Ladies and gentlemen, welcome to the Hanmi Financial Corporation's third quarter 2026 conference call. As a reminder, today's call is being recorded for replay purposes. Currently, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. I would now like to turn the call over to Ben Brodkowitz, investor relations for the company. Please go ahead.

Thank you, Operator, and thank you all for joining us today to discuss HOMNY's third quarter 2026 results. This afternoon, HOMNY issued its earnings release and quarterly supplemental slide presentation to accompany today's call. Both documents are available in the IR section of the company's website at HOMNY.com. I'm here today with Bonnie Lee, President and Chief Executive Officer of HOMNY Financial Corporation, Anthony Kim, Chief Banking Officer, and Ron Santarosa, Chief Financial Officer. Bonnie will begin today's call with an overview. Anthony will discuss loan and deposit activities. Ron will provide details on our financial performance, and then Bonnie will provide closing comments before we open the call up for your questions. Before we begin, I would like to remind you that today's comments may include forward-looking statements under the federal securities laws. Forward-looking statements are based on current plans, expectations, events, and financial industry trends that may affect the company's future operating results and Financial Position. Our actual results may differ materially from those contemplated by our forward-looking statements, which involve risks and uncertainties. Discussion of the factors that could cause our actual results to differ materially from these forward-looking statements can be found in our SEC filings, including our reports on Forms 10-K and 10-Q. In particular, we direct you to the discussion of certain risk factors Thank you, Ben, and good afternoon, everyone. Thank you for joining us today to discuss Hanmi's third quarter 2026 results. Hanmi delivered a solid quarter with excellent deposit growth, robust loan production, strong asset quality, and prudent capital management.

As a result, pre-provisioned net revenues grew 10.8% sequentially, reflecting an increase in net interest income and margin, as well as a disciplined expense management. Credit loss expense was higher, but demonstrated our commitment to resolving credit issues quickly. Collectively, our performance this quarter shows the durability of our franchise, continued momentum across all lines of business, and our ability to generate sustainable, profitable growth. Now turning to some highlights for the quarter, net income increased from last quarter to $23.7 million or 80 cents per daily share. Deposits grew 1.4% on a lean quarter basis with the core deposits increasing 1.9%. reflecting the strength and quality of our funding base while non-interest bearing deposits remain stable at 30% of total deposits. Loan originations were strong at $544 million with a notable increase in CNI bonds. Net interest income increased 5.8% sequentially and net interest margin increased by 8 basis points to 3.44%. We maintained disciplined expense management, improving our efficiencies ratio by more than 200 basis points to 52%, demonstrating our ability to generate positive operating leverage. Credit loss expense was $4.5 million and reflected a $3.2 million loan charge-off to resolve a previously identified CRE loan. The return on average assets for the third quarter was 1.17% and the return on average equity was 10.90%. Moving on to our corporate career initiative, this area of our business activities continues to generate meaningful results. The investments we have made in specialized bankers and targeted client coverage are deepening customer relationships and driving increased business activities. Deposits from Corporate Korea clients increased 12% during the quarter to $1.3 billion, reaching an all-time high of approximately 19% of total deposits, while loans for Corporate Korea clients represent 12% of total loans. This initiative continues to be a significant growth opportunity and a key differentiator for Hanmi. Turning now to asset quality. Hanmi's credit metrics continue to demonstrate discipline underwriting and active portfolio oversight. During the quarter, we took two actions that underscore our proactive approach to credit risk management. First, we enter into an agreement to sell the previously identified CRE loan with a closing expected during the fourth quarter. This action enables us to avoid a potentially prolonged resolution process and more quickly redeploy these funds into interest earning assets with a more attractive risk adjusted returns. In addition, following changes to local rent control regulations in New York City, we proactively reassessed two multifamily loan relationships and downgraded these loans to reflect this evolving risk environment. Although these two loans are current, we believe these actions illustrate our commitment to identifying issues early and addressing them decisively to preserve the long-term strength of the loan portfolio. All told, delinquent loans and non-performing loans continue to be a low percentage of total loans at 0.2% and 0.14% respectively at quarter end. Non-performing assets also remain constant at 0.12% of total assets. Last, I would like to highlight our capital strength and prudent capital management. Tangible common equity to tangible assets was 9.93% and all regulatory capital ratios were strong. For the solid earnings for the third quarter, we returned 55.6% of third quarter net income to shareholders through dividends and share repurchases. Our capital position provides HOMI flexibility to pursue attractive growth opportunities Invest strategically in the business and continue delivering compelling returns to shareholders. I'll now turn the call over to Anthony Kim, our Chief Banking Officer, to discuss loan production and deposit trends in greater detail. Anthony?

Thank you, Bonnie, and thank you for joining us today. I'll begin by providing additional details on our loan production. Third quarter loan production was $544 million. of 172 million or 46.2% from the prior quarter with a weighted average interest rate of 6.61% compared to 6.59% last quarter. The increase in loan production was primarily due to an increase in CNI, CRA, and residential. In fact, every category of loan production increased during the third quarter. We maintain a disciplined underwriting framework, engaging only in opportunities that are consistent with our conservative underwriting principles. CNI production was $170 million with a broad representation of industries such as manufacturing and wholesale. While CNI loan balances were flat from the prior quarter, they grew 11.3% from the same period a year ago. Additionally, CNI loans have grown to 18% of total loan portfolio from 16% one year ago. This growth reflects our investment in CNI talent, the continued traction of our USKC initiative, and the successful execution of our strategy to broaden the portfolio. Total commitments for our commercial lines of credit were $1.4 billion in the third quarter, up approximately 5% from the previous quarter and 7% from a year ago. Outstanding balances increased by 3% resulting in a utilization rate of 39.7% down slightly from 40.3% in the prior quarter CRA production was $227 million, an increase of $57 million or 33.4% CRA loans remain 61% of our total loans We are pleased with the quality of our CRA portfolio It has a weighted average loan-to-value ratio of approximately 47% and a weighted average debt service coverage ratio of 2.27 times. Residential mortgage loan production was $77 million for the third quarter, up 54% or $27 million from the previous quarter. Residential mortgage loans represent approximately 15% of our total loan portfolio, consistent with the previous quarter. We saw $13 million of residential mortgages during the third quarter, resulting in a gain on sale of $0.2 million. We'll continue to evaluate additional sales contingent on market conditions. SBA was a bright spot this quarter with production sales trade premiums all higher. SBA loan production increased $4 million from the prior quarter to $41 million. While slightly below in historical debt levels, our pipeline indicates a pickup in production in the fourth quarter, underscoring the strength of our recent investment in talent and the momentum we are generating with the small business clients across our markets. During the quarter, we sold approximately $34 million of SBA loans. Turning to corporate career, which accounted for $34 million of total loan production. USK loan balances were 780 million, down 46 million, or 5% from the prior quarter, and represent approximately 12% of our total loan portfolio. Last, payoffs, which are a variable each quarter, were substantially higher at 283 million for the third quarter. More than a third of our payoffs were driven by refinancing with our other lenders, offering terms that did not meet are disciplined underwriting and risk criteria. Approximately one quarter of the payoffs were from the sale of property or the borrower using their own cash. Just under 10% of payoffs were due to our desire to exit the loan relationships. Turning now to deposits. In the third quarter, deposit increased 1.4% from the prior quarter, driven primarily by World Enormous Treaty interest-bearing deposits and a 1.9% increase in core deposits. Deposit balances for USKC customers increased by 145 million or 12% surpassing 1.3 billion. At quarter end, corporate career deposits represented 19% of total deposits and 18% of bank's demand deposits. The competition of our deposit base remains stable, reflecting the strength of our relationship banking model. At the end of third quarter, non-interest-bearing deposits remain healthy at 30% of total bank deposits. And now I'll hand the call over to Ron Santarosa, our Chief Financial Officer, for more details on our third quarter financial results.

Thank you, Anthony, and good afternoon all. I will begin with HOMNE's 10.8% sequential increase in third quarter pre-provision net revenues before turning to the credit loss expense for the quarter. First, net interest income grew 5.8% on a linked quarter basis due to the 2.4% increase in average interest earning assets and the eight basis point net interest margin expansion. The 3.1% growth in average core deposits efficiently fueled growth in average interest earning assets, while a 13 basis point increase in average loan yield drove higher net interest income. This was partially offset by a one basis point increase in the cost of average interest bearing deposits. We noted in the earnings release that there were several items affecting third quarter net interest income and net interest margin, namely An interest reversal from a non-accrual loan, accelerated deferred fee income and prepayment fees from loan payoffs, a special FHLB San Francisco dividend, and overlapping interest expense from the issuance and redemption of subordinated notes. Together, these items contribute approximately $700,000 of net interest income, representing four basis points, or roughly half of the quarterly increase in net interest margins. The loan-related items contributed approximately five basis points to the increase in loan yield. I also think it's important to note here that Omni undertook actions during the third quarter, which together should aid future period debt interest income and margin in what might be a higher interest rate environment going forward. At the end of July, Omni issued $55 million of fixed to floating rate subordinated notes due in 2036. These proceeds, combined with parent company resources, were used to redeem on September 1st the $110 million fixed to floating rate subordinated notes due in 2031. As a result, the company reduced its ongoing interest expense by $550,000 annually and avoided the burden of floating rate debt. Next, the company secured a two-year interest rate cap for its $26 million floating rate trust preferred securities with a floating rate of three months SOFR plus 166 basis points that resets quarterly cannot exceed 5.66%. The bank also secured a two-year interest rate swap for its $180 million of State of California time deposits, fixing the interest rate on these funds at 4.46%. Moving on to non-interest income, It increased 8.2% on a linked quarter basis, primarily due to higher gains from sales of SBA loans. Omni sold $34 million of SBA loans at a premium of 8.1%, significantly higher than the second quarter volume of $20.9 million with a premium of 7.92%. Completing the look at third quarter PPNR, non-interest expense increased 2.1%, primarily driven by a $1.1 million charge from the acceleration of deferred debt issuance costs upon the redemption of the 2031 notes. Absent that event, non-interest expense would have declined by 0.8% sequentially. Turning to credit loss expense, it was $4.5 million, up from $1.2 million for the second quarter. That increase was primarily due to a $3.2 million partial charge-off on the previously mentioned CRE loan. As such, annualized net charge-offs to average loans for the third quarter jumped to 27 basis points compared with eight basis points for the second quarter. Absent this charge-off, annualized net charge-offs to average loans would have been seven basis points. HOMNI continued to return capital to shareholders in the form of dividends and share repurchases Share repurchases for the third quarter were $4.9 million, and 1.84 million shares currently remain available under the existing share repurchase program. Third quarter equity capital was negatively affected by the increase in the general level of interest rates at the end of the third quarter, resulting in a $16.5 million increase in unrealized after-tax losses on securities available for sale. However, capital ratios continue to remain strong. The company's tangible common equity to tangible assets ratio was 9.93% at the end of the third quarter, and its common equity tier one ratio was 12.3%. Tangible common equity per share also remained essentially unchanged at $27.03. The bank's capital ratios also remained strong and well above the levels needed for the well-capitalized category. The bank had a total risk-based capital ratio of 14.33%, and a common equity tier one ratio of 13.28%. With that, I will now turn it back to Bonnie.

Thank you, Ron. As we look ahead, we remain constructive on the operating environment. While geopolitical uncertainty warrants monitoring, the broader economy continues to be supported by growth, low unemployment and healthy business activity. As we enter the final quarter of the year, we remain well-positioned for continued success. healthy loan and deposit pipelines, strong customer activity, and momentum across the franchise support our confidence in delivering continued earnings growth and attractive shareholder returns. In closing, our third quarter performance highlights the strength of our franchise, the dedication of our employees, and the trust our customers place in HOMNI. We remain focused on disciplined execution, sustainable growth, strong profitability, and Long-Term Value for our shareholders. We'll now open the call to answer your questions. Operator, please go ahead.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please.

while we poll for questions.

Our first question is from Matthew Clark with Piper Sandler.

Good afternoon, everyone.

The margin, maybe for Ron, just trying to think through deposit costs going forward. If you have the spot rate at the end of September, I saw the slide showing your beta last couple of cycles, but tracking obviously well below that. I guess, how should we think about that beta? and then on the CDs that are maturing in your deck, what kind of rate should we expect it to reprice to?

So beginning with average interest-bearing deposit costs, for the month of September, they were 3.19, one basis point higher than the average for the quarter of 3.18. For October to date, right now it's about 3.22%, so about four basis points higher. And that does reflect the 25 basis point move that occurred mid to late September. So at this point in deposit competition, etc., It seems like interest-bearing deposit costs are holding in. The beta that you can deduce from that, I think, is well-behaved. But again, we await a Fed decision tomorrow and then, of course, the Fed decision in December. So against the backdrop of not knowing what that might be and then the deposit pressures from competition, I'll be optimistic in that the deposit costs may continue to creep, but if Fed moves in very large ways, then I would expect much more pressure on our cost of deposits. So I'll let Anthony talk about the CD market and the deposit market generally.

During the fourth quarter, I think a little over $1 billion is maturing at 3.69%. That's the rate in my head. Months today, October, the rate we're seeing, plus a new combination, it's about the same. If not, it's maybe a little tad higher, but what I'm saying until October, it's about the same. So we have no benefit of repricing. We have no damage done from the repricing.

That's great. Okay, thank you. And then shifting to... Your exposure in New York, it looks like you only have 84 million of multifamily in New York. I guess, how much of that is rent stabilized, or are those the two loans that you called out within that portfolio?

So excluding the two loans that we called out, the rest of the portfolio, it's a composition of about a half a dozen smaller loans, and most of them are current, and the majority of them are the properties are not in the rent. Majority of the properties are not in the rent control.

Okay, great. And then just on the USKC initiative, the deposit growth looked really good again. Any color around what drove that by industry and how the pipeline looks going forward?

It's more abroad based. You know, deposit increase from industries, various industries. It's more of we see influx of the fund coming in. They're preparing for the investment in whether in CapEx or the manufacturing facility to be deployed later on. So we continue to see influx of funds that helps our deposit growth.

Great, thanks again.

Our next question is from Gary Tenner with DA Davidson.

Thanks, good afternoon. I wanted to ask about loan growth. Bonnie, obviously really good production this quarter, but, you know, even with that production year to date, your loans are essentially flat. So I'm just kind of wondering how you're thinking about net growth here in the fourth quarter and then how the rate environment is potentially shaping your thoughts on 2027.

Yeah, so while our year-to-date deposit growth is trending, mid-single-digit growth above 5%, our loans, despite of our robust production, This quarter, it has stayed pretty flat or slightly moderately increased. And it's really due to the payoffs. And if you trend year-to-date loan production compared to the same period last year, loan production is up 4%. But the payoffs compared to last year, year-to-date, it increased 65%. and that amount to over $250 million. So if we would have stayed, you know, if the payoffs had remained stayed at the same level as last year, obviously our loan growth would have been 4%, which is in the, you know, mid-single disease growth. Just looking at the payoffs, this quarter it has subsided a little bit compared to the third quarter. However, definitely looking at the average quarterly year-to-date payoff is above $200 million. So we are looking at all in all. Continuing with the production that we had, we are probably looking at probably low single-digit growth in the loan for the year.

and coupled with that, any impact to the outlook in a higher for longer scenario or maybe preliminary thoughts about 2027 growth? Is that kind of mid-single digit number you had mentioned a good assumption to start the year?

Yeah, for the 2027, I would project low to mid-single digit growth and and as rates actually go up, I will probably see a lower level of a payoffs. So with that, we could even hit, you know, mid single digit or even higher, assuming that, you know, the production continues at the level that we have been enjoying.

Got it. Makes sense. Thank you. And then just a follow up run on kind of the rate sensitivity. I appreciate all the color on the deposit side of things. Can you just refresh us on the loan portfolio and how much of that is floating rate, either the prime or short-term silver repricing?

About 25% of the portfolio that truly adjusts with rates. And then that's excluding any of the maturities that roll down to us in each quarter. Perfect.

Thank you.

Our next question is from Kelly Moda with KBW.

Hey, thanks for the question. Maybe following up on that, it looks like your yield on new production has been pretty stable. I'm wondering, I think you break out loans for touring over the next year in the deck. Ron, if you could provide what the loan runoff cadence looks like in terms of both timing, if it's pretty throughout the year as well as the yield on that.

Related to the cadence, I guess we have no better guess than what the scheduled maturities are. Again, that's before any of the payoffs that are induced by other lenders, the circumstance of the particular borrower, or the actions that we take on our own to ensure the credit quality of the book. There's no other insight other than that. With respect then to the rates, again, on a maturity basis, it's a mix of both fixed as well as variable rate loans. I think Anthony had quoted the production, which is like six, I can't remember the last digit, six and a half-ish, if you will. So in this current rate environment, I would expect that that would be the continued run rate, give or take, against an average yield of the book, which on an adjusted basis for the activities that I mentioned earlier is probably just around 6%. So you can start to see that the increment to the book is higher than the average of the book. So the loan yield should continue to kind of inch upward under that kind of scenario.

Got it. That's helpful. And then with higher rates, we've heard it's pressuring SBA gain on sale margins. Just wondering if you could refresh us on your outlook, both on the production side of that business as well as your cadence itself.

Yeah, I mean, similar to this quarter, I think that run rate for in terms of a production rate would be on a quarterly basis about 45 to 50 million. Any given quarter plus minus five to 10%. And then the sole portion, we sell all of our SBA 7A productions.

Got it. That's helpful. And then lastly, you guys were more active on the buyback here, just wondering about appetite at this level, especially in the context that the balance sheet growth on the loan side has been more limited because of the payoff. Thanks.

So at least with respect to the fourth quarter of 2026, as we do visit each quarter our actions, I think it's fair to say that we'd probably continue at the same dollar run rate that you've seen in the previous three quarters.

Great, thank you.

As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Thank you. There are no further questions at this time.

I'd like to hand the floor back over to management for any closing remarks.

Thank you for joining our call today. We appreciate your interest in having me and look forward to sharing our progress with you. Thank you.

This concludes today's conference call. You may disconnect your lines at this time. Thank you again for your participation.