institutions, is primarily dependent on interest rates and credit quality.
In 2024, our employees participated in over 2,000 hours of community service, participating in a variety of educational efforts such as financial literacy, financial education for seniors, affordable housing education, education for first-time homebuyers and working with various community non-profits.
In 2025, our employees participated in over 2,000 hours of community service, participating in a variety of educational efforts such as financial literacy, financial education for seniors, affordable housing education, education for first-time homebuyers and working with various community non-profits.
(l) Impact of Monetary Policies The earnings and growth of the Bank are largely dependent on its ability to maintain a favorable differential or spread between the yield on its interest-earning assets and the rates paid on its deposits and other interest-bearing liabilities.
(m) Impact of Monetary Policies The earnings and growth of the Bank are largely dependent on its ability to maintain a favorable differential or spread between the yield on its interest-earning assets and the rates paid on its deposits and other interest-bearing liabilities.
Human Capital Resources Our core values of Integrity, Transparency, Fairness and Collaboration are central to our belief that long-term shareholder value is derived by serving the best interests of all of our constituencies.
Human Capital Resources Our core values of Integrity, Transparency, Fairness and Collaboration are central to our belief that long-term corporate value is derived by serving the best interests of all of our constituencies.
At December 31, 2024, the Bank was in compliance with the FHLBSF’s stock ownership requirement, and our investment in FHLBSF capital stock was $16.4 million.
At December 31, 2025, the Bank was in compliance with the FHLBSF’s stock ownership requirement, and our investment in FHLBSF capital stock was $16.4 million.
The Bank’s client base reflects the multi-ethnic composition of these communities. The Bank’s revenues are derived primarily from interest and fees on loans, interest and dividends on securities, service charges on deposit accounts and sales of SBA and mortgage loans.
The Bank’s client base reflects the multi-ethnic composition of these communities. The Bank’s revenues are derived primarily from interest and fees on loans, interest and dividends on securities and other interest-earning assets, service charges and fees on deposit accounts and sales of SBA and mortgage loans.
At December 31, 2024, the Company employed 597 individuals across our footprint, of which seven were part-time. None of the employees are represented by a union or covered by a collective bargaining agreement. We believe that our employee relations are good and we have established a cross-functional Employee Engagement Committee with executive leadership to promote relationship building across the organization.
At December 31, 2025, the Company employed 610 individuals across our footprint, of which four were part-time. None of the employees are represented by a union or covered by a collective bargaining agreement. We believe that our employee relations are good and we have established a cross-functional Employee Engagement Committee with executive leadership to promote relationship building across the organization.
The final rule was scheduled to take effect on April 1, 2024 and the applicability date for the majority of the provisions in the CRA regulations was January 1, 2026, with additional requirements applicable on January 1, 2027. However, the rule is subject to legal challenges that have pushed back the implementation date and compliance deadlines.
The final rule was scheduled to take effect on April 1, 2024 and the applicability date for the majority of the provisions in the CRA regulations was January 1, 2026, with additional requirements applicable on January 1, 2027, but ongoing legal challenges have pushed back the implementation date and compliance deadlines.
Even after the sale of an SBA loan, the Bank retains the right to service the SBA loan and to receive servicing fees. The unsold portions of the SBA loans that remain owned by the Bank are included in loans receivable on the Consolidated Balance Sheets.
Even after the sale of an SBA loan, the Bank retains the right to service the SBA loan and to receive servicing fees. The unsold portions of the SBA loans that remain owned by the Bank are included in loans, net of allowance for credit losses, on the Consolidated Balance Sheets.
As of December 31, 2024, the Bank had no residential mortgage loans held for sale and was servicing $37.0 million of residential mortgage loans sold to investors. Commercial and Industrial Loans The Bank offers commercial loans for intermediate- and short-term credit.
As of December 31, 2025, the Bank had no residential mortgage loans held for sale and was servicing $62.5 million of residential mortgage loans sold to investors. Commercial and Industrial Loans The Bank offers commercial loans for intermediate- and short-term credit.
The Company is a bank holding company within the meaning of Section 3700 of the California Financial Code. Therefore, the Company and any of its subsidiaries are subject to examination by, and may be required to file reports with, the DFPI. The DFPI's approval may also be required for certain mergers and acquisitions.
The Company is a bank holding company within the meaning of Section 3700 of the California Financial Code. Therefore, the Company and any of its subsidiaries are subject to examination by, and may be required to file reports with, the DFPI.
A summary of revenues for the periods indicated follows: Year Ended December 31, 2024 2023 2022 (dollars in thousands) Interest and fees on loans receivable $ 366,153 85.2 % $ 339,811 84.3 % $ 257,878 83.8 % Interest and dividends on securities 23,019 5.3 18,167 4.5 13,375 4.3 Other interest income 9,611 2.2 11,350 2.8 2,560 0.8 Service charges, fees and other income 24,004 5.6 30,349 7.5 24,722 8.0 Gain on sale of SBA loans 6,112 1.4 5,701 1.4 9,478 3.1 Gain on sale of mortgage loans 1,469 0.3 — — — — Subtotal 430,368 100.0 405,378 100.5 308,013 100.0 Net gain (loss) on sale of securities — — (1,871 ) (0.5 ) — — Total revenues $ 430,368 100.0 % $ 403,507 100.0 % $ 308,013 100.0 % Market Area The Bank historically has provided its banking services through its branch network to a wide variety of small- to medium-sized businesses.
A summary of revenues for the periods indicated follows: Year Ended December 31, 2025 2024 2023 (dollars in thousands) Interest and fees on loans $ 375,760 84.5 % $ 366,153 85.2 % $ 339,811 84.3 % Interest and dividends on securities 26,778 6.0 23,019 5.3 18,167 4.5 Other interest income 8,390 1.9 9,611 2.2 11,350 2.8 Service charges, fees and other income 24,254 5.4 24,004 5.6 30,349 7.5 Gain on sale of SBA loans 7,808 1.8 6,112 1.4 5,701 1.4 Gain on sale of residential mortgage loans 1,913 0.4 1,469 0.3 — 0.0 Subtotal 444,903 100.0 430,368 100.0 405,378 100.5 Net loss on sale of securities — — — — (1,871 ) (0.5 ) Total revenues $ 444,903 100.0 % $ 430,368 100.0 % $ 403,507 100.0 % Market Area The Bank historically has provided its banking services through its branch network to a wide variety of small- to medium-sized businesses.
As of December 31, 2024, the total borrowing capacity available based on pledged collateral and the remaining available borrowing capacity were $1.69 billion and $1.30 billion, respectively, compared to $1.54 billion and $1.09 billion, respectively, as of December 31, 2023.
As of December 31, 2025, the total borrowing capacity available based on pledged collateral and the remaining available borrowing capacity were $1.76 billion and $1.46 billion, respectively, compared to $1.69 billion and $1.30 billion, respectively, as of December 31, 2024.
(4) Total includes $1.3 million of Home Equity Line of Credit ("HELOC") and $4.1 million in consumer loans. Commercial Property The Bank offers commercial real estate loans, which are usually collateralized by first deeds of trust. The Bank obtains formal appraisals in accordance with applicable regulations to support the value of the real estate collateral.
(4) Total includes $0.9 million of Home Equity Lines of Credit and $3.9 million of consumer loans as of December 31, 2025. Commercial Property The Bank offers commercial real estate loans, which are usually collateralized by first deeds of trust. The Bank obtains formal appraisals in accordance with applicable regulations to support the value of the real estate collateral.
Lending activities include real estate loans (commercial property, construction and residential property), commercial and industrial loans (commercial term, commercial lines of credit and international), equipment lease financing and SBA loans. 3 The following provides the composition of our loan portfolio at the dates indicated: December 31, 2024 2023 Real estate loans: Commercial property Investor (nonowner- occupied) (1) (2) 42.3 % 42.2 % Owner-occupied (1) (2) 13.0 % 12.3 % Multifamily (1) (2) (4) 6.6 % 6.8 % Total commercial property loans 61.9 % 61.3 % Construction (1) (2) 1.3 % 1.6 % Residential (3) 15.2 % 15.6 % Total real estate loans 78.4 % 78.5 % Commercial and industrial loans (1) 13.8 % 12.1 % Equipment financing agreements 7.8 % 9.4 % Total loans 100.0 % 100.0 % (1) Includes syndicated loans of $287.8 million in total commitments ($216.5 million disbursed) across C&I ($224.0 million committed and $152.7 million disbursed) and commercial real estate ("CRE") ($63.8 million committed and disbursed).
Lending activities include real estate loans (commercial property, construction and residential property), commercial and industrial loans (commercial term, commercial lines of credit and international), equipment lease financing and SBA loans. 3 The following provides the composition of our loan portfolio at the dates indicated: December 31, 2025 2024 Real estate loans: Commercial property Investor (nonowner- occupied) (1) (2) 40.2 % 42.3 % Owner-occupied (1) (2) 13.8 13.0 Multifamily (1) (2) (4) 7.2 6.6 Total commercial property loans 61.2 61.9 Construction (1) (2) 0.2 1.3 Residential (3) 16.0 15.2 Total real estate loans 77.4 78.4 Commercial and industrial loans (1) 16.4 13.8 Equipment financing agreements 6.2 7.8 Total loans 100.0 % 100.0 % (1) Includes syndicated loans of $549.4 million in total commitments ($435.5 million disbursed) across C&I ($438.2 million committed and $339.9 million disbursed) and commercial real estate ("CRE") ($111.2 million committed and $95.6 million disbursed) as of December 31, 2025.
As of December 31, 2024, the Bank had $8.6 million of SBA loans held for sale and $242.4 million of SBA loans in its loan portfolio, and was servicing $523.2 million of SBA loans sold to investors. The Bank also periodically purchases the guaranteed portion of SBA loans from unrelated third parties.
As of December 31, 2025, the Bank had $7.4 million of SBA loans held for sale and $256.6 million of SBA loans in its loan portfolio, and was servicing $553.4 million of SBA loans sold to investors. The Bank also periodically purchases the guaranteed portion of SBA loans from unrelated third parties.
At December 31, 2024, the Bank’s authorized legal lending limits for loans to one borrower was $143.0 million for unsecured loans and an additional $95.3 million for secured and unsecured loans combined. The Bank seeks to mitigate the risks inherent in its loan portfolio by adhering to strict underwriting practices.
At December 31, 2025, the Bank’s authorized legal lending limits for loans to one borrower was $147.9 million for unsecured loans and an additional $98.6 million for secured and unsecured loans combined. The Bank seeks to mitigate the risks inherent in its loan portfolio by adhering to strict underwriting practices.
At December 31, 2024, the Company and the Bank’s total risk-based capital ratios were 15.24% and 14.43%, respectively; Tier 1 risk-based capital ratios were 12.46% and 13.36%, respectively; Common Equity Tier 1 capital ratios were 12.11% and 13.36%, respectively, and Tier 1 leverage capital ratios were 10.63% and 11.47%, respectively, all of which ratios exceeded the minimum percentage requirements for the Bank to be deemed “well-capitalized” and for the Company to meet and exceed all applicable capital ratio requirements for regulatory purposes.
At December 31, 2025, the Company and the Bank’s total risk-based capital ratios were 15.06% and 14.25%, respectively; Tier 1 risk-based capital ratios were 12.37% and 13.17%, respectively; Common Equity Tier 1 capital ratios were 12.05% and 13.17%, respectively, and Tier 1 leverage capital ratios were 10.70% and 11.47%, respectively, all of which ratios exceeded the minimum percentage requirements for the Bank to be deemed “well-capitalized” and for the Company to meet and exceed all applicable capital ratio requirements for regulatory purposes.
We cannot assure that these procedures will protect against losses on loans secured by real property. 6 The following presents key statistics of our commercial real estate loans: As of December 31, 2024 2023 Weighted Average Weighted Average Number Loan-to-Value Ratio Debt Coverage Ratio Number Loan-to-Value Ratio Debt Coverage Ratio Commercial property (1) (2) Investor (nonowner-occupied) 862 49.0 % 2.04x 893 50.3 % 2.06x Owner-occupied 711 45.0 % 2.70x 753 47.8 % 2.69x Multifamily 148 54.4 % 1.58x 155 55.1 % 1.57x (1) CRE is a combination of investor (non-owner), owner occupied, multifamily, and construction.
We cannot assure that these procedures will protect against losses on loans secured by real property. 6 The following presents key statistics of our commercial real estate loans: As of December 31, 2025 2024 Weighted Average Weighted Average Number Loan-to-Value Ratio Debt Coverage Ratio Number Loan-to-Value Ratio Debt Coverage Ratio Commercial property (1) (2) Investor (nonowner-occupied) 825 48.7 % 2.04x 862 49.0 % 2.04x Owner-occupied 716 46.8 % 2.70x 711 45.0 % 2.70x Multifamily 157 53.7 % 1.68x 148 54.4 % 1.58x (1) CRE is a combination of investor (non-owner), owner occupied, multifamily, and construction.
(2) Term loans are a commitment for a specified term. A majority of the lines of credit are revolving, including commercial revolvers, with some non-revolvers (sub-notes and working capital tranches). (3) Top quintile represents top 20% of the loans. Commercial lending entails significant risks.
(2) Term loans are a commitment for a specified term. A majority of the lines of credit are revolving, including commercial revolvers, with some non-revolvers (sub-notes and working capital tranches). (3) Top quintile represents top 20% of the loans. (4) Loan size refers to the lowest-balance outstanding loan among those within the top quintile. Commercial lending entails significant risks.
Advances require authorization and disbursement requests, depending on the progress of the project and inspections. Advances are non-revolving and are made throughout the term, up to the original commitment amount. (2) Top quintile represents top 20% of the loans.
Advances require authorization and disbursement requests, depending on the progress of the project and inspections. Advances are non-revolving and are made throughout the term, up to the original commitment amount. (2) Top quintile represents top 20% of the loans. (3) Loan size refers to the lowest-balance outstanding loan among those within the top quintile.
(2) Non-QM loans do not conform to the Dodd-Frank Act. These loans mitigate additional risk from additional non-standard income documentation, by maintaining lower maximum loan-to-values ("LTVs") and higher maximum FICO requirements. (3) Other loan amounts exceed Federal Housing Finance Agency limits, but generally conform to the ATR/QM rules.
These loans mitigate additional risk from additional non-standard income documentation, by maintaining lower maximum loan-to-values ("LTVs") and higher maximum FICO requirements. (2) QM loans conform to the Ability-to-Repay ("ATR") rules/requirements of the Consumer Financial Protection Bureau (the "CFPB"). (3) Other loan amounts exceed Federal Housing Finance Agency limits, but generally conform to the ATR/QM rules.
The Bank’s capital conservation buffer was 6.43% and 6.27%, and the Company’s capital conservation buffer was 6.46% and 6.20% as of December 31, 2024 and 2023, respectively.
As of December 31, 2025 and 2024, the Bank’s capital conservation buffer was 6.25% and 6.43%, respectively, and the Company’s capital conservation buffer was 6.37% and 6.46%, respectively.
All borrowers must demonstrate the ability to service and repay not only their obligations to the Bank, but also any and all outstanding business debt, without liquidating the collateral, based on historical earnings or reliable projections.
Typically, the Bank requires all principals and significant stockholders of a business to be guarantors on all loan instruments. All borrowers must demonstrate the ability to service and repay not only their obligations to the Bank, but also any and all outstanding business debt, without liquidating the collateral, based on historical earnings or reliable projections.
As a result, the availability of funds for the repayment of commercial equipment financing agreements may be substantially dependent on the success of the business itself, which in turn, is often dependent in part upon general economic conditions. SBA Loans The Bank originates loans that are guaranteed by the SBA, an independent agency of the federal government.
As a result, the availability of funds for the repayment of commercial equipment financing agreements may be substantially dependent on the success of the business itself, which in turn, is often dependent in part upon general economic conditions.
The FDIC will collect the special assessment at a quarterly rate of 3.36 basis points, multiplied by an insured depository institution's estimated uninsured deposits, reported for the quarter that ended December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits, over an initial eight quarterly assessment periods and currently projects that the special assessment will be collected for an initial two quarters at a lower rate.
Throughout the initial collection period, the FDIC collected the special assessment at a quarterly rate of 3.36 basis points, multiplied by an insured depository institution's estimated uninsured deposits as reported for the quarter that ended December 31, 2022, adjusted to exclude the first $5 billion.
Employee retention helps us operate efficiently and offers continuity to our customers and the communities we serve. At December 31, 2024, 65% of our current staff had been with us for at least five years.
Employee retention helps us operate efficiently and offers continuity to our customers and the communities we serve. At December 31, 2025, 67% of our current staff had been with us for at least three years, and 44% of our staff had been with us for at least five years. Our annual turnover rate in 2025 was 17.9%.
(2) $105.0 million, or 2.6%, and $115.5 million, or 3.0%, of the CRE portfolio are unguaranteed SBA loans at December 31, 2024 and 2023, respectively. 5 A qualifying mortgage is a mortgage that meets certain requirements for lender protection and secondary market trading.
(2) $115.7 million, or 2.9%, and $32.5 million, or 0.8%, of the CRE portfolio were unguaranteed and guaranteed SBA loans, respectively, at December 31, 2025. 5 A qualifying residential mortgage is one that meets certain requirements for lender protection and secondary market trading.
The actions of the Federal Reserve in these areas influence the growth of bank loans, investments, and deposits, and also affect interest rates charged on loans and deposits.
The actions of the Federal Reserve in these areas influence the growth of bank loans, investments, and deposits, and also affect interest rates charged on loans and deposits. The nature and impact of any future changes in monetary policies cannot be predicted.
Each FHLB serves as a reserve or central bank for its members within its assigned region and makes available loans or advances to its members. Each FHLB is financed primarily from the sale of consolidated obligations of the FHLB system.
There are eleven Federal Home Loan Banks (each, an “FHLB”) across the U.S. owned by their members. Each FHLB serves as a reserve or central bank for its members within its assigned region and makes available loans or advances to its members. Each FHLB is financed primarily from the sale of consolidated obligations of the FHLB system.
Additionally, on November 29, 2023, the FDIC adopted a final rule, effective on April 1, 2024, to implement a special assessment to recover the loss to the DIF arising from the protection of uninsured depositors following the closures 16 of two regional banks in the spring of 2023; the special assessment does not apply to any banking organizations with less than $5 billion in assets.
Additionally, on November 29, 2023, the FDIC adopted a final rule, effective on April 1, 2024, to implement a special assessment over eight quarterly assessment periods to recover the loss to the DIF arising from the protection of uninsured depositors following the closures of two regional banks in the spring of 2023.
In the exercise of their supervisory and examination authority, the regulatory agencies have emphasized corporate governance, stress testing, enterprise risk management and other board responsibilities; anti-money laundering compliance and enhanced high-risk customer due diligence; vendor management; cybersecurity; and fair lending and other consumer compliance obligations. 13 (c) Capital Adequacy Requirements Bank holding companies and banks are subject to various regulatory capital requirements administered by state and federal banking regulators.
In the exercise of their supervisory and examination authority, the regulatory agencies have emphasized corporate governance, stress testing, enterprise risk management and other board responsibilities; anti-money laundering compliance and enhanced high-risk customer due diligence; vendor management; cybersecurity; and fair lending and other consumer compliance obligations.
The following presents key statistics of our commercial and industrial loans: December 31, 2024 Term (1) (2) Lines of Credit (2) (dollars in millions) Commercial & industrial loans by size: Total balance $ 390 $ 473 Average $ 0.34 $ 0.92 Median $ 0.07 $ 0.20 Top quintile balance (3) $ 336.00 $ 385.00 Loan size $ 0.2 $ 0.8 Average $ 1.50 $ 41.94 Median $ 0.41 $ 2.51 (1) $52.9 million, or 6.1%, and $62.1 million, or 7.2%, of the C&I term portfolio are unguaranteed and guaranteed SBA loans, respectively.
The following presents key statistics of our commercial and industrial loans: December 31, 2025 Term (1) (2) Lines of Credit (1) (2) (dollars in millions) Commercial & industrial loans by size: Total balance $ 579.1 $ 495.8 Average 0.5 0.9 Median 0.1 0.2 Top quintile balance (3) $ 521.8 $ 411.2 Loan size (4) 0.2 0.9 Average 2.2 4.6 Median 0.4 2.0 (1) $62.9 million, or 5.8%, and $52.7 million, or 4.9%, of the C&I portfolio were unguaranteed and guaranteed SBA loans, respectively, at December 31, 2025.
The implementation of more stringent requirements to maintain higher levels of capital, or to maintain higher levels of liquid assets, could adversely impact the Company’s net income and return on equity, restrict the ability to pay dividends or executive bonuses, and require the raising of additional capital.
The implementation of more stringent requirements to maintain higher levels of capital, or to maintain higher levels of liquid assets, could adversely impact the Company’s net income and return on equity, restrict the ability to pay dividends or executive bonuses, and require the raising of additional capital. 14 (d) Bank Holding Company Regulation The Company is a bank holding company that is subject to comprehensive supervision, regulation, examination and enforcement by the Federal Reserve.
Lending Procedures and Lending Limits Individual lending authority is granted to the Chief Credit Officer and certain additional designated officers. Loans for which direct and indirect borrower liability exceeds an individual’s lending authority are referred to the Bank’s Management Credit Committee.
Loans for which direct and indirect borrower liability exceeds an individual’s lending authority are referred to the Bank’s Management Credit Committee.
(3) Residential real estate ("RRE") is a loan (mortgage) secured by a single-family residence, including one to four units (duplexes, triplexes, and fourplexes). RRE also includes $1.3 million of home equity lines of credit and $4.1 million in consumer loans. (4) $80.4 million, or 19.48%, of the CRE multifamily loans are rent-controlled in New York City.
(3) Residential real estate ("RRE") is a loan (mortgage) secured by a single-family residence, including one to four units (duplexes, triplexes, and fourplexes). RRE also includes $0.9 million of home equity lines of credit and $3.8 million in consumer loans.
Noncompliance with any of these laws could subject the Bank to compliance enforcement actions as well as lawsuits, and could also result in administrative penalties, including fines and reimbursements.
Noncompliance with any of these laws could subject the Bank to compliance enforcement actions as well as lawsuits, and could also result in administrative penalties, including fines and reimbursements. The Bank and the Company are also subject to federal and state laws prohibiting unfair or fraudulent business practices, untrue or misleading advertising, and unfair competition.
Commercial loans typically involve larger loan balances, are generally dependent on the cash flows of the business and may be subject to adverse conditions in the general economy or in a specific industry. Short-term business loans are customarily intended to finance current operations and typically provide for principal payment at maturity, with interest payable monthly.
Commercial loans typically involve larger loan balances, are generally dependent on the cash flows of the business and may be subject to adverse conditions in the general economy or in a specific industry.
On October 24, 2023, the FDIC, the Federal Reserve Board, and the Office of the Comptroller of the Currency issued a final rule to strengthen and modernize the CRA regulations.
On October 24, 2023, the FDIC, the Federal Reserve Board, and the Office of the Comptroller of the Currency issued a final rule (the “2023 CRA Rule”) to the CRA regulations adopted by the agencies on May 4,1995 (the “1995 CRA Regulation”).
The Bank and the Company are also subject to federal and state laws prohibiting unfair or fraudulent business practices, untrue or misleading advertising, and unfair competition. 17 These laws and regulations mandate certain disclosure and reporting requirements, regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, servicing, collecting and foreclosure of loans, and providing other services.
These laws and regulations mandate certain disclosure and reporting requirements, regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, servicing, collecting and foreclosure of loans, and providing other services.
Employees can choose from core workshops focused on a single concept or job skill, leadership and professional development programming to develop our emerging leaders, and regulatory compliance training to ensure safe and sound banking practices. In addition to internal training, we offer a tuition reimbursement program where costs for certain relevant job training is offered to eligible employees.
We offer in-house training led by instructors or through interactive online offerings to all employees. Employees can choose from core workshops focused on a single concept or job skill, leadership and professional development programming to develop our emerging leaders, and regulatory compliance training to ensure safe and sound banking practices.
OREO properties are categorized as real property that is owned by the Bank but which is not directly related to the Bank’s business. 4 The following tables present the distribution of real estate loans by size, geography, and type at the dates indicated: Investor (nonowner- occupied) Owner-occupied Multifamily Construction (1) Residential property December 31, 2024 (dollars in millions) Real estate loans by size: Total balance $ 2,647 $ 811 $ 413 $ 79 $ 951 Average $ 3.07 $ 1.14 $ 2.79 $ 11.23 $ 0.54 Median $ 1.09 $ 0.35 $ 1.10 $ 8.00 $ 0.45 Top quintile balance (2) $ 1,906.15 $ 616.49 $ 298.05 $ 49.02 $ 406.92 Loan size $ 3.7 $ 1.2 $ 2.6 $ 16.8 $ 0.1 Average $ 11.21 $ 4.37 $ 9.93 $ 24.51 $ 1.17 Median $ 7.34 $ 2.22 $ 4.51 $ 24.51 $ 0.93 (1) Represents the total outstanding amount.
OREO properties are categorized as real property that is owned by the Bank but which is not directly related to the Bank’s business. 4 The following tables present the distribution of real estate loans by size, geography, and type at the dates indicated: Investor (nonowner- occupied) Owner-occupied Multifamily Construction (1) Residential property December 31, 2025 (dollars in millions) Real estate loans by size: Total balance $ 2,637.5 $ 904.5 $ 474.4 $ 13.7 $ 1,049.9 Average 3.2 1.3 3.0 3.4 0.6 Median 1.2 0.4 1.1 3.0 0.5 Top quintile balance (2) $ 1,860.7 $ 689.3 $ 341.8 $ 7.2 $ 473.9 Loan size (3) 3.9 1.3 3.0 5.3 0.8 Average 11.3 4.9 10.7 7.2 1.3 Median 7.9 2.6 5.2 7.2 1.0 (1) Represents the total outstanding amount.
(b) Legislation and Regulatory Developments Legislative and regulatory developments to date, as well as those that come in the future, have had, and are likely to continue to have, an impact on the conduct of our business.
Such developments may further alter the structure, regulation, and competitive relationship among financial institutions, and may subject us to increased regulation, disclosure, and reporting requirements. 13 (b) Legislation and Regulatory Developments Legislative and regulatory developments to date, as well as those that come in the future, have had, and are likely to continue to have, an impact on the conduct of our business.
In addition to healthy base wages, we offer annual bonus opportunities, a company-matched 401(k) Plan, healthcare and insurance benefits, flexible spending accounts, wellness incentives, long-term disability, paid time off, and an employee assistance program. 11 (d) Employee Health and Safety We recognize that the success of our business is fundamentally connected to the well-being of our employees.
(c) Compensation and Benefits As part of our compensation philosophy, we offer competitive salaries and employee benefits to attract and retain superior talent. In addition to healthy base wages, we offer annual bonus opportunities, a company-matched 401(k) Plan, healthcare and insurance benefits, flexible spending accounts, wellness incentives, long-term disability insurance, paid time off, and an employee assistance program.
The DFPI and the FDIC may require the Bank to recognize additions to the allowance for credit losses through a provision for credit losses based upon their assessment of the information available to them at the time of their examinations.
The DFPI and the FDIC may require the Bank to recognize additions to the allowance for credit losses through a provision for credit losses based upon their assessment of the information available to them at the time of their examinations. 10 Deposits The Bank offers a traditional array of deposit products, including noninterest-bearing checking accounts, negotiable order of withdrawal (“NOW”) accounts, savings accounts, money market accounts, and certificates of deposit.
(p) Incentive Compensation In October 2022, the SEC adopted a final rule implementing the incentive-based compensation recovery (“clawback”) provisions of the Dodd-Frank Act.
The Company is subject to the information and proxy solicitation requirements, insider trading restrictions and other requirements under the Exchange Act. (p) Incentive Compensation In October 2022, the SEC adopted a final rule implementing the incentive-based compensation recovery (“clawback”) provisions of the Dodd-Frank Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) expanded definitions and restrictions on transactions with affiliates under Sections 23A and 23B, and also lending limits for derivative transactions, repurchase agreements, and securities lending and borrowing transactions. 15 Pursuant to the Federal Deposit Insurance Act (“FDI Act”) and the California Financial Code, California state-chartered commercial banks may generally engage in any activity permissible for national banks.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) expanded definitions and restrictions on transactions with affiliates under Sections 23A and 23B, and also lending limits for derivative transactions, repurchase agreements, and securities lending and borrowing transactions.
CFPB regulations and guidance apply to banks, and banks with $10 billion or more in assets are subject to examination by the CFPB. Banks with less than $10 billion in assets, including the Bank, continue to be examined for compliance by their primary federal banking agency.
Although CFPB regulations and guidance apply to all banks, those with $10 billion or more in assets are subject to examination by the CFPB, while those with less than $10 billion in assets, which includes Hanmi Bank, continue to be examined for compliance by their primary federal banking agency. 18 (k) Federal Home Loan Bank System The Bank is a member and holder of the capital stock of the Federal Home Loan Bank of San Francisco (“FHLBSF”).
Through Hanmi Banking School, the Corporate Learning and Development Department offers a variety of programs to empower employees with the knowledge and skills they need to be successful and remain competitive. We offer in-house training led by instructors or through interactive online offerings to all employees.
(b) Learning and Development We have a robust learning and development program with broad offerings to help employees achieve their career goals. Through Hanmi Banking School, the Corporate Learning and Development Department offers a variety of programs to empower employees with the knowledge and skills they need to be successful and remain competitive.
(e) Bank Regulation The Bank is a California state-chartered commercial bank whose deposits are insured by the FDIC. The FDIC is its primary federal bank regulator and the DFPI is the Bank’s primary state bank regulator. The Bank is subject to comprehensive supervision, regulation, examination and enforcement by the FDIC and the DFPI.
The DFPI's approval may also be required for certain mergers and acquisitions. 15 (e) Bank Regulation The Bank is a California state-chartered commercial bank whose deposits are insured by the FDIC. The FDIC is its primary federal bank regulator and the DFPI is the Bank’s primary state bank regulator.
(d) Bank Holding Company Regulation The Company is a bank holding company that is subject to comprehensive supervision, regulation, examination and enforcement by the Federal Reserve.
The Bank is subject to comprehensive supervision, regulation, examination and enforcement by the FDIC and the DFPI.
During the year ended December 31, 2024 the Bank purchased $58.6 million of guaranteed SBA loans. 9 Off-Balance Sheet Commitments As part of the suite of services available to its small- to medium-sized business customers, the Bank from time to time issues formal commitments and lines of credit. These commitments can be either secured or unsecured.
Off-Balance Sheet Commitments As part of the suite of services available to its small- to medium-sized business customers, the Bank from time to time issues formal commitments and lines of credit. These commitments can be either secured or unsecured. They may be revolving lines of credit for seasonal working capital needs, commercial letters of credit or standby letters of credit.
Real Estate Loans Real estate lending involves risks associated with the potential declines in the value of the underlying real estate collateral and the cash flows from income-producing properties.
(4) $78.6 million, or 16.6%, of the CRE multifamily loans are rent-controlled in New York City as of December 31, 2025. Real Estate Loans Real estate lending involves risks associated with the potential declines in the value of the underlying real estate collateral and the cash flows from income-producing properties.
Deposits The Bank offers a traditional array of deposit products, including noninterest-bearing checking accounts, negotiable order of withdrawal (“NOW”) accounts, savings accounts, money market accounts, and certificates of deposit. These accounts, except for noninterest-bearing checking accounts, earn interest at rates established by management based on competitive market factors and management’s desire to increase certain types or maturities of deposit liabilities.
These accounts, except for noninterest-bearing checking accounts, earn interest at rates established by management based on competitive market factors, the Bank's liquidity needs, and management’s desire to increase certain types or maturities of deposit liabilities. Our approach is to tailor products and bundle those that meet the customer’s needs.
Through employee engagement surveys, we focus our community engagement and employee volunteer efforts in five areas: Youth, Education, Health, Senior, and Community Development.
Hanmi is committed to and has a long history of supporting the communities in which we live and work. Through employee engagement surveys, we focus our community engagement and employee volunteer efforts in five areas: Youth, Education, Health, Senior, and Community Development.
The following presents real estate by qualifying ("QM") and non-qualifying ("Non-QM") residential mortgage loans at the dates indicated: December 31, 2024 % of Total Loans December 31, 2023 % of Total Loans (dollars in thousands) QM (1) $ 15,623 1.6 % $ 16,514 1.7 % Non-QM (2) 924,446 97.2 % 933,304 97.0 % Other (3) 11,232 1.2 % 12,847 1.3 % Total (4) $ 951,301 100.0 % $ 962,665 100.0 % (1) QM loans conform to the Ability-to-Repay ("ATR") rules/requirements of the Consumer Financial Protection Bureau (the "CFPB").
The following presents real estate by qualifying ("QM") and non-qualifying ("Non-QM") residential mortgage loans at the dates indicated: December 31, 2025 % of Total Loans December 31, 2024 % of Total Loans (dollars in thousands) Non-QM (1) $ 1,025,066 97.6 $ 924,446 97.2 QM (2) 14,466 1.4 15,623 1.6 Other (3) 10,339 1.0 11,232 1.2 Total residential real estate (4) $ 1,049,871 100.0 $ 951,301 100.0 (1) Non-QM loans do not conform to the Dodd-Frank Act.
We focus on being responsive to our workforce's needs and have implemented significant operating environment changes as needed to serve the best interest of our employees, as well as the communities in which we operate. These efforts guided our response to the pandemic as well as the recent Southern California wildfires.
We focus on being responsive to our workforce's needs and have implemented significant operating environment changes as needed to serve the best interest of our employees, as well as the communities in which we operate. (e) Community Engagement As a community bank, we are proud to work with our communities to build a stronger future for all of our stakeholders.
The nature and impact of any future changes in monetary policies cannot be predicted. 18 (m) Regulation of Non-Bank Subsidiaries Non-bank subsidiaries may be subject to additional or separate regulation and supervision by other state, federal and self-regulatory bodies. Additionally, any foreign-based subsidiaries would also be subject to foreign laws and regulations.
(n) Regulation of Non-Bank Subsidiaries Non-bank subsidiaries may be subject to additional or separate regulation and supervision by other state, federal and self-regulatory bodies. Additionally, any foreign-based subsidiaries would also be subject to foreign laws and regulations. (o) Federal Securities Law The Company’s common stock is registered with the SEC under the Exchange Act.
Since 2021, the Bank has invested in the training and development of the next generation of bankers through the Hanmi Credit Trainee program, leveraging targeted credit training courses from external vendors to supplement our internal trainings. (c) Compensation and Benefits As part of our compensation philosophy, we offer competitive salaries and employee benefits to attract and retain superior talent.
We also have partnerships with Bankers’ Compliance Group and California Bankers’ Association to provide timely and relevant webinars and training. Since 2021, the Bank has invested in the training and development of the next generation of bankers through the Hanmi Credit Trainee program, leveraging targeted credit training courses from external vendors to supplement our internal trainings.
Our approach is to tailor products and bundle those that meet the customer’s needs. This approach is designed to add value for the customer, increase products per household, and produce higher service fee income. Available Information We file reports with the U.S.
This approach is designed to add value for the customer, increase products per household, and produce higher service fee income. Available Information We file reports with the U.S. Securities and Exchange Commission (the “SEC”), including our Proxy Statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments thereto.
The purchased SBA loans are held for investment and included in loans receivable on the Consolidated Balance Sheets.
The purchased SBA loans are held for investment and included in Loans, net of allowance for credit losses, on the Consolidated Balance Sheets. During the year ended December 31, 2025 the Bank purchased $11.0 million of guaranteed SBA loans.
Where real estate is the primary collateral, the Bank obtains formal appraisals in accordance with applicable regulations to support the value of the real estate collateral. Typically, the Bank requires all principals and significant stockholders of a business to be guarantors on all loan instruments.
Collateral may include, but is not limited to, liens on inventory, accounts receivable, fixtures and equipment, leasehold improvements and real estate. Where real estate is the primary collateral, the Bank obtains formal appraisals in accordance with applicable regulations to support the value of the real estate collateral.
They may be revolving lines of credit for seasonal working capital needs, commercial letters of credit or standby letters of credit. Commercial letters of credit facilitate import trade. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.
Commercial letters of credit facilitate import trade. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Lending Procedures and Lending Limits Individual lending authority is granted to the Chief Credit Officer and certain additional designated officers.
Term loans typically provide for floating interest rates, with monthly payments of both principal and interest. 8 In general, it is the intent of the Bank to take collateral whenever possible, regardless of the loan purpose(s). Collateral may include, but is not limited to, liens on inventory, accounts receivable, fixtures and equipment, leasehold improvements and real estate.
Short-term business loans are customarily intended to finance current operations and typically provide for principal payment at maturity, with interest payable monthly. 8 In general, it is the intent of the Bank to take collateral whenever possible, regardless of the loan purpose(s).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThose borrowers might not be able to repay their loans, and the collateral for such loans may decline significantly in value. We are vulnerable to losses if an earthquake, fire, flood or other natural catastrophe occurs in Southern California. On January 7, 2025, wildfires occurred in Los Angeles County, continuing over several days and causing severe property damage.
Biggest changeMany of our borrowers may suffer property damage, experience interruption of their businesses or lose their jobs after an earthquake. Those borrowers might not be able to repay their loans, and the collateral for such loans may decline significantly in value.
Any material interruption in our customers’ supply chains, such as a 22 material interruption of the resources required to conduct their business, such as those resulting from interruptions in service by third-party providers, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, reductions in federal subsidies or grants, social or labor unrest, natural disasters, epidemics or pandemics or political disputes and military conflicts, that cause a material disruption in our customers’ supply chains, could have a negative impact on their business and ability to repay their borrowings with us.
Any material interruption in our customers’ supply chains, such as a material interruption of the resources required to conduct their business, such as those resulting from interruptions in service by third-party providers, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, reductions in federal subsidies or grants, social or labor unrest, natural disasters, epidemics or pandemics or political disputes and military conflicts that cause a material disruption in our customers’ supply chains, could have a negative impact on their business and ability to repay their borrowings with us.
The trading price of the shares of our common stock will depend on many factors, which may change from time to time, including, without limitation, our financial condition, performance, creditworthiness and prospects, future sales of our equity securities, and other factors identified in the section captioned “Cautionary Note Regarding Forward-Looking Statements.” Your share ownership may be diluted by the issuance of additional shares of our common stock in the future.
The trading price of the shares of our common stock will depend on many factors, which may change from time to time, including, without limitation, our financial condition, performance, creditworthiness and prospects, future sales of our equity securities, and other factors identified in the section captioned “Cautionary Note Regarding Forward-Looking Statements.” Share ownership may be diluted by the issuance of additional shares of our common stock in the future.
Its policies can also adversely affect borrowers, potentially increasing the risk that they may fail to repay their loans. The monetary policies and regulations of the FRB have had a significant effect on the overall economy and the operating results of financial institutions in the past and are expected to continue to do so in the future.
Its policies can also adversely affect borrowers, potentially increasing the risk that they may fail to repay their loans. The 23 monetary policies and regulations of the FRB have had a significant effect on the overall economy and the operating results of financial institutions in the past and are expected to continue to do so in the future.
As discussed below under “—Risks Related to Market Interest Rates— Our earnings are affected by changing interest rates,” as inflation increases and market interest rates rise the value of our investment securities, particularly those with longer maturities decrease, although this effect can be less pronounced for floating rate instruments.
As discussed below under “—Risks Related to Market Interest Rates— Our earnings are affected by changing interest rates,” as inflation increases and market interest rates rise the value of our investment securities, particularly those with longer maturities decrease, although this 21 effect can be less pronounced for floating rate instruments.
If our assumptions prove to be incorrect, our allowance for credit losses may not be sufficient to cover losses in our loan portfolio, and adjustments may be necessary to address different economic conditions or adverse developments in the loan portfolio. Consequently, a problem with one or more loans could require us to significantly increase our provision for credit losses.
If our assumptions prove to be incorrect, our allowance for credit losses may not be sufficient to cover losses in our loan portfolio, and adjustments may be necessary to address different economic conditions or adverse developments in the loan portfolio. Consequently, a problem with one or more loans could require us to significantly increase our allowance for credit losses.
These changes could materially impact, potentially retroactively, how we report our financial condition and results of operations. 26 Risks Related to Market Interest Rates Our earnings are affected by changing interest rates. Our profitability is dependent to a large extent on our net interest income.
These changes could materially impact, potentially retroactively, how we report our financial condition and results of operations. Risks Related to Market Interest Rates Our earnings are affected by changing interest rates. Our profitability is dependent to a large extent on our net interest income.
If we fail to comply with applicable consumer rules and regulations, we may be subject to adverse enforcement actions, fines or penalties. 23 We face a risk of non-compliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
If we fail to comply with applicable consumer rules and regulations, we may be subject to adverse enforcement actions, fines or penalties. We face a risk of non-compliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The level of the commercial real estate loan portfolio may subject the Bank to additional regulatory scrutiny. Federal bank regulatory agencies have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending.
The level of the commercial real estate loan portfolio may subject the Bank to additional regulatory scrutiny. Federal bank regulatory agencies have promulgated guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending.
The Bank’s Information Security Officer meets at least quarterly with the committee to provide updates on cybersecurity and information security risk, and the Board annually reviews and approves our Information Security Program and Information Security Policy. We also engage outside consultants to support its cybersecurity efforts.
The Bank’s Information Security Officer meets at least quarterly with the committee to provide updates on cybersecurity and information security risk, and the Board annually reviews and approves our Information Security Program and Information Security Policy. We also engage outside consultants to support our cybersecurity efforts.
Our net interest income may decline based on our exposure to a difference in short-term and long-term interest rates. If the difference between the short-term and long-term interest rates shrinks or disappears, the difference between rates paid on deposits and received on loans could narrow significantly resulting in a decrease in net interest income.
Our net interest income may decline based on our exposure to a difference in short-term and long-term interest rates. If the difference between the short-term and long-term interest rates shrinks or disappears, the difference between rates paid on deposits and received on loans could narrow, resulting in a decrease in net interest income.
In addition, a number of our vendors are large national entities, and their services could prove difficult to replace in a timely manner if a failure or other service interruption 25 were to occur.
In addition, a number of our vendors are large national entities, and their services could prove difficult to replace in a timely manner if a failure or other service interruption were to occur.
Factors that are considered include the extent to which the fair value is less than the amortized cost basis, the financial condition, credit rating and future prospects of the issuer, whether the debtor is current on contractually obligated interest and principal payments and our intent and ability to retain the security for a period of time sufficient to allow for any anticipated recovery in fair value and the likelihood of any near-term fair value recovery.
Factors that are considered include the extent to which the fair value is less than the amortized cost basis, the financial condition, credit rating and future prospects of the issuer, whether the issuer is current on contractually obligated interest and principal payments and our intent and ability to retain the 28 security for a period of time sufficient to allow for any anticipated recovery in fair value and the likelihood of any near-term fair value recovery.
The banking and financial services businesses in our market areas are highly competitive. We face competition in attracting deposits, making loans, and attracting and retaining employees, 27 particularly in the Korean-American community.
The banking and financial services businesses in our market areas are highly competitive. We face competition in attracting deposits, making loans, and attracting and retaining employees, particularly in the Korean-American community.
Although we have policies and procedures to perform an environmental review before initiating any foreclosure on nonresidential real property, these reviews may not be sufficient to detect all potential environmental hazards. If we become subject to significant environmental liabilities, our business, financial condition, results of operations and prospects could be materially and adversely affected.
Although we have policies and procedures to perform an environmental review before initiating any foreclosure on nonresidential real properties, these reviews may not be sufficient to detect all potential environmental hazards. If we become subject to significant environmental liabilities, our business, financial condition, results of operations and prospects could be materially and adversely affected.
Based on these factors, the Bank did not have a concentration in commercial real estate lending, as while such loans represented more than 300% of total Bank capital as of December 31, 2024, the outstanding balance of the Bank’s CRE loan portfolio has not increased 50% or more during the prior 36 months.
Based on these factors, the Bank did not have a concentration in commercial real estate lending, as while such loans represented more than 300% of total Bank capital as of December 31, 2025, the outstanding balance of the Bank’s CRE loan portfolio has not increased 50% or more during the prior 36 months.
Changes in such regulation and oversight, whether in the form of regulatory policy, new regulations, legislation or supervisory action, may have a material impact on our operations. Further, compliance with such regulation may increase our costs and limit our ability to pursue business opportunities.
Changes in such regulation and oversight, whether in the form of regulatory policy, new regulations, executive orders, legislation or supervisory action, may have a material impact on our operations. Further, compliance with such regulation may increase our costs and limit our ability to pursue business opportunities.
Additionally, Congress and the administration through executive orders controls fiscal policy through decisions on taxation and expenditures. Depending on industries and markets involved, changes to tax law and increased or reduced public expenditures could affect us directly or the business operations of our customers.
Additionally, Congress and the administration through executive orders control fiscal policy through decisions on taxation and expenditures. Depending on industries and markets involved, changes to tax law and increased or reduced public expenditures could affect us directly or the business operations of our customers.
A significant source of risk arises from the possibility that we could sustain losses because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loans.
Significant risk arises from the possibility that we could sustain losses because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loans.
Among the factors that could affect our stock price are: • actual or anticipated fluctuations in our operating results and financial condition; • changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts; • failure to meet analysts’ revenue or earnings estimates; • speculation in the press or investment community; 28 • strategic actions by us or our competitors, such as acquisitions or restructurings; • general market conditions and, in particular, developments related to market conditions for the financial services industry; • inflation and changes in interest rates; • proposed or adopted legislative, regulatory or accounting changes or developments; • anticipated or pending investigations, proceedings or litigation that involve or affect us; or • domestic and international economic factors unrelated to our performance.
Among the factors that could affect our stock price are: • actual or anticipated fluctuations in our operating results and financial condition; 29 • changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts; • failure to meet analysts’ revenue or earnings estimates; • speculation in the press or investment community; • strategic actions by us or our competitors, such as acquisitions or restructurings; • general market conditions and, in particular, developments related to market conditions for the financial services industry; • inflation and changes in interest rates; • the imposition of tariffs and any retaliatory responses; • proposed or adopted legislative, regulatory or accounting changes or developments; • anticipated or pending investigations, proceedings or litigation that involve or affect us; or • domestic and international political and economic factors unrelated to our performance.
We conduct a periodic review of the debt securities portfolio to determine if any decline in the estimated fair value of any security below its cost basis is considered impaired.
We conduct a periodic review of the debt securities portfolio to determine if any decline in the estimated fair value of any security below its cost basis indicates that the security is impaired.
The performance of our New York multifamily real estate loans could be adversely impacted by regulation.
The performance of our multifamily real estate loans within the State of New York could be adversely impacted by regulation.
If economic conditions in South Korea change, we could experience an outflow of deposits from our customers with connections to South Korea, which could have a material adverse effect on our financial condition and results of operations.
If economic conditions in South Korea change, we could experience an outflow of deposits from our customers with connections to South Korea, which could have a material adverse effect on our financial condition and results of operations. Tariffs imposed on South Korea could have an impact on our business.
Deteriorating business and economic conditions can adversely affect our industry and business. Our financial performance, the ability of borrowers to make payments on outstanding loans and the value of the collateral securing those loans, is highly dependent upon the business and economic conditions in the markets in which we operate and in the United States as a whole.
Our financial performance, the ability of borrowers to make payments on outstanding loans and the value of the collateral securing those loans, is highly dependent upon the business and economic conditions in the markets in which we operate and in the United States as a whole.
In determining the adequacy of the allowance for credit losses, we rely on our historic loss experience and our evaluation of economic conditions.
In determining the adequacy of the allowance for credit losses, we rely on our historic loss experience, our evaluation of economic conditions and other qualitative factors.
Disruptions or failures in the physical infrastructure or operating systems that support our businesses, customers or third parties, or cyber-attacks or security breaches of the networks, systems or devices that our customers or third parties use to access our products and services could result in customer attrition, financial losses, the inability of our customers or vendors to transact business with us, violations of applicable privacy and other laws, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition.
Disruptions or failures in the physical infrastructure or operating systems that support our businesses, customers or third parties, or cyber-attacks or security breaches of the networks, systems or devices that our customers or third parties use to access our products and services could result in customer attrition, financial losses, the inability of our customers or vendors to transact business with us, violations of applicable privacy and other laws, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition. 25 We rely on management and outside consultants in overseeing cybersecurity risk management.
We are exposed to risk of environmental liabilities with respect to properties to which we take title. In the course of our business, we may foreclose and take title to real estate that could subject us to environmental liabilities with respect to these properties.
In the course of our business, we may foreclose and take title to real estate that could subject us to environmental liabilities with respect to these properties.
At December 31, 2024, accumulated other comprehensive losses were $70.7 million, net of tax, primarily related to unrealized holding losses in the available for sale investment securities portfolio, which negatively impacted stockholders’ equity, as well as book value per common share.
At December 31, 2025, accumulated other comprehensive losses were $43.4 million, net of tax, primarily related to unrealized holding losses in the available for sale investment securities portfolio, which negatively impacted stockholders’ equity, as well as book value per common share.
In particular, we may face the following risks in connection with deterioration in economic conditions: • Problem assets and foreclosures may increase; • Our allowance for credit losses may increase; • Demand for our products and services may decline; • Low cost or non-interest-bearing deposits may decrease; • Inflation may accelerate, which may increase our operating costs and also may increase real estate costs and lower customer buying power, thereby reducing loan demand; • The value of our securities portfolio may decrease; and • Collateral for loans made by us, especially real estate, may decline in value.
In particular, we may face the following risks in connection with deterioration in economic conditions: • Problem assets and foreclosures may increase; • Our allowance for credit losses may increase; • Demand for our products and services may decline; • Low cost or non-interest-bearing deposits may decrease; • Inflation may accelerate, which may increase our operating costs and also may increase real estate costs and lower customer buying power, thereby reducing loan demand; • The value of our securities portfolio may decrease; • The net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and • Collateral for loans made by us, especially real estate, may decline in value.
At December 31, 2024, we maintained an available for sale debt securities portfolio of $905.8 million. The estimated fair value of the available for sale debt securities portfolio may change depending on the credit quality of the underlying issuer, market liquidity, changes in interest rates and other factors.
At December 31, 2025, we maintained an available for sale debt securities portfolio of $880.6 million. The estimated fair value of the available for sale debt securities portfolio may change depending on the credit quality of the underlying issuer, market liquidity, changes in interest rates and other factors.
As of January 1, 2025, after giving effect to the 2025 first quarter dividend declared by the Company, the Bank had the ability to pay $119.6 million of dividends without the prior approval of the Commissioner of the DFPI. The price of our common stock may be volatile or may decline.
As of January 1, 2026, after giving effect to the 2026 first quarter dividend declared by the Company, the Bank had the ability to pay $86.4 million of dividends without the prior approval of the Commissioner of the DFPI. The price of our common stock may be volatile or may decline.
Current and future legal and regulatory requirements, restrictions and regulations, including those imposed under Dodd-Frank, may adversely impact our business, financial condition, and results of operations, may require us to invest significant management attention and resources to evaluate and make any changes required by the legislation and accompanying rules.
Current and future legal and regulatory requirements, including those imposed under Dodd-Frank, may adversely impact our business, financial condition, and results of operations, may require us to invest significant management attention and resources to evaluate and make any required changes.
Our emphasis on commercial lending may expose us to increased lending risks. At December 31, 2024, $4.81 billion, or 77.0%, of total loans consisted of commercial real estate and commercial and industrial loans. These portfolios have grown in recent years and the Bank intends to continue to emphasize these types of lending.
Our emphasis on commercial lending may expose us to increased lending risks. At December 31, 2025, $5.11 billion, or 77.8%, of total loans consisted of commercial real estate and commercial and industrial loans. These portfolios have grown in recent years and the Bank intends to continue to emphasize these types of lending.
In addition, the DFPI and the FDIC review our allowance for credit losses and as a result of such reviews, they may require us to adjust our allowance for credit losses, loan classifications or recognize loan charge-offs. Material additions to the allowance would materially decrease our net income.
In addition, the DFPI and the FDIC review our allowance for credit losses and as a result of such reviews, they may require us to adjust our allowance for credit losses, loan classifications or recognize loan charge-offs.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their 21 households and businesses, which could have a negative impact on their ability to repay their loans with us.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. Deteriorating business and economic conditions can adversely affect our industry and business.
While it is management’s belief that policies and procedures with respect to the Bank’s commercial real estate loan portfolio have been implemented consistent with this guidance, bank regulators could require that additional policies and procedures be implemented consistent with their interpretation of the guidance that may result in additional costs or that may result in the curtailment of commercial real estate lending that would adversely affect the Bank’s loan originations and profitability.
While it is management’s belief that policies and procedures with respect to the Bank’s commercial real estate loan portfolio have been implemented consistent with this guidance, bank regulators could require that additional policies and procedures be implemented that may result in additional costs or that may result in the curtailment of commercial real estate lending that would adversely affect the Bank’s loan originations and profitability. 20 Our focus on lending to small to mid-sized community-based businesses may increase our credit risk.
Our focus on lending to small to mid-sized community-based businesses may increase our credit risk. The Bank finances primarily commercial business and commercial real estate loans to small or middle-market businesses. These 20 businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions.
The Bank finances primarily commercial business and commercial real estate loans to small or middle-market businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions.
Risks Related to Local and International Economic Conditions Inflation can have an adverse impact on our business and on our customers. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
Risks Related to Local and International Economic and Political Conditions Inflation can have an adverse impact on our business and on our customers. Inflation can negatively impact the value of assets or income from investments as inflation decreases the value of money.
Members of the committee receive regular reports from the Chief Risk Officer related to information technology and information security to fulfill its role of assisting management in identifying, assessing, measuring and managing certain risks facing the Company.
We have a standing Risk, Compliance and Planning Committee, which includes outside directors. Members of the committee receive regular reports from the Chief Risk Officer related to information technology and information security to fulfill their role of assisting management in identifying, assessing, measuring and managing certain risks facing the Company.
In addition, future system enhancements could have higher than expected costs and/or result in operating inefficiencies. We rely on third-party vendors and other service providers, which could expose us to additional risk. We face additional risk of failure in or breach of operational or security systems or infrastructure related to our reliance on third-party vendors and other service providers.
We rely on third-party vendors and other service providers, which could expose us to additional risk. We face additional risk of failure in or breach of operational or security systems or infrastructure related to our reliance on third-party vendors and other service providers.
Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients.
We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients.
Changes in accounting standards may affect how we record and report our financial condition and results of operations. Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations.
Material additions to the allowance would materially decrease our net income. 27 Changes in accounting standards may affect how we record and report our financial condition and results of operations. Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations.
We invest significant resources in information technology system enhancements to improve functionality and security. We may not be able to successfully implement and integrate future system enhancements, which could adversely impact our ability to provide timely and accurate financial information in compliance with legal and regulatory requirements, which could result in enforcement actions from regulatory authorities.
We may not be able to successfully implement and integrate future system enhancements, which could adversely impact our ability to provide timely and accurate financial information in compliance with legal and regulatory requirements, which could result in enforcement actions from regulatory authorities. In addition, future system enhancements could have higher than expected costs and/or result in operating inefficiencies.
Your share ownership may be diluted by the issuance of additional shares of our common stock in the future. We may decide to raise additional funds for many reasons, including in response to regulatory or other requirements, to meet our liquidity and capital needs, to finance our operations and business strategy or for other reasons.
We may decide to raise additional funds for many reasons, including in response to regulatory or other requirements, to meet our liquidity and capital needs, to finance our operations and business strategy or for other reasons.
As of December 31, 2024, the Bank’s loan portfolio included loans to: (i) lessors of non-residential buildings of $1.61 billion, or 25.8% of total loans; (ii) borrowers in the hospitality industry of $845.2 million, or 13.5% of total loans; and (iii) borrowers in the retail industry of $327.1 million, or 5.0% of total loans.
As of December 31, 2025, the Bank’s loan portfolio included loans to: (i) lessors of non-residential buildings of $1.56 billion, or 23.8% of total loans; (ii) borrowers in the hospitality industry of $847.4 million, or 12.9% of total loans; and (iii) borrowers in the retail industry of $351.0 million, or 5.3% of total loans.
Although we have business continuity plans and other safeguards in place, our business operations may be adversely affected by significant and widespread disruption to our physical infrastructure or operating systems that support our businesses and customers. 24 As a financial institution, we are susceptible to information security breaches and cybersecurity-related incidents that may be committed against us, our clients or our vendors, which may result in financial losses or increased costs to us, our clients or our vendors, disclosure or misuse of our information or our client or vendor information, misappropriation of assets, privacy breaches against our clients or our vendors, litigation or damage to our reputation.
As a financial institution, we are susceptible to information security breaches and cybersecurity-related incidents that may be committed against us, our clients or our vendors, which may result in financial losses or increased costs to us, our clients or our vendors, disclosure or misuse of our information or our client or vendor information, misappropriation of assets, privacy breaches against our clients or our vendors, litigation or damage to our reputation.
A return of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans, investments, and collateral securing our loans, the level of our classified assets, reduce the demand for our products and services, and/or adversely affect our ongoing operations, costs and profitability.
A decline in economic conditions, a return of recessionary conditions and/or negative developments in the domestic and international credit markets caused by inflation, recession, tariff wars, acts of terrorism, civil unrest, an outbreak of hostilities or other international or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond our control may significantly affect the markets in which we do business, the value of our loans, investments, and collateral securing our loans, the level of our classified assets, reduce the demand for our products and services, and/or adversely affect our ongoing operations, costs and profitability.
Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us, our clients or our vendors, attacks resulting in denial or degradation of service, and malware or other cyber-attacks.
Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us, our clients or our vendors, attacks resulting in denial or degradation of service, and malware or other cyber-attacks. We also may become subject to governmental enforcement actions or litigation if we do not comply with data privacy requirements or experience a data breach.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Future changes to the FDIC assessment rate could adversely affect our earnings. The amount of premiums that we are required to pay for FDIC insurance is generally beyond our control.
Future changes to the FDIC assessment rate could adversely affect our earnings. The amount of premiums that we are required to pay for FDIC insurance is generally beyond our control.
Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be obtained or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due us.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be obtained or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due us. Any such losses could have a material adverse effect on our financial condition and results of operations.
The unexpected loss of services of one or more of our key personnel or failure to attract or retain such employees could have a material adverse effect on our financial condition and results of operations.
The unexpected loss of services of one or more of our key personnel or failure to attract or retain such employees could have a material adverse effect on our financial condition and results of operations. 26 If we fail to maintain an effective system of internal controls and disclosure controls and procedures, we may not be able to accurately report our financial results or prevent fraud.
Our ability to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole. The soundness of other financial institutions could adversely affect us.
Furthermore, if certain funding sources become unavailable, we may need to seek alternatives at higher costs, which would negatively impact our results of operations. 24 Our ability to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole.
A significant portion of our operations is concentrated in Southern California, which is in an earthquake-prone region. A major earthquake may result in material loss to us. A significant percentage of our loans are secured by real estate. Many of our borrowers may suffer property damage, experience interruption of their businesses or lose their jobs after an earthquake.
Other Risks Related to Our Business We are exposed to the risks of natural disasters and global market disruptions . A significant portion of our operations is concentrated in Southern California, which is in an earthquake-prone region. A major earthquake may result in material loss to us. A significant percentage of our loans are secured by real estate.
All of our directors do not have significant experience in cybersecurity risk management in other business entities comparable to ours and rely on management and other consultants for cybersecurity guidance. We may not be able to successfully implement future information technology system enhancements, which could adversely affect our business operations and profitability.
We may not be able to successfully implement future information technology system enhancements, which could adversely affect our business operations and profitability. We invest significant resources in information technology system enhancements to improve functionality and security.
As a result, the value of the collateral located in New York securing our multifamily loans or the future net operating income of such properties could potentially become impaired. At December 31, 2024, our total multifamily rent regulated exposure in New York was approximately $80.4 million, or 19.5%, of our multifamily portfolio.
Further restrictions on rent-regulated properties may be enacted or existing restrictions strengthened as a result of the results of the recent New York City mayoral election. As a result, the value of the collateral located in New York securing our multifamily loans or the future net operating income of such properties could potentially become impaired.
There has been no significant collateral loss to the Company or business interruption to our commercial customers as a result of the recent wildfires. Additionally, global markets may be adversely affected by natural disasters, the emergence of widespread health emergencies or pandemics, cyber-attacks or campaigns, military conflict, terrorism or other geopolitical events.
We are vulnerable to losses if an earthquake, fire, flood or other natural catastrophe occurs in Southern California, including wildfires. Additionally, global markets may be adversely affected by natural disasters, the emergence of widespread health emergencies or pandemics, cyber-attacks or campaigns, military conflict, terrorism or other geopolitical events.
Increasing interest rates may also reduce the fair value of our fixed-rate available for sale investment securities negatively impacting shareholders’ equity. Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations.
Conversely, in a period of rising interest rates, the interest income we earn on our interest-earning assets may not increase as rapidly as the interest we pay on deposits and other interest-bearing liabilities. Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations.
Risks Related to Accounting Matters Our allowance for credit losses may not be adequate to cover actual losses.
Misuse of AI/ML, biased outcomes, or privacy violations can harm our brand, erode customer confidence, and attract negative public attention, potentially affecting demand for our services. Risks Related to Accounting Matters Our allowance for credit losses may not be adequate to cover actual losses.
Removed
The Federal Reserve had raised certain benchmark interest rates significantly to combat inflation. However, in September, the Federal Reserve reduced rates by 50 basis points and by an additional 25 basis points in November and December of 2024.
Added
At December 31, 2025, our total multifamily rent regulated exposure in New York was approximately $79 million, or 17%, of our multifamily portfolio. We are exposed to risk of environmental liabilities with respect to properties to which we take title.
Removed
Sustained higher interest rates by the Federal Reserve to tame persistent inflationary price pressures could also push down asset prices and weaken economic activity.
Added
Inflation rose sharply at the end of 2021 and remained elevated through the first half of 2024, before beginning to moderate in the latter half of 2024 and throughout 2025. However, inflation levels continue to exceed the Federal Reserve Board's long-term target of 2.0%.
Removed
A deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.
Added
On July 31, 2025, President Trump announced that an agreement has been reached with South Korea whereby a 15% tariff will be imposed on goods imported by South Korea 22 into the U.S. and South Korea will make investments in certain U.S. industries. The details were reaffirmed following a meeting of representatives of the two countries in October 2025.
Removed
In addition, rising geopolitical risks nationally and abroad may adversely impact the economy and financial markets in the United States. These economic pressures may adversely affect our business, financial condition, results of operations, and stock price.
Added
Any tariffs or required investments in U.S. industries imposed on South Korea may have an impact on South Korean businesses and the South Korean economy, which may negatively impact our customers with ties to South Korea, including U.S. subsidiaries of South Korean companies.
Removed
Furthermore, if certain funding sources become unavailable, we may need to seek alternatives at higher costs, which would negatively impact our results of operations.
Added
While the impact of any final trade agreement with South Korea is uncertain, it may have an impact on the demand and performance of loans related to our customers with South Korean ties which, in turn, could have an effect on our financial condition and results of operations.
Removed
Any such losses could have a material adverse effect on our financial condition and results of operations.
Added
Another prolonged U.S. government shutdown or a default by the U.S. on government obligations would harm our result of operations.
Removed
We also may become subject to governmental enforcement actions or litigation in the event we do not comply with data privacy requirements or experience a data breach.
Added
Our results of operations, including revenue, non-interest income, expenses and net interest income, would be adversely affected in the event of widespread financial and business disruption on account of a default by the United States on U.S. government obligations or a prolonged failure to maintain significant U.S. government operations, particularly those pertaining to the SBA.
Removed
We rely on management and outside consultants in overseeing cybersecurity risk management. We have a standing Risk, Compliance and Planning Committee, consisting of outside directors.
Added
The gain on the sale of SBA loans provides a meaningful portion of our non-interest income. Our SBA lending program is dependent upon the U.S. federal government. We are designated by the SBA as a Preferred Lender.
Removed
If we fail to maintain an effective system of internal controls and disclosure controls and procedures, we may not be able to accurately report our financial results or prevent fraud.
Added
As an SBA Preferred Lender, we are able to offer SBA loans to our customers without the potentially lengthy SBA approval process for application, servicing or liquidation actions required for lenders that are not SBA Preferred Lenders.
Removed
In addition to these factors, if market interest rates rise rapidly, interest rate adjustment caps may limit increases in the interest rates on adjustable-rate loans, thus reducing our net interest income. In a period of rising interest rates, the interest income we earn on our assets may not increase as rapidly as the interest we pay on our liabilities.
Added
Any prolonged government shutdown could, among other things, impede our ability to sell SBA loans in the secondary market, which could adversely affect our business, consolidated financial condition and consolidated results of operations.
Removed
Furthermore, increases in interest rates may adversely affect the ability of our borrowers to make loan repayments on adjustable-rate loans, as the interest owed on such loans would increase as interest rates increase.
Added
Any such failure to maintain such U.S. government operations would impede our ability to originate SBA loans and our ability to sell such loans in the secondary market, which would materially adversely affect our business, results of operations and financial condition.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Information Security Officer manages the IRP and coordinates with senior level management and multiple areas of the company in execution of the plan . While we have experienced cybersecurity incidents, we have not, to our knowledge, experienced an incident materially affecting, or reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition.
Biggest changeWhile we have experienced cybersecurity incidents, we have not, to our knowledge, experienced an incident materially affecting, or reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition, to date. Cybersecurity Governance Our Head of Information Security is accountable for managing the information security department and executing the information security program.
The Information Security Officer is primarily responsible for administering, updating and enforcing the cybersecurity components of the risk management strategy and reports to the Chief Risk Officer. The Information Security Officer periodically collaborates with third-party service providers and industry groups to discuss cybersecurity trends and best practices.
The Head of Information Security is primarily responsible for administering, updating and enforcing the cybersecurity components of the risk management strategy and reports to the Chief Risk Officer. The Head of Information Security periodically collaborates with third-party service providers and industry groups to discuss cybersecurity trends and best practices.
The information security program is reviewed by the Chief Risk Officer 29 and presented to the Risk, Compliance and Planning Committee to periodically account for the changes in the cyber threat landscape. It is also periodically assessed by the Internal Audit department.
The information security program is reviewed by the Chief Risk Officer and presented to the Risk, Compliance and Planning Committee to periodically account for the changes in the cyber threat landscape. It is also periodically assessed by the Internal Audit department.
The Risk, Compliance and Planning Committee of the Board of Directors provide a report of activities to the full board at each quarterly board meeting. 30
The Risk, Compliance and Planning Committee of the Board of Directors provide a report of activities to the full board at each quarterly board meeting. 31
The information security department holds a monthly security meeting with the managers from the information technology department to discuss significant security incidents and status of the threat landscape. The Information Security Officer reports significant cybersecurity or privacy incidents and the state of the information security program to the Risk, Compliance and Planning Committee of the board on a quarterly basis.
The Information Security department holds a monthly security meeting with the managers from the Information Technology department to discuss significant security incidents and status of the threat landscape. The Head of Information Security reports significant cybersecurity incidents and the state of the information security program to the Risk, Compliance and Planning Committee of the board on a quarterly basis.
Cybersecurity metrics are reported to the committee quarterly. Additionally, management has established an Information Technology Executive Steering Committee focused on technology impact, and an Enterprise Risk Management Committee focused on business and risk impact, both consisting of executives and department leaders across multiple domains. These committees generally meet quarterly and more frequently when warranted.
Additionally, management has established an Information Technology Executive Steering Committee focused on technology impact, and an Enterprise Risk Management Committee focused on business and risk impact, both consisting of executives and department leaders across multiple domains. These committees generally meet quarterly and more frequently when warranted.
To manage cybersecurity risk, the Company has implemented a multi-layered “defense-in-depth” cybersecurity strategy, integrating people, technology, and processes. The cybersecurity strategy is memorialized within the Company’s information security program. The program incorporates regulatory guidance and industry standards while leveraging information from industry associations, third-party benchmarking, audits, threat intelligence and peer industry groups.
The cybersecurity strategy is memorialized within the Company’s information security program. The program incorporates regulatory guidance and industry standards while leveraging information from industry associations, third-party benchmarking, audits, threat intelligence and peer industry groups.
The Information Security Officer is supported by the Chief Technology Officer, who reports directly to the Chief Financial Officer. The Chief Technology Officer oversees our Information Technology department, comprising our first line of defense. As a financial services company, cyber threats are present and growing, and the potential exists for a cybersecurity incident disrupting business operations and compromising sensitive data.
The Chief Technology Officer oversees our Information Technology department, comprising our first line of defense. 30 As a financial services company, cyber threats are present and growing, and the potential exists for a cybersecurity incident disrupting business operations and compromising sensitive data. To manage cybersecurity risk, the Company has implemented a multi-layered “defense-in-depth” cybersecurity strategy, integrating people, technology, and processes.
Cybersecurity Governance Our Information Security Officer is accountable for managing the information security department and executing the information security program. The information security department is responsible for cybersecurity risk assessments, alert monitoring, incident response, vulnerability assessment, threat intelligence, identity access governance, and third-party information security risk management.
The information security department is responsible for cybersecurity risk assessments, alert monitoring, incident response, vulnerability assessment, threat intelligence, identity access governance, and third-party information security risk management. The department consists of information security professionals with varying levels of education, experience and certifications.
The information technology department is responsible for the patch and vulnerability management, identity and access management, endpoint and network security, IT asset management program, and backups and recovery operations. The Risk, Compliance and Planning Committee of our Board of Directors provides oversight of the information security program including cybersecurity and is chaired by an independent director.
The Risk, Compliance and Planning Committee of our Board of Directors provides oversight of the information security program, including cybersecurity, and is chaired by an independent director. Cybersecurity metrics are reported to the committee quarterly.
The department consists of information security professionals with varying levels of education, experience and certifications. Our information security department is further supported by our first line of defense, the Information Technology department and a third-party managed service security provider.
Our Information Security department is further supported by our first line of defense, the Information Technology department and a third-party managed security service provider. The Information Technology department is responsible for the patch and vulnerability management, identity and access management, endpoint and network security, IT asset management program, and backup and recovery operations.
Added
The Head of Information Security is supported by the Chief Technology Officer, who reports directly to the Chief Financial Officer.
Added
Our Head of Information Security manages the IRP and coordinates with senior level management and multiple areas of the company in execution of the plan .

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2024, our consolidated investment in premises and equipment, net of accumulated depreciation and amortization, was $21.4 million. Our lease expense was $8.9 million, net of lease income of $0.1 million, for the year ended December 31, 2024. We consider our present facilities to be sufficient for our current operations.
Biggest changeAs of December 31, 2025, our consolidated investment in premises and equipment, net of accumulated depreciation and amortization, was $20.4 million. Our lease expense was $9.4 million, net of sublease income of $0.2 million, for the year ended December 31, 2025. We consider our present facilities to be sufficient for our current operations.
Item 2. Properties Hanmi Financial’s principal office is located at 900 Wilshire Boulevard, Suite 1250, Los Angeles, California . As of December 31, 2024, we had 40 properties consisting of 32 branch offices and eight loan production offices. We own six locations and the remaining properties are leased.
Item 2. Properties Hanmi Financial’s principal office is located at 900 Wilshire Boulevard, Suite 1250, Los Angeles, California . As of December 31, 2025, we had 37 properties consisting of 32 branch offices and five loan production offices. We owned six locations and the remaining properties were leased.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNeither Hanmi Financial nor any of its subsidiaries is currently involved in any legal proceedings, the outcome of which we believe would have a material adverse effect on the business, financial condition or results of operations of Hanmi Financial or its subsidiaries. Item 4. Mine S afety Disclosures Not applicable. 31 Part II
Biggest changeNeither Hanmi Financial nor any of its subsidiaries is currently involved in any legal proceedings, the outcome of which we believe would have a material adverse effect on the business, financial condition or results of operations of Hanmi Financial or its subsidiaries. Item 4. Mine S afety Disclosures Not applicable. 32 Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 31 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32 Item 6. [RESERVED] 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 53 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 32 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 6. [RESERVED] 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 54 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSmall Cap Banks $ 100.00 $ 135.98 $ 116.86 $ 113.49 $ 130.14 Source: S&P Global, New York, NY 32 Recent Unregistered Sales of Equity Securities There were no unregistered sales of Hanmi Financial’s equity securities during the year ended December 31, 2024.
Biggest changeDecember 31, 2021 2022 2023 2024 2025 Hanmi Financial Corporation $ 100.00 $ 108.45 $ 89.86 $ 115.74 $ 138.49 Nasdaq Composite $ 100.00 $ 66.49 $ 95.36 $ 122.67 $ 147.65 S&P 500 Financials $ 100.00 $ 89.36 $ 100.21 $ 130.83 $ 150.49 Nasdaq US Small Cap Banks $ 100.00 $ 91.36 $ 91.22 $ 104.77 $ 113.87 Source: S&P Global, New York, NY 33 Recent Unregistered Sales of Equity Securities There were no unregistered sales of Hanmi Financial’s equity securities during the year ended December 31, 2025.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Hanmi Financial’s common stock is traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “HAFC”. As of February 21, 2025, there were approximately 602 record holders of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Hanmi Financial’s common stock is traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “HAFC”. As of February 20, 2026, there were approximately 576 record holders of our common stock.
The table below provides information on purchases made during the three months ended December 31, 2024: Purchase Date: 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 October 1, 2024 - October 31, 2024 $ 22.99 10,500 1,244,500 November 1, 2024 - November 30, 2024 $ 22.84 14,000 1,230,500 December 1, 2024 - December 31, 2024 $ — — 1,230,500 Total $ 22.91 24,500 1,230,500 During the fourth quarter of 2024, the Company acquired 1,856 shares from employees in connection with the satisfaction of income tax withholding obligations incurred through vesting of Company stock awards.
The table below provides information on purchases made during the three months ended December 31, 2025: Purchase Date: 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 October 1, 2025 - October 31, 2025 $ 26.85 22,400 888,402 November 1, 2025 - November 30, 2025 $ 26.71 51,200 837,202 December 1, 2025 - December 31, 2025 $ — — 837,202 Total $ 26.75 73,600 837,202 During the fourth quarter of 2025, the Company acquired 1,137 shares from employees in connection with the satisfaction of income tax withholding obligations incurred through vesting of Company stock awards.
Removed
December 31, 2020 2021 2022 2023 2024 Hanmi Financial Corporation $ 100.00 $ 208.82 $ 218.25 $ 171.08 $ 208.29 Nasdaq Composite $ 100.00 $ 121.39 $ 81.21 $ 116.47 $ 149.83 S&P 500 Financials $ 100.00 $ 132.54 $ 116.17 $ 127.71 $ 164.03 S&P U.S.
Added
The program permits shares to be repurchased in open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission.
Removed
Such shares were not purchased as a part of the Company’s repurchase program.
Added
The repurchase program may be suspended, terminated, or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. These factors may also affect the timing and amount of share repurchases.
Added
The repurchase program does not obligate the Company to purchase any particular number of shares.
Added
Such shares were not purchased as a part of the Company’s repurchase program. On January 29, 2026, the Board of Directors authorized an expansion of the share repurchase program, adding 1.5 million shares to the 837,202 shares remaining as of December 31, 2025, bringing total repurchase capacity to approximately 2.3 million shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Interest Average Interest Average Interest Average Average Income / Yield / Average Income / Yield / Average Income / Yield / Balance Expense Rate Balance Expense Rate Balance Expense Rate Assets (dollars in thousands) Interest-earning assets: Loans receivable (1) $ 6,110,713 $ 366,153 5.99 % $ 5,968,339 $ 339,811 5.69 % $ 5,596,564 $ 257,878 4.61 % Securities (2) 983,434 21,583 2.22 % 967,231 16,938 1.78 % 949,889 12,351 1.33 % FHLB stock 16,385 1,437 8.76 % 16,385 1,229 7.50 % 16,385 1,024 6.25 % Interest-bearing deposits in other banks 192,342 9,610 5.00 % 230,835 11,350 4.92 % 236,678 2,560 1.08 % Total interest-earning assets 7,302,874 398,783 5.46 % 7,182,790 369,328 5.15 % 6,799,516 273,813 4.03 % Noninterest-earning assets: Cash and due from banks 55,830 62,049 66,993 Allowance for credit losses (68,553 ) (70,501 ) (73,094 ) Other assets 248,820 240,779 247,838 Total assets $ 7,538,971 $ 7,415,117 $ 7,041,253 Liabilities and stockholders' equity Interest-bearing liabilities: Deposits: Demand: interest-bearing $ 83,807 $ 119 0.14 % $ 97,388 $ 117 0.12 % $ 121,992 $ 100 0.08 % Money market and savings 1,870,541 68,304 3.65 % 1,547,911 44,066 2.85 % 2,025,961 12,753 0.63 % Time deposits 2,433,516 114,269 4.70 % 2,371,520 90,525 3.82 % 1,136,073 13,085 1.15 % Total interest-bearing deposits 4,387,864 182,692 4.16 % 4,016,819 134,708 3.35 % 3,284,026 25,938 0.79 % Borrowings 154,193 6,746 4.38 % 197,409 6,867 3.48 % 148,047 2,382 1.61 % Subordinated debentures 130,325 6,571 5.04 % 129,708 6,482 5.00 % 149,891 7,846 5.23 % Total interest-bearing liabilities 4,672,382 196,009 4.20 % 4,343,936 148,057 3.41 % 3,581,964 36,166 1.01 % Noninterest-bearing liabilities and equity: Demand deposits: noninterest-bearing 1,920,492 2,173,813 2,665,646 Other liabilities 165,288 149,460 109,847 Stockholders' equity 780,809 747,908 683,796 Total liabilities and stockholders' equity $ 7,538,971 $ 7,415,117 $ 7,041,253 Net interest income (taxable equivalent basis) $ 202,774 $ 221,271 $ 237,647 Cost of deposits (3) 2.90 % 2.18 % 0.44 % Net interest spread (taxable equivalent basis) (4) 1.27 % 1.74 % 3.02 % Net interest margin (taxable equivalent basis) (5) 2.78 % 3.08 % 3.50 % (1) Loans receivable include loans held for sale and exclude the allowance for credit losses.
Biggest changeFor the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 Interest Average Interest Average Interest Average Average Income / Yield / Average Income / Yield / Average Income / Yield / Balance Expense Rate Balance Expense Rate Balance Expense Rate Assets (dollars in thousands) Interest-earning assets: Loans: Commercial real estate (1) $ 3,963,919 $ 225,929 5.70 % $ 3,874,291 $ 219,899 5.68 % $ 3,769,283 $ 201,385 5.34 % Residential mortgage 1,004,057 53,950 5.37 % 952,709 49,344 5.18 % 866,610 41,079 4.74 % Commercial and industrial (1) 878,181 65,518 7.46 % 741,568 63,651 8.58 % 729,382 63,973 8.77 % Consumer 7,127 501 7.03 % 6,509 486 7.46 % 7,294 528 7.24 % Equipment financing 449,440 29,862 6.64 % 535,636 32,773 6.12 % 595,770 32,846 5.51 % Total loans (1) 6,302,724 375,760 5.96 % 6,110,713 366,153 5.99 % 5,968,339 339,811 5.69 % Securities (2) 984,172 25,345 2.60 % 983,434 21,583 2.22 % 967,231 16,938 1.78 % FHLB stock 16,385 1,433 8.74 % 16,385 1,436 8.76 % 16,385 1,229 7.50 % Interest-bearing deposits in other banks 202,152 8,390 4.15 % 192,342 9,611 5.00 % 230,835 11,350 4.92 % Total interest-earning assets 7,505,433 410,928 5.48 % 7,302,874 398,783 5.46 % 7,182,790 369,328 5.15 % Noninterest-earning assets: Cash and due from banks 53,861 55,830 62,049 Allowance for credit losses (69,373 ) (68,553 ) (70,501 ) Other assets 249,812 248,820 240,779 Total assets $ 7,739,733 $ 7,538,971 $ 7,415,117 Liabilities and stockholders' equity Interest-bearing liabilities: Deposits: Demand: interest-bearing $ 81,213 $ 124 0.15 % $ 83,807 $ 119 0.14 % $ 97,388 $ 117 0.12 % Money market and savings 2,100,326 66,147 3.15 % 1,870,541 68,304 3.65 % 1,547,911 44,066 2.85 % Time deposits 2,445,794 98,434 4.02 % 2,433,516 114,269 4.70 % 2,371,520 90,525 3.82 % Total interest-bearing deposits 4,627,333 164,705 3.56 % 4,387,864 182,692 4.16 % 4,016,819 134,708 3.35 % Borrowings 82,512 3,727 4.52 % 154,193 6,746 4.38 % 197,409 6,867 3.48 % Subordinated debentures 130,687 6,306 4.83 % 130,325 6,571 5.04 % 129,708 6,482 5.00 % Total interest-bearing liabilities 4,840,532 174,738 3.61 % 4,672,382 196,009 4.20 % 4,343,936 148,057 3.41 % Noninterest-bearing liabilities and equity: Demand deposits: noninterest-bearing 1,940,552 1,920,492 2,173,813 Other liabilities 142,508 165,288 149,460 Stockholders' equity 816,141 780,809 747,908 Total liabilities and stockholders' equity $ 7,739,733 $ 7,538,971 $ 7,415,117 Net interest income (taxable equivalent basis) $ 236,190 $ 202,774 $ 221,271 Cost of deposits (3) 2.51 % 2.90 % 2.18 % Net interest spread (taxable equivalent basis) (4) 1.87 % 1.27 % 1.74 % Net interest margin (taxable equivalent basis) (5) 3.15 % 2.78 % 3.08 % (1) Total loans includes loans held for sale and excludes the allowance for credit losses.
The decrease in net interest income was due to higher rates paid on deposits and borrowings, and a higher average balance of deposits, offset partially by higher yields and average balances of loans.
The decrease in net interest income was due to higher rates paid on deposits and borrowings, and a higher average balance of deposits, offset partially by higher yields on loans and higher average balances of loans.
For a discussion of recently implemented changes to the capital adequacy framework prompted by Basel III and the Dodd-Frank Act, see “Note 13 — Regulatory Matters” of Notes to Consolidated Financial Statements in this Report.
For a discussion of recently implemented changes to the capital adequacy framework prompted by Basel III and the Dodd-Frank Act, see “Note 13 — Regulatory Matters” in the Notes to Consolidated Financial Statements in this Report.
Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, including the imposition of the tariffs, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve. 36 The following table shows the average balances of assets, liabilities and stockholders’ equity; the amount of interest income, on a tax equivalent basis 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 for the periods indicated.
Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, including the imposition of the tariffs, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve. 38 The following table shows the average balances of assets, liabilities and stockholders’ equity; the amount of interest income, on a tax equivalent basis 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 for the periods indicated.
Except for nonperforming loans discussed below, management is not aware of any loans as of December 31, 2024 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 the loan being designated as nonperforming at some future date.
Except for nonperforming loans discussed below, management is not aware of any loans as of December 31, 2025 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 the loan being designated as nonperforming at some future date.
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 December 31, 2024 and 2023 reflected losses expected over the remaining contractual life of the assets based on historical, current, and forward-looking information. The contractual term does not consider extensions, renewals or modifications.
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 December 31, 2025 and 2024 reflected losses expected over the remaining contractual life of the assets based on historical, current, and forward-looking information. The contractual term does not consider extensions, renewals or modifications.
In this regard, as of December 31, 2024, management has implemented appropriate risk management practices, including risk assessments, board-approved underwriting policies and related procedures, which include monitoring loan portfolio performance and stressing of the commercial real estate portfolio under adverse economic conditions.
In this regard, as of December 31, 2025, management has implemented appropriate risk management practices, including risk assessments, board-approved underwriting policies and related procedures, which include monitoring loan portfolio performance and stressing of the commercial real estate portfolio under adverse economic conditions.
Based on management’s evaluation and analysis of portfolio credit quality, prevailing economic conditions and economic forecasts, we believe these allowances were adequate for losses inherent in the loan portfolio and off-balance sheet exposure as of December 31, 2024.
Based on management’s evaluation and analysis of portfolio credit quality, prevailing economic conditions and economic forecasts, we believe these allowances were adequate for losses inherent in the loan portfolio and off-balance sheet exposure as of December 31, 2025.
Most of the securities carried fixed interest rates. Other than holdings of U.S. government and agency securities, there were no securities of any one issuer exceeding 10% of stockholders’ equity as of December 31, 2024, 2023 or 2022.
Most of the securities carried fixed interest rates. Other than holdings of U.S. government and agency securities, there were no securities of any one issuer exceeding 10% of stockholders’ equity as of December 31, 2025, 2024 or 2023.
The unemployment rate forecast remained with the baseline scenario due to job market volatility and deterioration below expectations, with less impact to the lending environment compared to GDP growth and consumer sentiment forecasts.
The unemployment rate forecast remained unfavorable within the baseline scenario due to job market volatility and deterioration below expectations, with less impact to the lending environment compared to GDP growth and consumer sentiment forecasts.
Income taxes are discussed in more detail in “Notes to Consolidated Financial Statements, Note 1 — Summary of Significant Accounting Policies” and “Note 11 — Income Taxes” presented elsewhere herein. 41 Financial Condition Securities Portfolio As of December 31, 2024, our securities portfolio was composed of mortgage-backed securities, collateralized mortgage obligations, debt securities issued by U.S. government agencies and sponsored agencies and tax-exempt municipal bonds.
Income taxes are discussed in more detail in “Notes to Consolidated Financial Statements, Note 1 — Summary of Significant Accounting Policies” and “Note 11 — Income Taxes” presented elsewhere herein. 43 Financial Condition Securities Portfolio As of December 31, 2025, our securities portfolio was composed of mortgage-backed securities, collateralized mortgage obligations, debt securities issued by U.S. government agencies and sponsored agencies and tax-exempt municipal bonds.
Subordinated debentures were comprised of fixed-to-floating subordinated notes of $108.5 million and $108.3 million as of December 31, 2024 and 2023, respectively, and junior subordinated deferrable interest debentures of $22.1 million and $21.7 million as of December 31, 2024 and 2023, respectively. See “Note 10 - Subordinated Debentures” to the consolidated financial statements for more details.
Subordinated debentures were comprised of fixed-to-floating subordinated notes of $108.7 million and $108.5 million as of December 31, 2025 and 2024, respectively, and junior subordinated deferrable interest debentures of $21.7 million and $22.1 million as of December 31, 2025 and 2024, respectively. See “Note 10 - Subordinated Debentures” to the consolidated financial statements for more details.
Effective Q1 2024, the Company elected to use equally weighted alternative scenario 2 and 3 (mid-level downside/pessimistic scenario) for the GDP growth rate and consumer sentiment forecasts, given the current market condition. The potential effect from changes in key assumptions could affect the estimated allowance for credit losses at December 31, 2024.
Effective Q1 2024, the Company elected to use equally weighted alternative scenario 2 and 3 (mid-level downside/pessimistic scenario) for the GDP growth rate and consumer sentiment forecasts, given the current market condition. 36 Sensitivity Analysis The potential effect from changes in key assumptions could affect the estimated allowance for credit losses at December 31, 2025.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This discussion presents management’s analysis of the financial condition and results of operations as of and for the years ended December 31, 2024, 2023 and 2022.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This discussion presents management’s analysis of the financial condition and results of operations as of and for the years ended December 31, 2025, 2024 and 2023.
The allowance for credit losses as a percentage of loans was 1.12% as of December 31, 2024 and 2023. The allowance attributed to loans individually evaluated was $6.2 million at December 31, 2024 compared with $3.4 million at December 31, 2023.
The allowance for credit losses as a percentage of loans was 1.07% as of December 31, 2025 and 1.12% as of December 31, 2024. The allowance attributed to loans individually evaluated was $3.4 million at December 31, 2025 compared with $6.2 million at December 31, 2024.
At December 31, 2024, the Bank’s total risk-based capital ratio was 14.43%, Tier 1 risk-based capital ratio was 13.36%, common equity Tier 1 capital ratio was 13.36%, and Tier 1 leverage capital ratio was 11.47%, placing the Bank in the “well capitalized” category, which is defined as institutions with 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 ratio of 6.50%, and Tier 1 leverage capital ratio equal to or greater than 5.00%.
At December 31, 2025, the Bank’s total risk-based capital ratio was 14.25%, Tier 1 risk-based capital ratio was 13.17%, common equity Tier 1 capital ratio was 13.17%, and Tier 1 leverage capital ratio was 11.47%, placing the Bank in the “well capitalized” category, which is defined as institutions with 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 ratio of 6.50%, and Tier 1 leverage capital ratio equal to or greater than 5.00%.
(2) The Moody's alternative scenarios 2 and 3 (equally weighted) were used for the GDP growth rate and consumer sentiment forecast for the periods ended December 31, 2024, and alternative scenario 3 was used for the period ended December 31, 2023.
(2) The Moody's alternative scenarios 2 and 3 (equally weighted) were used for the GDP growth rate and consumer sentiment forecast for the period ended December 31, 2024.
The following table summarizes the contractual maturity schedule for securities, at amortized cost, and their cost-weighted average yield, which is calculated using amortized cost as the weight, as of December 31, 2024: After One Year But After Five Years But Within One Year Within Five Years Within Ten Years After Ten Years Total Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield (dollars in thousands) Securities available for sale: U.S.
The following table summarizes the contractual maturity schedule for securities, at amortized cost, and their cost-weighted average yield as of December 31, 2025: After One Year But After Five Years But Within One Year Within Five Years Within Ten Years After Ten Years Total Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield (dollars in thousands) Securities available for sale: U.S.
The following is a summary of contractual maturities of FHLB advances greater than twelve months: December 31, 2024 December 31, 2023 FHLB of San Francisco Outstanding Balance Weighted Average Rate Outstanding Balance Weighted Average Rate (dollars in thousands) Advances due over 12 months through 24 months $ 37,500 4.58 % $ 12,500 1.90 % Advances due over 24 months through 36 months — — 62,500 4.37 Outstanding advances over 12 months $ 37,500 4.58 % $ 75,000 3.96 % The following is financial data pertaining to FHLB advances: As of December 31, 2024 2023 2022 (dollars in thousands) Weighted-average interest rate at end of year 4.75 % 4.69 % 3.57 % Weighted-average interest rate during the year 4.37 % 3.48 % 1.52 % Average balance of FHLB advances $ 154,112 $ 197,390 $ 148,027 Maximum amount outstanding at any month-end $ 350,000 $ 450,000 $ 350,000 Subordinated debentures were $130.6 million as of December 31, 2024 and $130.0 million as of December 31, 2023.
The following is a summary of contractual maturities of FHLB advances greater than twelve months: December 31, 2025 December 31, 2024 FHLB of San Francisco Outstanding Balance Weighted Average Rate Outstanding Balance Weighted Average Rate (dollars in thousands) Advances due over 12 months through 24 months $ — — % $ 37,500 4.58 % Advances due over 24 months through 36 months — — — — Outstanding advances over 12 months $ — — % $ 37,500 4.58 % The following is financial data pertaining to FHLB advances: As of December 31, 2025 2024 2023 (dollars in thousands) Weighted-average interest rate at end of year 4.02 % 4.75 % 4.69 % Weighted-average interest rate during the year 4.52 % 4.37 % 3.48 % Average balance of FHLB advances $ 82,390 $ 154,112 $ 197,390 Maximum amount outstanding at any month-end $ 150,000 $ 350,000 $ 450,000 Subordinated debentures were $130.5 million as of December 31, 2025 and $130.6 million as of December 31, 2024.
The average rate on interest-bearing deposits increased from 0.79% in 2022, to 3.35% in 2023. The average rate on borrowings increased from 1.61% in 2022, to 3.48% in 2023. Credit Loss Expense As a result of credit risks inherent in our lending business, we recognize an allowance for credit losses through charges to credit loss expense.
The average rate on interest-bearing deposits increased from 3.35% in 2023, to 4.16% in 2024. The average rate on borrowings increased from 3.48% in 2023, to 4.38% in 2024. Credit Loss Expense As a result of credit risks inherent in our lending business, we recognize an allowance for credit losses through charges to credit loss expense.
As of December 31, 2024 and 2023, OREO consisted of one property with a carrying value of $0.1 million. Individually Evaluated Loans The Company reviews all loans on an individual basis when they do not share similar risk characteristics with loan pools.
At December 31, 2025, OREO consisted of two properties with an aggregate carrying value of $2.0 million. At December 31, 2024, OREO consisted of one property with a carrying value of $0.1 million. Individually Evaluated Loans The Company reviews all loans on an individual basis when they do not share similar risk characteristics with loan pools.
Loan Quality Indicators Loans 30 to 89 days past due and still accruing were $18.5 million, $10.3 million and $7.5 million as of December 31, 2024, 2023 and 2022, respectively, representing an increase of $8.2 million, or 79.8%, for 2024 and an increase of $2.8 million or 37.0%, for 2023.
Loan Quality Indicators Loans 30 to 89 days past due and still accruing were $19.9 million, $18.5 million and $10.3 million as of December 31, 2025, 2024 and 2023, respectively, representing an increase of $1.4 million, or 7.6%, for 2025 and an increase of $8.2 million, or 79.8%, for 2024.
The allowance for off-balance sheet items is included in accrued expenses and other liabilities and the allowance for uncollectible accrued interest receivable is included in accrued interest receivable. 2024 Compared to 2023 Credit loss expense for 2024 was $4.4 million, compared with a credit loss expense of $4.3 million for 2023.
The allowance for off-balance sheet items is included in accrued expenses and other liabilities. 2025 Compared to 2024 Credit loss expense for 2025 was $14.4 million, compared with a credit loss expense of $4.4 million for 2024.
Nonaccrual loans receivable are included in the average loans receivable balance. (2) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%. (3) Represents interest expense on deposits as a percentage of all interest-bearing and noninterest-bearing deposits.
Nonaccrual loans are included in the average total loans balance. (2) Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%. (3) Represents interest expense on deposits as a percentage of all interest-bearing and noninterest-bearing deposits. (4) Represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
As of December 31, 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $2.72 billion. The aggregate amount of our uninsured time deposits was $647.3 million. Other uninsured deposits, such as demand deposits and money market and savings deposits were $2.07 billion.
As of December 31, 2025, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $2.92 billion. The aggregate amount of our uninsured time deposits was $750.8 million. Other uninsured deposits, such as demand deposits and money market and savings deposits were $2.17 billion.
For a discussion of our liquidity position, see “Note 22 - Liquidity” of Notes to Consolidated Financial Statements in this Report. 52 Off-Balance Sheet Arrangements For a discussion of off-balance sheet arrangements, see “Note 19 — Off-Balance Sheet Commitments” of Notes to Consolidated Financial Statements and “Item 1. Business — Off-Balance Sheet Commitments” in this Report.
Off-Balance Sheet Arrangements For a discussion of off-balance sheet arrangements, see “Note 19 — Off-Balance Sheet Commitments” in the Notes to Consolidated Financial Statements and “Item 1. Business — Off-Balance Sheet Commitments” in this Report.
The following table summarizes the results as of December 31, 2024. The results are compared to policy limits, which for net interest income, specify the maximum tolerance level over a 1- to 12-month and a 13- to 24-month horizon.
The results are compared to policy limits, which for net interest income, specify the maximum tolerance level over a 1- to 12-month and a 13- to 24-month horizon.
As of January 1, 2025, after giving effect to the 2025 first quarter dividend declared by the Company, the Bank has the ability to pay $119.6 million of dividends without the prior approval of the Commissioner of the DFPI.
As of January 1, 2026, after giving effect to the 2026 first quarter dividend declared by the Company, the Bank had the ability to pay $86.4 million of dividends without the prior approval of the Commissioner of the DFPI.
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 shareholders made during such period).
The Company’s ability to pay dividends to shareholders 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 shareholders made during such period).
Nonperforming assets were $14.4 million at December 31, 2024, or 0.19% of total assets, compared with $15.6 million, or 0.21%, at December 31, 2023. Additionally, not included in nonperforming assets were repossessed personal property assets associated with equipment finance agreements of $0.6 million and $1.3 million at December 31, 2024 and 2023, respectively.
Nonperforming assets were $20.1 million at December 31, 2025, or 0.26% of total assets, compared with $14.4 million, or 0.19%, at December 31, 2024. Additionally, not included in nonperforming assets was repossessed personal property associated with equipment financing agreements of $0.6 million at December 31, 2025 and 2024.
At December 31, 2024, the Company’s total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 capital ratio and Tier 1 leverage capital ratio were 15.24%, 12.46%, 12.11%, and 10.63%, respectively, all of which exceeded the Company’s regulatory capital ratio requirements.
At December 31, 2025, the Company’s total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 capital ratio and Tier 1 leverage capital ratio were 15.06%, 12.37%, 12.05%, and 10.70%, respectively, all of which exceeded the Company’s regulatory capital ratio requirements.
(4) Represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. (5) Represents net interest income as a percentage of average interest-earning assets. 37 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.
(5) Represents net interest income as a percentage of average interest-earning assets. 39 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 2024 credit loss expense was comprised of a $4.8 million provision for credit losses and a $0.4 million recovery for off-balance sheet items.
The 2024 credit loss expense included a $4.8 million credit loss expenses for loan losses and a $0.4 million credit loss recovery for off-balance sheet items.
Deposits The following table shows the composition of deposits by type as of the dates indicated: As of December 31, 2024 2023 2022 Balance Percent Balance Percent Balance Percent (dollars in thousands) Demand – noninterest-bearing $ 2,096,634 32.6 % $ 2,003,596 31.9 % $ 2,539,602 41.3 % Interest-bearing: Demand 80,323 1.2 87,452 1.4 115,573 1.9 Money market and savings 1,933,535 30.0 1,734,659 27.6 1,556,690 25.2 Uninsured amount of time deposits more than $250,000: Three months or less 225,015 3.5 186,321 3.0 44,828 0.7 Over three months through six months 219,304 3.4 201,085 3.2 123,471 2.0 Over six months through twelve months 202,966 3.2 222,683 3.5 191,248 3.1 Over twelve months 14 — 70,932 1.1 138,451 2.2 All other insured time deposits 1,677,985 26.1 1,773,846 28.2 1,458,209 23.6 Total deposits $ 6,435,776 100.0 % $ 6,280,574 100.0 % $ 6,168,072 100.0 % Total deposits were $6.44 billion, $6.28 billion and $6.17 billion as of December 31, 2024, 2023 and 2022, respectively, representing an increase of $155.2 million, or 2.5%, for 2024, and an increase of $112.5 million, or 1.8%, for 2023.
Deposits The following table shows the composition of deposits by type as of the dates indicated: As of December 31, 2025 2024 2023 Balance % Balance % Balance % (dollars in thousands) Demand – noninterest-bearing $ 2,015,212 30.2 % $ 2,096,634 32.6 % $ 2,003,596 31.9 % Interest-bearing: Demand 74,799 1.1 80,323 1.2 87,452 1.4 Money market and savings 2,084,218 31.2 1,933,535 30.0 1,734,659 27.6 Uninsured amount of time deposits more than $250,000: Three months or less 317,086 4.7 225,015 3.5 186,321 3.0 Over three months through six months 276,791 4.1 219,304 3.4 201,085 3.2 Over six months through twelve months 156,750 2.3 202,966 3.2 222,683 3.5 Over twelve months 159 — 14 — 70,932 1.1 All other insured time deposits 1,752,635 26.2 1,677,985 26.1 1,773,846 28.2 Total deposits $ 6,677,650 100.0 % $ 6,435,776 100.0 % $ 6,280,574 100.0 % Total deposits were $6.68 billion, $6.44 billion and $6.28 billion as of December 31, 2025, 2024 and 2023, respectively, representing an increase of $241.9 million, or 3.8%, for 2025, and an increase of $112.5 million, or 1.8%, for 2024.
The Company paid $30.4 million ($1.00 per share), $30.5 million ($1.00 per share), and $28.6 million ($0.94 per share) in dividends in 2024, 2023, and 2022, respectively.
The Company paid $32.6 million ($1.08 per share), $30.4 million ($1.00 per share), and $30.5 million ($1.00 per share) in dividends in 2025, 2024, and 2023, respectively.
For the years ended December 31, 2024, 2023 and 2022, our earnings per diluted share were $2.05, $2.62 and $3.32, respectively. Additional significant financial highlights include: • Loans receivable increased by $68.9 million, or 1.1%, to $6.25 billion as of December 31, 2024, compared with $6.18 billion as of December 31, 2023.
For the years ended December 31, 2025, 2024 and 2023, our earnings per diluted share were $2.51, $2.05 and $2.62, respectively. 37 Additional significant financial highlights include: • Loans increased by $312.0 million, or 5.0%, to $6.56 billion as of December 31, 2025, compared with $6.25 billion as of December 31, 2024.
In addition, the increase during 2024 includes a $1.8 million decrease in unrealized after-tax losses on securities available for sale due to changes in intermediate-term interest rates. During 2024, Hanmi repurchased 369,500 shares of its 50 common stock at an average share price of $17.09 for a total cost of $6.3 million.
In addition, the increase during 2025 includes a $27.0 million decrease in unrealized after-tax losses on securities available for sale due to changes in intermediate-term interest rates. During 2025, Hanmi repurchased 393,298 shares of its common stock at an average share price of $23.91 for a total cost of $9.4 million.
The decrease of $21.4 million, or 21.1%, in net income for the year ended December 31, 2023 as compared with the year ended December 31, 2022, reflects a $16.4 million decrease in net interest income, a $6.2 million increase in noninterest expense and a $3.5 million increase in credit loss expense, offset by a $4.8 million decrease in income tax expense.
The increase of $13.9 million, or 22.3%, in net income for the year ended December 31, 2025 as compared with the year ended December 31, 2024, reflects a $33.4 million increase in net interest income and a $2.4 million increase in noninterest income, offset by a $6.5 million increase in noninterest expense and a $5.4 million increase in income tax expense.
(2) Amounts calculated on a fully equivalent basis using the current statutory federal tax rate of 21%. 2024 Compared to 2023 Interest income, on a taxable equivalent basis, increased $29.5 million, or 8.0%, to $398.8 million for the year ended December 31, 2024 from $369.3 million for the year ended December 31, 2023.
Nonaccrual loans are included in the average total loans balance. (2) Amounts calculated on a fully equivalent basis using the current statutory federal tax rate of 21%. 2025 Compared to 2024 Interest income increased $12.1 million, or 3.0%, to $410.9 million for the year ended December 31, 2025 from $398.8 million for the year ended December 31, 2024.
The increase in total deposits for 2024 was primarily attributable to an increase of $198.9 million in money market and savings accounts and an increase of $93.0 million in non-interest bearing demand deposits, offset by a decrease of $129.6 million in time deposits.
The increase in total deposits for 2025 was primarily attributable to an increase of $150.7 million in money market and savings accounts and an increase of $178.1 million in time deposits, offset by a decrease of $81.4 million in non-interest bearing demand deposits and a decrease of $5.5 million in interest-bearing demand deposits.
Other real estate owned income in 2024 primarily consisted of a $1.6 million gain on sale of an other-real-estate-owned property, offset partially by other-real-estate-owned expenses. 2023 Compared to 2022 For the year ended December 31, 2023, noninterest expense was $136.5 million, an increase of $6.2 million, or 4.8%, compared with $130.3 million for 2022.
Other real estate owned income in 2024 primarily consisted of a $1.6 million gain on sale of an other-real-estate-owned property, offset partially by other-real-estate-owned expenses. Income Tax Expense For the years ended December 31, 2025, 2024 and 2023, income tax expense was $31.8 million, $26.4 million and $34.5 million, respectively.
The allowance attributed to loans collectively evaluated was $64.0 million at December 31, 2024, compared with $66.1 million at December 31, 2023. 48 The following table presents a summary of net charge-offs (recoveries) for the loan portfolio: For the year ended December 31, 2024 2023 2022 Average Loans Net (Charge-offs) Recoveries Net (Charge-offs) Recoveries to Average Loans Average Loans Net (Charge-offs) Recoveries Net (Charge-offs) Recoveries to Average Loans Average Loans Net (Charge-offs) Recoveries Net (Charge-offs) Recoveries to Average Loans (dollars in thousands) Commercial real estate loans $ 3,874,291 $ 451 0.01 % $ 3,769,283 $ (322 ) (0.01 )% $ 3,833,043 $ (1,041 ) (0.03 )% Construction loans — 226 — — — — — — — Residential loans 952,709 3 0.00 873,904 7 0.00 541,975 3 — Commercial and industrial loans 748,077 2,906 0.39 729,382 432 0.06 686,042 654 0.10 Equipment financing agreements 535,636 (7,719 ) (1.44 ) 595,770 (7,160 ) (1.20 ) 535,504 (990 ) (0.18 ) Total $ 6,110,713 $ (4,133 ) (0.07 )% $ 5,968,339 $ (7,043 ) (0.12 )% $ 5,596,564 $ (1,374 ) (0.02 )% For the year ended December 31, 2024, gross charge-offs were $11.6 million, a decrease of $4.5 million, or 27.8%, from $16.1 million for 2023, and gross recoveries were $7.5 million, a decrease of $1.6 million, or 17.3%, from $9.0 million for 2023.
The following table presents a summary of net charge-offs (recoveries) for the loan portfolio: For the year ended December 31, 2025 2024 2023 Average Loans Net (Charge-offs) Recoveries Net (Charge-offs) Recoveries to Average Loans Average Loans Net (Charge-offs) Recoveries Net (Charge-offs) Recoveries to Average Loans Average Loans Net (Charge-offs) Recoveries Net (Charge-offs) Recoveries to Average Loans (dollars in thousands) Commercial real estate loans $ 3,963,919 $ (8,515 ) (0.21 )% $ 3,874,291 $ 451 0.01 % $ 3,769,283 $ (322 ) (0.01 )% Construction loans — — — — 226 — — — — Residential loans 1,004,057 4 0.00 952,709 3 0.00 873,904 7 0.00 Commercial and industrial loans 885,308 1,406 0.16 748,077 2,906 0.39 729,382 432 0.06 Equipment financing agreements 449,440 (7,302 ) (1.62 ) 535,636 (7,719 ) (1.44 ) 595,770 (7,160 ) (1.20 ) Total $ 6,302,724 $ (14,407 ) (0.23 )% $ 6,110,713 $ (4,133 ) (0.07 )% $ 5,968,339 $ (7,043 ) (0.12 )% For the year ended December 31, 2025, gross charge-offs were $21.0 million, an increase of $9.4 million, or 81.1%, from $11.6 million for 2024, and gross recoveries were $6.6 million, a decrease of $0.8 million, or 11.3%, from $7.5 million for 50 2024.
The increase in credit loss expense for 2023 compared to 2022 was mainly attributable to a $5.2 million increase in specific allowances arising from a charge-off on a $10.0 million nonperforming commercial and industrial loan in the health-care industry. 39 Noninterest Income The following table sets forth the various components of noninterest income for the years indicated: Year Ended December 31, 2024 2023 2022 (in thousands) Service charges on deposit accounts $ 9,381 $ 10,147 $ 11,488 Trade finance and other service charges and fees 5,309 4,832 4,805 Servicing income 2,993 3,177 2,757 Bank-owned life insurance income 1,578 792 832 All other operating income 3,883 5,458 4,840 Service charges, fees and other 23,144 24,406 24,722 Gain on sale of SBA loans 6,112 5,701 9,478 Gain on sale of mortgage loans 1,469 — — Net gain (loss) on sales of securities — (1,871 ) — Gain on sale of bank premises 860 4,000 — Legal settlement — 1,943 — Total noninterest income $ 31,585 $ 34,179 $ 34,200 2024 Compared to 2023 For the year ended December 31, 2024, noninterest income was $31.6 million, a decrease of $2.6 million, or 7.6%, compared to $34.2 for the same period in 2023, due primarily to a $4.0 million gain on the sale-leaseback of a branch property in 2023 and a $0.8 million decrease in service charges on deposits due primarily to a decrease in money service business volume.
The credit loss expense for 2023 was comprised of a $4.9 million credit loss for loan losses and a $0.6 million credit loss recovery for off-balance sheet items. 41 Noninterest Income The following table sets forth the various components of noninterest income for the years indicated: Year Ended December 31, 2025 2024 2023 (in thousands) Service charges on deposit accounts $ 8,742 $ 9,381 $ 10,147 Trade finance and other service charges and fees 6,144 5,309 4,832 Servicing income 3,346 3,005 3,177 Bank-owned life insurance income 2,591 1,578 792 All other operating income 3,431 3,871 5,458 Service charges, fees and other 24,254 23,144 24,406 Gain on sale of SBA loans 7,808 6,112 5,701 Gain on sale of residential mortgage loans 1,913 1,469 — Net loss on sales of securities — — (1,871 ) Gain on sale of bank premises — 860 4,000 Legal settlement — — 1,943 Total noninterest income $ 33,975 $ 31,585 $ 34,179 2025 Compared to 2024 For the year ended December 31, 2025, noninterest income was $34.0 million, an increase of $2.4 million, or 7.6%, compared to $31.6 million for the same period in 2024.
During the second quarter of 2023, there was a $1.9 million net loss on sales of $8.1 million of securities as part of a portfolio realignment as well as $1.9 million of income from a legal settlement. 40 Noninterest Expense The following table sets forth various components of noninterest expense for the years indicated: Year Ended December 31, 2024 2023 2022 (in thousands) Salaries and employee benefits $ 83,368 $ 81,398 $ 76,140 Occupancy and equipment 17,845 18,340 17,648 Data processing 14,876 13,695 13,134 Professional fees 6,956 6,255 5,692 Supplies and communications 2,261 2,479 2,638 Advertising and promotion 3,028 3,105 3,637 All other operating expenses 13,173 11,306 11,386 Subtotal 141,507 136,578 130,275 Branch consolidation expense 301 — — Other real estate owned income (1,483 ) (166 ) (6 ) Repossessed personal property expense 1,010 115 15 Total noninterest expense $ 141,335 $ 136,527 $ 130,284 2024 Compared to 2023 For the year ended December 31, 2024, noninterest expense was $141.3 million, an increase of $4.8 million, or 3.5%, compared with $136.5 million for 2023.
Bank-owned life insurance income increased by $0.8 million due primarily to a $0.3 benefit received in 2024 and a $0.3 million impairment allowance in 2023. 42 Noninterest Expense The following table sets forth various components of noninterest expense for the years indicated: Year Ended December 31, 2025 2024 2023 (in thousands) Salaries and employee benefits $ 87,676 $ 83,368 $ 81,398 Occupancy and equipment 17,639 17,845 18,340 Data processing 15,472 14,876 13,695 Professional fees 7,514 6,956 6,255 Supplies and communications 2,028 2,261 2,479 Advertising and promotion 3,104 3,028 3,105 All other operating expenses 14,206 13,173 11,306 Subtotal 147,639 141,507 136,578 Branch consolidation expense — 301 — Other real estate owned expense (income) 72 (1,483 ) (166 ) Repossessed personal property expense 88 1,010 115 Total noninterest expense $ 147,799 $ 141,335 $ 136,527 2025 Compared to 2024 For the year ended December 31, 2025, noninterest expense was $147.8 million, an increase of $6.5 million, or 4.6%, compared with $141.3 million for 2024.
Stockholder's Equity Stockholders’ equity at December 31, 2024 was $732.2 million, an increase of $30.3 million from $701.9 million at December 31, 2023. 2024 net income, net of $30.4 million of dividends paid, added $31.8 million to stockholders' equity for the period.
Stockholders' Equity Stockholders’ equity at December 31, 2025 was $796.4 million, an increase of $64.2 million from $732.2 million at December 31, 2024. 2025 net income, net of $32.6 million of dividends paid, added $43.5 million to stockholders' equity for the period.
In addition, $1.21 billion of total uninsured deposits were in accounts with balances of $5.0 million or more at December 31, 2024. The Bank’s wholesale funds historically consisted of FHLB advances, brokered deposits, as well as State of California time deposits.
In addition, $1.34 billion of total uninsured deposits were in accounts with balances of $5.0 million or more at December 31, 2025. Borrowings and Subordinated Debentures The Bank’s wholesale funds have historically consisted of FHLB advances, brokered deposits, and State of California time deposits. FHLB advances allow for open basis (no maturity) borrowing or term borrowing.
The net interest spread and net interest margin, on a taxable equivalent basis, for the year ended December 31, 2023 were 1.74% and 3.08%, respectively, compared with 3.02% and 3.50%, respectively, for 2022. The average balance of interest earning assets increased $383.3 million, or 5.6%, to $7.18 billion for the year ended December 31, 2023 from $6.80 billion for 2022.
The net interest spread and net interest margin, on a taxable equivalent basis, for the year ended December 31, 2025 were 1.87% and 3.15%, respectively, compared with 1.27% and 2.78%, respectively, for 2024. The average balance of interest earning assets increased $202.6 million, or 2.8%, to $7.51 billion for the year ended December 31, 2025 from $7.30 billion for 2024.
Individually evaluated loans were $14.3 million, $15.4 million and $9.8 million as of December 31, 2024, 2023 and 2022, respectively, representing a decrease of $1.2 million, or 7.6%, for 2024, and an increase of $5.6 million, or 56.8%, for 2023. The decrease primarily reflected the payoff of a $1.2 million commercial real estate loan in 2024.
Individually evaluated loans were $18.1 million, $14.3 million and $15.4 million as of December 31, 2025, 2024 and 2023, respectively, representing an increase of $3.8 million, or 26.9%, for 2025, and an increase of $5.6 million, or 56.8%, for 2024.
These estimates are based upon a number of assumptions, including the timing and magnitude of interest rate changes, prepayments on loans receivable and securities, pricing strategies on loans receivable and deposits, and replacement of asset and liability cash flows. 51 The key assumptions, based upon loans receivable, securities and deposits, are as follows: Conditional prepayment rates*: Loans receivable 15 % Securities 6 % Deposit rate betas*: NOW, savings, money market demand 48 % Time deposits, retail and wholesale 76 % * 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.
The key assumptions, based upon loans, securities and deposits, are as follows: Conditional prepayment rates*: Loans 12 % Securities 6 % Deposit rate betas*: NOW, savings, money market demand 49 % Time deposits, retail and wholesale 76 % * 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. 53 Capital Resources and Liquidity Capital Resources Historically, our primary source of capital has been the retention of operating earnings.
The average rate on borrowings increased from 3.48% in 2023, to 4.38% in 2024. 38 2023 Compared to 2022 Interest income, on a taxable equivalent basis, increased $95.5 million, or 34.9%, to $369.3 million for the year ended December 31, 2023 from $273.8 million for the year ended December 31, 2022.
The average rate paid on interest-bearing deposits decreased from 4.16% in 2024, to 3.56% in 2025, while the average rate paid on borrowings increased from 4.38% in 2024, to 4.52% in 2025. 40 2024 Compared to 2023 Interest income, on a taxable equivalent basis, increased $29.5 million, or 8.0%, to $398.8 million for the year ended December 31, 2024 from $369.3 million for the year ended December 31, 2023.
As of December 31, 2024, securities, all of which were classified as available for sale, increased $40.1 million, or 4.6%, to $905.8 million from $865.7 million as of December 31, 2023. The increase was primarily attributable to $196.4 million in securities purchases, partially offset by $156.2 million in payments and maturities.
As of December 31, 2025, securities, all of which were classified as available for sale, decreased $25.2 million, or 2.8%, to $880.6 million from $905.8 million as of December 31, 2024. The decrease was primarily attributable to $233.3 million in payments and maturities, partially offset by $173.1 million in purchases and a $37.6 million decrease in net unrealized losses.
The Company may grant a concession by providing principal forgiveness, a term extension, an other-than-insignificant payment delay, interest only, payment deferrals, or an interest rate reduction.
The Company may grant a concession by providing principal forgiveness, a term extension, an other-than-insignificant payment delay, interest only, payment deferrals, or an interest rate reduction. No loans were modified to borrowers experiencing financial difficulty during the twelve months ended December 31, 2025.
At December 31, 2024, the loan-to-deposit ratio was 97.1% compared with 98.4% at December 31, 2023. 49 The average balance of deposits for the years ended December 31, 2024, 2023 and 2022 was $6.31 billion, $6.19 billion and $5.95 billion, respectively. The average balance of deposits increased 1.9%, 4.0% and 7.0% in 2024, 2023 and 2022, respectively.
The average balance of deposits for the years ended December 31, 2025, 2024 and 2023 was $6.57 billion, $6.31 billion and $6.19 billion, respectively. The average balance of deposits increased 4.1%, 1.9%, and 4.0% in 2025, 2024 and 2023, respectively.
The net increase was due to loan production of $1.19 billion, offset by payoffs, loan sales, and prepayments of $1.12 billion. • Securities increased $40.1 million to $905.8 million at December 31, 2024 from $865.7 million at December 31, 2023, primarily attributable to $196.4 million in securities purchases, offset by $156.2 million in securities maturities and payoffs during 2024. • Deposits were $6.44 billion at December 31, 2024 compared with $6.28 billion at December 31, 2023 as non-interest bearing demand deposits and money market and savings deposits increased by $93.0 million and $198.9 million, respectively, while time deposits decreased by $129.6 million. • Borrowings decreased $62.5 million to $262.5 million at December 31, 2024 compared with $325.0 million at December 31, 2023. • Cash dividends were $1.00, $1.00, and $0.94 per share of common stock for the years ended December 31, 2024, 2023 and 2022, respectively. • Return on average assets and return on average stockholders’ equity for the year ended December 31, 2024 were 0.83% and 7.97%, respectively, as compared with 1.08% and 10.70%, respectively, for the year ended December 31, 2023, and 1.44% and 14.83%, respectively, for the year ended December 31, 2022.
The decrease was primarily attributable to $233.3 million in maturities and payments, partially offset by $173.1 million in purchases and a $37.6 million decline in net unrealized losses. • Deposits were $6.68 billion at December 31, 2025 compared with $6.44 billion at December 31, 2024 as money market and savings deposits and time deposits increased by $150.7 million and $178.1 million, respectively, while interest-bearing and non-interest bearing demand deposits decreased by $5.5 million and $81.4 million, respectively. • Borrowings decreased $112.5 million to $150.0 million at December 31, 2025 compared with $262.5 million at December 31, 2024. • Cash dividends were $1.08, $1.00, and $1.00 per share of common stock for the years ended December 31, 2025, 2024 and 2023, respectively. • Return on average assets and return on average stockholders’ equity for the year ended December 31, 2025 were 0.98% and 9.32%, respectively, as compared with 0.83% and 7.97%, respectively, for the year ended December 31, 2024, and 1.08% and 10.70%, respectively, for the year ended December 31, 2023.
The average balance of time deposits and borrowings increased $1.24 billion and $49.4 million, respectively, offset by decreases in the average balance of money market and savings accounts, subordinated debentures, and interest-bearing demand deposits of $478.1 million, $20.2 million, and $24.6 million, respectively.
The average balance of money market and savings accounts and time deposits accounts increased $229.8 million and $12.3 million, respectively, which were offset by decreases in the average balance of borrowings and interest-bearing demand deposits of $71.7 million and $2.6 million, respectively.
We emphasize capital protection through stable earnings rather than maximizing yield. 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.
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. 52 The Company performs simulation modeling to measure sensitivity of its interest-earning assets and interest-bearing liabilities to changes in interest rates.
Year Ended December 31, 2024 vs 2023 2023 vs 2022 Increases (Decreases) Due to Change In Increases (Decreases) Due to Change In Volume Rate Total Volume Rate Total (in thousands) Interest and dividend income: Loans receivable (1) $ 7,159 $ 19,183 $ 26,342 $ 17,046 $ 64,887 $ 81,933 Securities (2) 284 4,361 4,645 225 4,362 4,587 FHLB stock (3 ) 211 208 — 205 205 Interest-bearing deposits in other banks (1,924 ) 184 (1,740 ) (63 ) 8,853 8,790 Total interest and dividend income (taxable equivalent) (2) $ 5,516 $ 23,939 $ 29,455 $ 17,208 $ 78,307 $ 95,515 Interest expense: Demand: interest-bearing $ (17 ) $ 19 $ 2 $ (20 ) $ 37 $ 17 Money market and savings 9,064 15,174 24,238 (2,467 ) 33,780 31,313 Time deposits 2,118 21,626 23,744 14,230 63,210 77,440 Borrowings (1,524 ) 1,403 (121 ) 617 3,868 4,485 Subordinated debentures 31 58 89 (1,056 ) (308 ) (1,364 ) Total interest expense $ 9,672 $ 38,280 $ 47,952 $ 11,304 $ 100,587 $ 111,891 Change in net interest income (taxable equivalent) (2) $ (4,156 ) $ (14,341 ) $ (18,497 ) $ 5,904 $ (22,280 ) $ (16,376 ) (1) Loans receivable include loans held for sale and exclude the allowance for credit losses.
Year Ended December 31, 2025 vs 2024 2024 vs 2023 Increases (Decreases) Due to Change In Increases (Decreases) Due to Change In Volume Rate Total Volume Rate Total (in thousands) Interest and dividend income: Loans (1) $ 10,497 $ (890 ) $ 9,607 $ 7,159 $ 19,183 $ 26,342 Securities (2) 17 3,745 3,762 284 4,361 4,645 FHLB stock (3 ) — (3 ) (3 ) 211 208 Interest-bearing deposits in other banks 465 (1,686 ) (1,221 ) (1,924 ) 184 (1,740 ) Total interest and dividend income (taxable equivalent) (2) $ 10,976 $ 1,169 $ 12,145 $ 5,516 $ 23,939 $ 29,455 Interest expense: Demand: interest-bearing $ (4 ) $ 9 $ 5 $ (17 ) $ 19 $ 2 Money market and savings 8,204 (10,361 ) (2,157 ) 9,064 15,174 24,238 Time deposits 264 (16,099 ) (15,835 ) 2,118 21,626 23,744 Borrowings (3,153 ) 134 (3,019 ) (1,524 ) 1,403 (121 ) Subordinated debentures 19 (284 ) (265 ) 31 58 89 Total interest expense $ 5,330 $ (26,601 ) $ (21,271 ) $ 9,672 $ 38,280 $ 47,952 Change in net interest income (taxable equivalent) (2) $ 5,646 $ 27,770 $ 33,416 $ (4,156 ) $ (14,341 ) $ (18,497 ) (1) Total loans includes loans held for sale and excludes the allowance for credit losses.
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.
The table below shows the maturity distribution of outstanding loans (before the allowance for credit losses and excluding loans held for sale) as of December 31, 2025. 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.
The $68.3 million net increase in loans for 2024 was due to production of $1.19 billion, offset by payoffs and prepayments of $1.13 billion.
The $312.0 million net increase in loans for 2025 was due to production of $1.62 billion, offset by payoffs, prepayments, and amortization of $947.3 million, sales of $241.7 million and other changes of $120.1 million.
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 aggregate investment of loans receivable for the periods presented: As of December 31, 2024 2023 Allowance Amount Percentage of Total Allowance Total Loans Percentage of Total Loans Allowance Amount Percentage of Total Allowance Total Loans Percentage of Total Loans (dollars in thousands) Real estate loans: Commercial property Retail $ 10,171 14.5 % $ 1,068,978 17.1 % $ 10,264 14.8 % $ 1,107,360 17.9 % Hospitality 15,302 21.8 848,134 13.6 15,534 22.4 740,519 12.0 Office 3,935 5.6 568,861 9.1 3,024 4.4 574,981 9.3 Other 8,243 11.8 1,385,051 22.2 8,663 12.4 1,366,534 22.1 Total commercial property loans 37,651 53.7 3,871,024 62.0 37,485 54.0 3,789,394 61.3 Construction 1,664 2.4 78,598 1.3 2,756 4.0 100,345 1.6 Residential 5,784 8.2 951,302 15.2 5,258 7.5 962,661 15.6 Total real estate loans 45,099 64.3 4,900,924 78.5 45,499 65.5 4,852,400 78.5 Commercial and industrial loans 10,006 14.3 863,431 13.8 10,257 14.8 747,819 12.1 Equipment financing agreements 15,042 21.4 487,022 7.7 13,706 19.7 582,215 9.4 Total $ 70,147 100.0 % $ 6,251,377 100.0 % $ 69,462 100.0 % $ 6,182,434 100.0 % The following table sets forth certain information regarding certain ratios related to our allowance for credit losses for the periods presented: As of and for the Year Ended December 31, 2024 2023 2022 (dollars in thousands) Ratios: Allowance for credit losses to loans 1.12 % 1.12 % 1.20 % Nonaccrual loans to loans 0.23 % 0.25 % 0.17 % Allowance for credit losses to nonaccrual loans 491.50 % 448.89 % 726.42 % Balance: Nonaccrual loans at end of period $ 14,272 $ 15,474 $ 9,846 Nonperforming loans at end of period $ 14,272 $ 15,474 $ 9,846 The allowance for credit losses was $70.1 million at December 31, 2024 compared with $69.5 million at December 31, 2023.
The methodology for calculating the allowance for credit losses is discussed in more detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — 49 Allowance for credit losses and Allowance for credit losses related to off-balance sheet items" and "Notes to Consolidated Financial Statements, Note 1 — Summary of Significant Accounting Policies." 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 aggregate investment of total loans for the periods presented: As of December 31, 2025 2024 Allowance Amount % of Total Allowance Total Loans % of Total Loans Allowance Amount % of Total Allowance Total Loans % of Total Loans (dollars in thousands) Real estate loans: Commercial property Retail $ 9,999 14.3 % $ 1,132,439 17.3 % $ 10,171 14.5 % $ 1,068,978 17.1 % Hospitality 8,737 12.5 847,989 12.9 15,302 21.8 848,134 13.6 Office 5,700 8.2 503,268 7.7 3,935 5.6 568,861 9.1 Other 14,078 20.1 1,532,667 23.4 8,243 11.8 1,385,051 22.2 Total commercial property loans 38,514 55.1 4,016,363 61.3 37,651 53.7 3,871,024 62.0 Construction 208 0.3 13,742 0.2 1,664 2.4 78,598 1.3 Residential 12,948 18.5 1,049,872 16.0 5,784 8.2 951,302 15.2 Total real estate loans 51,670 73.9 5,079,977 77.5 45,099 64.3 4,900,924 78.5 Commercial and industrial loans 7,792 11.1 1,074,908 16.4 10,006 14.3 863,431 13.8 Equipment financing agreements 10,441 15.0 408,483 6.1 15,042 21.4 487,022 7.7 Total $ 69,903 100.0 % $ 6,563,368 100.0 % $ 70,147 100.0 % $ 6,251,377 100.0 % The following table sets forth certain information regarding certain ratios related to our allowance for credit losses for the periods presented: As of and for the Year Ended December 31, 2025 2024 2023 (dollars in thousands) Ratios: Allowance for credit losses to loans 1.07 % 1.12 % 1.12 % Nonaccrual loans to loans 0.28 % 0.23 % 0.25 % Allowance for credit losses to nonaccrual loans 385.95 % 491.50 % 448.89 % Balance: Nonaccrual loans at end of period $ 18,112 $ 14,272 $ 15,474 Nonperforming loans at end of period $ 18,112 $ 14,272 $ 15,474 The allowance for credit losses was $69.9 million at December 31, 2025 compared with $70.1 million at December 31, 2024.
The allowance for off-balance sheet exposure as of December 31, 2024, 2023 and 2022 was $2.1 million, $2.5 million and $3.1 million, respectively, representing a decrease of $0.4 million, or 16.2%, in 2024, and a decrease of $0.6 million, or 20.6%, in 2023. The Bank closely monitors the borrower’s repayment capabilities, while funding existing commitments to ensure losses are minimized.
This represents an increase of $0.2 million, or 9.5%, in 2025 and a decrease of $0.4 million, or 16.2%, in 2024. The Bank closely monitors the borrower’s repayment capabilities, while funding existing commitments to ensure losses are minimized.
Management considers, among other things, earnings generated from operations, and access to capital from financial markets through the issuance of additional securities, including common stock or notes, to meet our capital needs. The Company’s ability to pay dividends to shareholders depends in part upon dividends it receives from the Bank.
In order to ensure adequate levels of capital, management periodically assesses projected sources and uses of capital in conjunction with projected increases in assets and levels of risk. Management considers, among other things, earnings generated from operations, and access to capital from financial markets through the issuance of additional securities, including common stock or notes, to meet our capital needs.
At December 31, 2024, FHLB advances were $262.5 million, a decrease of $62.5 million from $325.0 million at December 31, 2023, as funds from deposit growth not used to fund loan production were used to pay off borrowings. At December 31, 2024, the Bank had $37.5 million in term advances and $225.0 million in FHLB open advances.
Borrowing terms can be overnight or for finite periods of time. At December 31, 2025, the Bank had $150.0 million of FHLB advances, all of which were overnight advances. This represented a decrease of $112.5 million from $262.5 million at December 31, 2024, as funds from deposit growth not used to fund loan production were used to pay off borrowings.
The Company performs simulation modeling to measure sensitivity of its interest-earning assets and interest-bearing liabilities to changes in interest rates. It consists of forecasting the net interest income and measuring the economic value of equity in scenarios of instantaneous parallel shifts in the yield curve, and measuring changes from the current rate scenario.
It consists of forecasting the net interest income and measuring the economic value of equity in scenarios of instantaneous parallel shifts in the yield curve, and measuring changes from the current rate scenario. The following table summarizes the results as of December 31, 2025.
Gross recoveries for the year ended December 31, 2024 primarily consisted of a $3.2 million recovery from a troubled loan relationship identified in 2023 and $1.8 million in recoveries on equipment financing arrangements.
Recoveries for the year ended December 31, 2025 primarily consisted of $2.0 million from a loan in the healthcare industry and $2.8 million of equipment financing agreements. The allowance for off-balance sheet exposures was $2.3 million, $2.1 million and $2.5 million, as of December 31, 2025, 2024 and 2023 respectively.
As of December 31, 2024 and 2023, the Bank had $262.5 million and $325.0 million of FHLB advances, and $60.7 million and $58.3 million of brokered deposits, respectively. The Bank had $120.0 million of State of California time deposits at both December 31, 2024 and 2023. Borrowings and Subordinated Debentures Borrowings mostly take the form of FHLB advances.
At December 31, 2024, FHLB advances included $37.5 million of term advances and $225.0 million of open advances. 51 As of December 31, 2025 and 2024, the Bank had $88.5 million and $60.7 million of brokered deposits, respectively. The Bank had $150.0 million and $120.0 million of State of California time deposits at December 31, 2025 and 2024, respectively.
The $14.3 million of nonperforming loans as of December 31, 2024 had individually evaluated allowances of $6.2 million, compared with $15.5 million of nonperforming loans with individually evaluated allowances of $3.4 million as of December 31, 2023.
At December 31, 2025 and 2024, all loans 90 days or more past due were classified as nonaccrual. 48 The $18.1 million of nonperforming loans as of December 31, 2025 had individually evaluated allowances of $3.4 million, compared with $14.3 million of nonperforming loans with individually evaluated allowances of $6.2 million as of December 31, 2024.
Interest expense increased $111.9 million, or 309.4%, to $148.1 million for 2023, from $36.2 million in 2022. Net interest income, on a taxable equivalent basis, decreased by $16.4 million, or 6.9%, to $221.3 million in 2023, from $237.6 million in 2022.
Interest expense decreased $21.3 million, or 10.9%, to $174.7 million for 2025, from $196.0 million in 2024. Net interest income, on a taxable equivalent basis, increased by $33.4 million, or 16.5%, to $236.2 million in 2025, from $202.8 million in 2024.
The credit loss expense for 2023 was comprised of a $4.9 million provision for loan losses and a $0.6 million recovery for off-balance sheet items. 2023 Compared to 2022 Credit loss expense for 2023 was $4.3 million, compared with a credit loss expense of $0.8 million for 2022.
The 2025 credit loss expense included a $14.2 million credit loss expense for loan losses and a $0.2 million credit loss expense for off-balance sheet items. The credit loss expense for 2024 included a $4.8 million credit loss expense for loans and a $0.4 million credit loss recovery for off-balance sheet items.
The decrease in net interest income was due to higher rates paid on deposits and borrowings and higher average time deposit balances, offset partially by increases in higher average interest-earning asset yields and higher average loan balances. Average loans were 83.1% of average interest earning assets for 2023, an increase from 82.3% for 2022.
The increase in net interest income was due to lower rates paid on deposits and a higher average balance of loans, offset partially by a higher average balance of deposits and lower yields on loans.
Allowance for credit losses and Allowance for credit losses related to off-balance sheet items Our allowance for credit losses methodologies incorporate a variety of risk considerations, both quantitative and qualitative, that management believes is appropriate at each reporting date.
This change is considered a change in accounting estimate resulting from a change in methodology and assumptions, and is accounted for prospectively in accordance with ASC 250-10-45-17 through 45-18. Our allowance for credit losses methodologies incorporate a variety of risk considerations, both quantitative and qualitative, that management believes is appropriate at each reporting date.
The average balance of interest-bearing liabilities increased $762.0 million, or 21.3%, to $4.34 billion for 2023 compared to $3.58 billion in 2022.
The average balance of securities increased $0.7 million, or 0.1%, to $984.2 million in 2025 from $983.4 million for 2024. The average balance of interest-bearing liabilities increased $168.2 million, or 3.6%, to $4.84 billion for 2025 compared with $4.67 billion in 2024.
At December 31, 2024, 1.81% of equipment financing agreements were on nonaccrual status compared with 1.25% at December 31, 2023. At December 31, 2024 and 2023, all loans 90 days or more past due were classified as nonaccrual.
At December 31, 2025, 1.3% of equipment financing agreements were classified as nonaccrual, compared with 1.8% at December 31, 2024.
The average rate paid on interest-bearing liabilities increased by 240 basis points to 3.41% for 2023 from 1.01% for 2022. The increase reflected the higher cost of interest-bearing deposits, the greater percentage of time deposits in the deposit portfolio, and the increase in the average rate on borrowings due to increases in market rates in 2023.
Similarly, the average rate paid on interest-bearing liabilities decreased by 59 basis points to 3.61% for 2025 from 4.20% for 2024, reflecting a decline in the rates paid on money market and time deposit accounts during 2025 and the lower percentage of time deposits in the deposit portfolio.
See “— Allowance for Credit Losses”, “Financial Condition — Allowance for credit losses and Allowance for credit losses related to off-balance sheet items”, “Results of Operations — Credit Loss Expense” and “Notes to Consolidated Financial Statements, Note 1 — Summary of Significant Accounting Policies” for additional information on methodologies used to determine the allowance for credit losses and the allowance for credit losses related to off-balance sheet items. 34 Allowance Attribution Analysis Allowance for credit losses (in thousands) December 31, 2023 $ 69,462 Charge-offs (11,618 ) Recoveries 7,485 Provision (recovery) attributed to qualitative considerations (1,015 ) Provision (recovery) attributed to quantitative considerations (1,071 ) Provision attributed to individually evaluated loans 6,904 December 31, 2024 $ 70,147 The following are the key assumptions employed in the determination of the allowance for credit losses at December 31, 2024 and 2023: Economic Factors 12/31/2024 12/31/2023 Description of Economic Factors Prepayment rates 14.35 % 14.44 % Average total portfolio rate Curtailment rates 83.83 % 83.72 % Average total portfolio rate Unemployment rate 4.10 % 3.96 % Average of 4 quarter forecast period; Baseline (1) Gross domestic product (“GDP”) growth rate year over year % (0.25 )% (0.91 )% Average of 4 quarter forecast period; Alternative Scenario 3 (2) Consumer sentiment 71.31 71.78 Average of 4 quarter forecast period; Alternative Scenario 3 (2) Federal funds target rate 3.9 % 4.6 % 1 year forecast of median target rate; FOMC December 2024 projection (1) The Moody's baseline scenario was used for the unemployment rate forecast for the periods ended December 31, 2024 and 2023.
Unlike the allowance for credit losses model used at December 31, 2024, there are not separate reversion periods in addition to the forecast periods. 12/31/2024 Description of Economic Factors Prepayment rates 14.35 % Average total portfolio rate Curtailment rates 83.83 % Average total portfolio rate Unemployment rate 4.10 % Average of 4 quarter forecast period; Baseline (1) Gross domestic product (“GDP”) growth rate year over year % (0.25 )% Average of 4 quarter forecast period; Alternative Scenario 3 (2) Consumer sentiment 71.31 Average of 4 quarter forecast period; Alternative Scenario 3 (2) Federal funds target rate 3.9 % 1 year forecast of median target rate; FOMC December 2024 projection (1) The Moody's baseline scenario was used for the unemployment rate forecast for the period ended December 31, 2024.
Qualitative factors considered in our methodologies include the general economic forecast in our markets, concentrations of credit, changes in lending management and staff, quality of the loan review system, and changes in interest rates.
Qualitative factors considered in our methodologies include the Bank's historical loan loss trends, concentrations of credit, loan policy exception rate trends, changes in lending management and staff, quality of the loan review system, and changes in prepayment rates. Certain quantitative and qualitative factors used to estimate credit losses and establish an allowance for credit losses are subject to uncertainty.
The increase for 2024 was primarily attributable to $6.4 million and $1.8 million increases in past due and still accruing residential mortgage loans and commercial and industrial loans, respectively. At December 31, 2024, equipment financing agreements comprised 7.8% of the total loan portfolio, compared with 9.4% at December 31, 2023.
At December 31, 2025, equipment financing agreements comprised 6.2% of the total loan portfolio, compared with 7.8% at December 31, 2024. Of these, 1.56% were 30 to 89 days delinquent and still accruing at December 31, 2025, compared with 1.59% at December 31, 2024.
Net Interest Income Simulation 1- to 12-Month Horizon 13- to 24-Month Horizon Change in Interest Rate Dollar Percentage Dollar Percentage (basis points) Change Change Change Change (dollars in thousands) 300 $ 11,388 4.45 % $ 36,228 12.52 % 200 $ 7,484 2.92 % $ 23,794 8.22 % 100 $ 4,320 1.69 % $ 13,104 4.53 % (100) $ (5,864 ) (2.29 %) $ (16,756 ) (5.79 %) (200) $ (12,019 ) (4.69 %) $ (36,110 ) (12.48 %) (300) $ (17,287 ) (6.75 %) $ (56,043 ) (19.37 %) Economic Value of Equity (EVE) Dollar Percentage Change in Interest Rate Change Change (dollars in thousands) 300 $ 33,661 4.18 % 200 $ 26,077 3.24 % 100 $ 19,974 2.48 % (100) $ (37,960 ) (4.72 %) (200) $ (94,131 ) (11.70 %) (300) $ (166,643 ) (20.72 %) The estimated sensitivity does not necessarily represent our forecast, and the results may not be indicative of actual changes to our net interest income.
Net Interest Income Simulation 1- to 12-Month Horizon 13- to 24-Month Horizon Change in Interest Rate Dollar Percentage Dollar Percentage (basis points) Change Change Change Change (dollars in thousands) 300 $ 21,666 7.60 % $ 56,431 18.03 % 200 $ 14,826 5.20 % $ 38,396 12.27 % 100 $ 8,859 3.11 % $ 21,229 6.78 % (100) $ (8,754 ) (3.07 %) $ (23,223 ) (7.42 %) (200) $ (15,538 ) (5.45 %) $ (46,353 ) (14.81 %) (300) $ (21,597 ) (7.58 %) $ (69,327 ) (22.16 %) Economic Value of Equity (EVE) Dollar Percentage Change in Interest Rate Change Change (dollars in thousands) 300 $ 83,057 8.93 % 200 $ 62,923 6.77 % 100 $ 44,418 4.78 % (100) $ (59,717 ) (6.42 %) (200) $ (133,781 ) (14.38 %) (300) $ (222,567 ) (23.93 %) The estimated sensitivity does not necessarily represent our forecast, and the results may not be indicative of actual changes to our net interest income.
The effective tax rate for the years ended December 31, 2024, 2023 and 2022 was 29.8%, 30.1% and 27.9%, respectively. The lower effective tax rate for 2024 compared with 2023 was due mainly to the decreases in the permanent difference addback and valuation allowance for state net operating loss carryforwards.
The effective tax rate for the years ended December 31, 2025, 2024 and 2023 was 29.5%, 29.8% and 30.1%, respectively.
Specific allowance allocations associated with individually evaluated loans increased $2.8 million to $6.2 million as of December 31, 2024, compared with $3.4 million as of December 31, 2023, mainly attributed to specific reserve allocation on newly added nonperforming equipment finance agreements. 46 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.
Included in the $15.7 million of new individually evaluated loans is a $10.2 million collateral-dependent commercial real estate office loan that was on nonaccrual status at December 31, 2025. 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk For quantitative and qualitative disclosures regarding market risks in the Bank’s portfolio, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Interest Rate Risk Management” and “— Capital Resources and Liquidity.”
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk For quantitative and qualitative disclosures regarding market risks in the Bank’s portfolio, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Interest Rate Risk Management” and “— Capital Resources and Liquidity.” 54

Other HAFC 10-K year-over-year comparisons