HANMI FINANCIAL CORP

Our primary source of revenue is net interest income, which is the difference between interest derived from assets, and interest paid on liabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on loans are affected principally by changes to market interest rates, the demand for loans, our loan composition, the supply of money available for lending purposes, and other competitive factors. Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve.

The following table shows the average balance of assets, liabilities and stockholders’ equity; the amount of interest income, and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin on a taxable-equivalent basis for the periods indicated. All average balances are daily average balances.

(1)

(2)

(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.

(5)

Represents net interest income as a percentage of average interest-earning assets.

The average balance of interest-earning assets increased 3.5%, or $266.7 million, to $7.81 billion for the three months ended September 30, 2026, from $7.55 billion for the three months ended September 30, 2025, primarily due to growth of $186.1 million in the average balance of commercial and industrial loans and growth of $130.6 million in the average balance of interest-bearing deposits in other banks, partially offset by an $81.6 million decrease in the average balance of equipment finance agreements. The average balance of interest-bearing liabilities increased 3.5%, or $170.4 million, to $5.03 billion for the three months ended September 30, 2026, compared with $4.86 billion for the three months ended September 30, 2025, primarily due to a $163.3 million increase in the average balance of time deposits.

Net interest margin, on a taxable equivalent basis, increased 22 basis points to 3.44% for the three months ended September 30, 2026, from 3.22% for the same period in 2025. This increase was primarily due to a decline in the cost of interest-bearing liabilities of 36 basis points to 3.24% for the three months ended September 30, 2026, from 3.60% for the same period in 2025, due to the decline in interest rates.

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. Simultaneous volume and rate effects have been allocated proportionally to the respective volume and rate variances based on their absolute dollar amounts.

(1)

(2)

Net interest income increased 10.6%, or $6.5 million, to $67.6 million for the three months ended September 30, 2026 from $61.1 million for the three months ended September 30, 2025. This increase was primarily due to a $4.7 million effect from a decrease in interest rates on liabilities and a $4.0 million effect from an increase in the average balance of interest-earning assets, partially offset by a $1.6 million effect from an increase in the average balance of interest-bearing liabilities.

The $4.7 million impact from the decrease in interest rates on liabilities was primarily driven by money market and savings accounts and time deposits, which increased net interest income by $2.9 million and $2.0 million, respectively, for the three months ended September 30, 2026, compared with the same period in 2025. The $4.0 million volume-driven increase in interest income on interest-earning assets was primarily due to a higher average balance of loans. The $1.6 million offsetting increase in interest expense was due to the $1.6 million impact of a higher average balance of time deposits.

The following table shows the average balance of assets, liabilities and stockholders’ equity; the amount of interest income and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin on a taxable-equivalent basis for the periods indicated. All average balances are daily average balances.

(1)

(2)

(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.

(5)

Represents net interest income as a percentage of average interest-earning assets.

The average balance of interest-earning assets increased 2.6%, or $196.7 million, to $7.66 billion for the nine months ended September 30, 2026, from $7.47 billion for the nine months ended September 30, 2025, primarily due to growth of $219.8 million in the average balance of commercial and industrial loans. The average balance of interest-bearing liabilities increased $124.6 million, or 2.6%, to $4.94 billion for the nine months ended September 30, 2026, compared with $4.82 billion for the nine months ended September 30, 2025, primarily due to a $184.0 million increase in the average balance of time deposits.

Net interest margin, on a taxable equivalent basis, increased 29 basis points to 3.40% for the nine months ended September 30, 2026, from 3.11% for the same period in 2025. This increase was primarily due to a decline in the cost of interest-bearing liabilities of 45 basis points to 3.23% for the nine months ended September 30, 2026, from 3.68% for the same period in 2025, due to the decline in interest rates.

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. Simultaneous volume and rate effects have been allocated proportionally to the respective volume and rate variances based on their absolute dollar amounts.

(1)

(2)

Net interest income increased 12.3%, or $21.3 million, to $194.6 million for the nine months ended September 30, 2026 from $173.3 million for the nine months ended September 30, 2025. This increase was primarily due to a $16.6 million effect from a decrease in interest rates on liabilities and an $8.7 million effect from an increase in the average balance of loans, partially offset by a $3.6 million impact from an increase in the average balance of interest-bearing liabilities.

The $16.6 million effect from the decrease in interest rates on liabilities was primarily driven by money market and savings accounts and time deposits, which increased net interest income by $9.8 million and $6.8 million, respectively, for the nine months ended September 30, 2026, compared with the same period in 2025. The $8.7 million volume-driven increase in interest income on loans was primarily due to a higher average balance of commercial and industrial loans, partially offset by a decline in the average balance of equipment financing agreements. The $3.6 million offsetting increase in interest expense was primarily due to a $5.6 million impact of a higher average balance of time deposits, partially offset by a lower average balance of borrowings.