HANMI FINANCIAL CORP

Criticized Loans

Activity in criticized loans was as follows for the periods indicated:

Special mention loans were $68.2 million and $71.1 million at June 30, 2026 and December 31, 2025, respectively. The $2.9 million decrease in the six months ended June 30, 2026 included the upgrade of $1.4 million of loans to the pass category and $1.0 million of paydowns and payoffs.

Classified loans were $45.7 million and $25.9 million at June 30, 2026 and December 31, 2025, respectively. The $19.8 million increase for the six months ended June 30, 2026 resulted from additions of $38.2 million and reductions of $18.4 million. Additions included the downgrade of a $21.2 million commercial real estate loan in the retail industry, which had been downgraded from the pass category to special mention during the 2026 first quarter, and further downgraded to classified during the 2026 second quarter. Additions also included the downgrade of a $5.0 million commercial real estate loan in the hospitality industry, which was modified during the first quarter of 2026 to allow for temporary interest-only payments, as well as the downgrade of a $3.1 million commercial real estate loan secured by an industrial property and $3.8 million of equipment finance agreements.

Reductions of $18.4 million included a $9.7 million payment on a commercial real estate office loan that had a balance of $10.2 million at December 31, 2025, as well as the sale of a $3.2 million commercial real estate loan and $3.4 million of charge-offs.

Nonperforming Assets

Loans 30 to 89 days past due and still accruing were $32.8 million at June 30, 2026, compared with $19.9 million at December 31, 2025. The increase of $12.9 million includes a $21.1 million commercial real estate loan that became delinquent during the three months ended June 30, 2026, partially offset by $9.9 million of loans that became current during the six months ended June 30, 2026. There were no loans 90 or more days past due and still accruing at June 30, 2026 or December 31, 2025.

Nonperforming loans consist of nonaccrual loans and loans 90 days or more past due and still accruing interest. Nonperforming assets consist of nonperforming loans and OREO. Loans are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless we believe the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on nonaccrual status earlier, depending upon the individual circumstances surrounding the loan’s delinquency. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans may be restored to accrual status when principal and interest become current and full repayment is expected, which generally occurs after sustained payment of six months. Interest income is recognized on the accrual basis for loans not meeting the criteria for nonaccrual. OREO consists of properties acquired by foreclosure or similar means.

Except for nonaccrual loans, management is not aware of any other loans as of June 30, 2026 for which known credit problems of the borrower would cause serious doubts as to the ability of such borrowers to comply with their present loan repayment terms, or any known events that would result in a loan being designated as nonperforming at some future date.

Activity in nonperforming loans was as follows for the periods indicated:

Nonperforming loans were $9.9 million and $18.1 million as of June 30, 2026 and December 31, 2025, respectively, representing a decrease of $8.2 million, or 45.2%. The decrease was primarily due to a $9.7 million payment received during the three months ended March 31, 2026 on a commercial real estate office loan that was designated as nonaccrual during the first quarter of 2025. As of June 30, 2026 and December 31, 2025, 1.2% and 1.3% of equipment financing agreements were on nonaccrual status, respectively. At June 30, 2026 and December 31, 2025, there were no loans 90 days or more past due and still accruing interest.

The $9.9 million of nonperforming loans as of June 30, 2026 had specific allowances of $2.6 million, compared with $18.1 million of nonperforming loans with specific allowances of $3.4 million as of December 31, 2025.

Nonperforming assets were $9.9 million at June 30, 2026, or 0.12% of total assets, compared to $20.1 million, or 0.26% of total assets, at December 31, 2025. Excluded from nonperforming assets is repossessed personal property associated with equipment finance agreements of $0.3 million and $0.6 million at June 30, 2026 and December 31, 2025, respectively.

Individually Evaluated Loans

The Company reviews loans on an individual basis when the loan does not share similar risk characteristics with loan pools. Individually evaluated loans are measured for expected credit losses based on the present value of expected cash flows discounted at the effective interest rate, the observable market price, or the fair value of collateral.

Individually evaluated loans were $9.9 million and $18.1 million as of June 30, 2026 and December 31, 2025, respectively, representing a decrease of $8.2 million, or 45.3%. Specific allowances associated with individually evaluated loans decreased $0.8 million to $2.6 million as of June 30, 2026, compared with $3.4 million as of December 31, 2025.

Loan Modifications to Borrowers Experiencing Financial Difficulty

A borrower is experiencing financial difficulties when there is a probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The Company may modify loans to borrowers experiencing financial difficulties by providing principal forgiveness, a term extension, an other-than-insignificant payment delay, or an interest rate reduction.

The following table presents loan modifications made to borrowers experiencing financial difficulty by type of modification, with related amortized cost balances, respective percentage shares of the total class of loans, and the related financial effect, as of the period indicated:

The modified loan above was current at June 30, 2026. The Company has not committed to lend any additional amounts to the borrower included in the table above as of June 30, 2026. During the six months ended June 30, 2026 and 2025, there were no payment defaults on loans modified within the preceding 12 months.

No loans were modified to borrowers experiencing financial difficulty during the three months ended June 30, 2026 or during the six months ended June 30, 2025.

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 June 30, 2026 and December 31, 2025 reflected losses expected over the remaining contractual life of assets based on historical, current, and forward-looking information. The contractual life does not consider extensions, renewals or modifications.

Our allowance for credit losses incorporate a variety of risk considerations, both quantitative and qualitative, that management believes is appropriate to absorb lifetime credit losses at each reporting date. Quantitative factors include the general economic forecast in our markets, risk ratings, delinquency trends, collateral values, changes in nonperforming, criticized and classified loans, and other factors.

We use qualitative factors to adjust the allowance calculation for risks not considered by the quantitative calculations. Qualitative factors considered in our methodologies include concentrations of credit, changes in lending management and staff, and quality of the loan review system.

The Company reviews baseline and alternative economic scenarios from Moody’s (previously known as Moody’s Analytics, a subsidiary of Moody’s Corporation) for consideration in the quantitative portion of our analysis of the allowance for credit losses. Moody’s publishes a baseline forecast that represents the estimate of the most likely path for the United States economy through the current business cycle (50% probability that economic conditions will be worse and 50% probability that economic conditions will be better) as well as alternative scenarios to examine how different types of shocks will affect the future performance of the United States economy.

The Company utilizes a midpoint approach of multiple forward-looking scenarios to incorporate losses from a baseline, upside (stronger near-term growth) and downside (slower near-term growth) economy. As a result, the upside and downside scenarios each receive a weight of 30%, and the baseline receives a weight of 40%.

Certain quantitative and qualitative factors used to estimate credit losses and establish an allowance for credit losses are subject to uncertainty. The adequacy of our allowance for credit losses is sensitive to changes in current and forecasted economic conditions that may affect the ability of borrowers to make contractual payments as well as the value of the collateral securing such payments.

Although management believes it uses the best information available to establish the allowance for credit losses, future adjustments to the allowance for credit losses may be necessary and the Company’s results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

In addition, because future events affecting borrowers and collateral cannot be predicted without uncertainty, the existing allowance for credit losses may not be adequate or increases may be necessary should the quality of any loans deteriorate as a result of the factors discussed. Any material increase in the allowance for credit losses would adversely impact the Company’s financial condition and results of operations.

The following table reflects our allocation of the allowance for credit losses by loan category as well as the amount of loans in each loan category, including related percentages, as of the dates indicated:

The following table sets forth certain ratios related to our allowance for credit losses at the dates presented:

The allowance for credit losses was $70.5 million and $69.9 million at June 30, 2026 and December 31, 2025, respectively. The allowance attributed to individually evaluated loans was $2.6 million and $3.4 million as of June 30, 2026 and December 31, 2025, respectively. The allowance attributed to collectively evaluated loans was $67.9 million and $66.5 million as of June 30, 2026 and December 31, 2025, respectively.

As of June 30, 2026 and December 31, 2025, the allowance for credit losses related to off-balance sheet items, primarily unfunded loan commitments, was $2.0 million and $2.3 million, respectively. The Bank closely monitors each borrower’s repayment capabilities while funding existing commitments to ensure losses are minimized. Based on management’s evaluation and analysis of portfolio credit quality, prevailing economic conditions and economic forecasts, we believe these allowances were adequate for current expected lifetime losses in the loan portfolio and off-balance sheet exposure as of June 30, 2026.

The following table presents a summary of gross charge-offs and recoveries for the loan portfolio:

For the three months ended June 30, 2026, gross charge-offs decreased $10.5 million from the same period in 2025. Gross recoveries for the three months ended June 30, 2026 decreased $0.4 million from the same period in 2025. Gross charge-offs for the three months ended June 30, 2026 and 2025 included $1.6 million and $2.9 million of equipment finance agreement charge-offs, respectively. Gross charge-offs for the three months ended June 30, 2025 also included an $8.6 million charge-off of a commercial real estate loan designated as nonaccrual in the first quarter of 2025. Gross recoveries for the three months ended June 30, 2026 and 2025 included $0.6 million of recoveries on equipment finance agreements for both periods.

For the six months ended June 30, 2026, gross charge-offs decreased $10.5 million from the same period in 2025. Gross recoveries for the six months ended June 30, 2026 decreased $1.1 million from the same period in 2025. Gross charge-offs for the six months ended June 30, 2026 and 2025 included $4.5 million and $5.7 million of equipment finance agreement charge-offs, respectively. Gross charge-offs for the six months ended June 30, 2025 also included the previously mentioned $8.6 million charge-off of a commercial real estate loan. Gross recoveries for the six months ended June 30, 2026 and 2025 included $1.0 million and $1.4 million of recoveries on equipment financing agreements, respectively.

The following table presents a summary of net (charge-offs) recoveries by loan category:

(1)

Annualized

Net loan charge-offs were $1.3 million, or 0.08% of average loans, and $11.4 million, or 0.36% of average loans, for the three months ended June 30, 2026 and 2025, respectively. Net loan charge-offs were $3.9 million, or 0.12% of average loans, and $13.3 million, or 0.43% of average loans, for the six months ended June 30, 2026 and 2025, respectively.

Deposits

The following table shows the composition of deposits by type as of the dates indicated:

(1)

Includes State of California time deposits of $90.0 million at June 30, 2026 and December 31, 2025.

(2)

Includes State of California time deposits of $90.0 million and $60.0 million at June 30, 2026 and December 31, 2025, respectively.

(3)

Includes brokered deposits of $86.9 million and $88.5 million at June 30, 2026 and December 31, 2025, respectively.

Total deposits were $6.96 billion and $6.68 billion as of June 30, 2026 and December 31, 2025, respectively, representing an increase of $277.7 million, or 4.2%. While all deposit types increased, deposit growth was primarily driven by a $151.1 million increase in time deposits and a $120.2 million increase in noninterest-bearing demand deposits. At June 30, 2026, the loan-to-deposit ratio was 94.0% compared to 98.3% at December 31, 2025.

As of June 30, 2026 and December 31, 2025, the aggregate amount of uninsured deposit accounts (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $3.12 billion and $2.92 billion, respectively. For time deposits, the aggregate amount exceeding the insurance limit was $919.1 million and $750.8 million, respectively. Other uninsured deposits, such as demand and money market and savings deposits, were $2.20 billion and $2.17 billion, respectively. At June 30, 2026 and December 31, 2025, $1.47 billion and $1.34 billion of total uninsured deposits, respectively, were in accounts with balances of $5.0 million or more.

The Bank’s wholesale funds historically consisted of FHLB advances, brokered deposits, and State of California time deposits. As of June 30, 2026, the Bank had no outstanding FHLB advances, compared with $150.0 million of FHLB advances as of December 31, 2025.