Ladies and gentlemen, welcome to the Hanmi Financial Corporation Second Quarter 2026 Conference Call. As a reminder, today's call is being recorded for replay purposes. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, 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 HOMNI's second quarter 2026 results. This afternoon, HOMNI 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 hominy.com. I'm here today with Bonnie Lee, President and Chief Executive Officer of Hominy 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 affecting our business contained in our earnings release, our investor presentation, and in our Form 10-Q. With that, I would now like to turn the call over to Bonnie Lee. Bonnie, please go ahead.

Thank you, Ben, and good afternoon, everyone. Thank you for joining us today to discuss HAMI's second quarter 2026 results. HAMI delivered another quarter of a strong financial performance, driven by solid earnings growth, expanding customer relationships, discipline execution, and excellent credit quality. Our results reflect the continued momentum across the franchise. We generated healthy loan production, strengthened our deposit base, further diversified the loan portfolio, and maintained strong asset quality. Combined with the discipline expense management, these efforts translate into higher earnings and improved profitability. Importantly, we continued to create value for shareholders while preserving capital strength. During the quarter, we returned 58% of earnings through dividends and share repurchases, while further improving profitability metrics. Return on average assets increased to 1.2%, and return on average equity improved to 11.1%. Taken together, these results demonstrate the resilience of our business model, the strength of our customer relationships, and our ability to execute consistently in a dynamic operating environment. Now, turning to some highlights for the quarter, net income increased to $23.5 million, or $0.79 per diluted share, compared to $22.6 million, or $0.75 per diluted share last quarter. Net interest income increased 1% sequentially. While net interest margin declined modestly by two basis points to 3.36%, excluding the impact of the San Francisco Federal Home Loan Bank dividend policy change, margin would have been slightly higher. Deposits grew 2.3% linked quarter, driven by 5.2% increase in non-interest-faring accounts, led by growth in commercial accounts. Non-interest-bearing deposits increased to 31% of total deposits, reflecting the strength and quality of our funding base. New loan originations totaled $372 million. While production was slightly lower than the prior quarter, year-to-date originations are up 11% compared with the first half of 2025. We remain encouraged by the strength of our loan pipeline. Historically, loan activity has accelerated during the second half of the year, and we believe we are well positioned to capitalize on that trend. Our portfolio diversification strategy continues to gain traction. Commercial and industrial loans increased 1.6% sequentially and 28% year-over-year, now representing 18% of total loans. Our efficiency ratio of 54% reflects continued operating discipline and a strong focus on driving productivity throughout the organization. We continue to maintain excellent credit quality with our discipline underwriting standards and active portfolio management. Our conservative risk culture continues to serve us well. Non-performing loans improved to 0.15% of total loans, and non-performing assets improved to 0.12% of total assets, underscoring the quality of our loan portfolio and effectiveness of our risk management framework. Turning to Corporate Korea Initiative, our Corporate Korea strategy continues to generate meaningful results. The investments we have made in specialized bankers and targeted client coverage are translating into deeper customer relationships, stronger engagement, and growing business activity. Deposits from corporate career clients increased 6.2% during the quarter to $1.2 billion, reaching an all-time high of approximately 17% of total deposits. Loan balances grew to $826 million, representing 13% of the total loan portfolio. This initiative remains a significant growth opportunity and a meaningful differentiator for HOMI. Last, I would like to speak to capital and shareholder returns. Strong earnings and disciplined balance sheet management drove additional improvement in our capital position. At the same time, we return $13.6 million to shareholders through dividends and share repurchases. Our capital strengths allow us to pursue growth opportunities, invest in the franchise, and continue delivering attractive shareholder returns. I'll now turn the call over to Anthony Kim, our Chief Banking Officer, to discuss loan production and deposit trends in greater detail.

Thank you, Bonnie, and thank you for joining us today. I'll begin by providing additional details on our loan production. Second quarter loan production was $372 million, down $6 million, or 1.6% from the prior quarter, with a weighted average interest rate of 6.59% compared to 6.54% last quarter. The decrease in loan production was primarily due to a decline in CNI, SBA, and equipment finance, which was partially upset by an increase in CRE and residential. We maintain a disciplined underwriting framework, engaging only in opportunities that are consistent with our conservative underwriting principles. C&I production was $89 million, with a corporate career representing 22 million, or 25% of total C&I loan production. CNI loan balances grew 1.6% from the prior quarter and 27.6% from the same period a year ago. Additionally, CNI loans have grown to 18% of total loan portfolio from 14% 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. CRA production was $171 million, an increase of $39 million, or 29.4%. CRA loans remain 61% of our total loans. We remain 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 2.2 times. SBA loan production declined $4 million from the prior quarter to $37 million, slightly below historical levels. However, our pipeline indicates a pickup in the production in the third 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 $21 million of Ex-Bay loans. Total commitments for our commercial lines of credit were $1.4 billion in the second quarter, up 2.7% from the previous quarter. Outstanding balances decreased by 3%, resulting in a utilization rate of 40%, down from 43% in the prior quarter. Residential mortgage loan production was $50 million for the second quarter, up 72%, or $21 million from the previous quarter. Residential mortgage loan represents approximately 15% of our total loan portfolio, consistent with the previous quarter. We sold $31 million of residential mortgages during the second quarter, resulting in a gain on sale of $0.4 million. We'll continue to evaluate additional sales contingent on market conditions. Corporate Korea accounted for $31 million of total loan production. USKC loan balances were $826 million, up $8 million, or 1% from the prior quarter, and represent approximately 12.6% of our total loan portfolio. Turning to deposits. In the second quarter, deposits increased 2.3% from the prior quarter, driven primarily by growth in non-interest-bearing deposits and a modest increase in interest-bearing demand deposits. Deposit balances for USKC customers increased by 70 million, or 6%, surpassing $1.2 billion. At quarter end, corporate Korea deposit represented 17% of both total deposits and demand deposits. The composition of our deposit base remains stable, reflecting the strength of our relationship banking model. At the end of second quarter, non-interest-bearing deposits remain healthy at roughly 31% of total bank deposits. Turning to asset quality, which remains strong, with the most metrics improving from the prior quarter, Non-performing loans declined 20% to 0.15% of total loans from 0.19% in the prior quarter, and the non-performing assets declined 20% to 0.12% of total assets from 0.16% in the prior quarter. During the quarter, delinquencies increased due to a $21.2 million CRA credit that was previously identified and downgraded in the prior quarter. The loan was subsequently moved from special mention to classified once it became delinquent. The bank commissioned an appraisal and a property condition report and found the collateral to be in good condition. As a result, the bank is well secured on this loan. Credit trends continue to be strong, and we view this loan as an isolated situation. This proactive approach reflects Hamid's discipline underwriting and risk management practices, which prioritize early identification of potential issues and timely actions to maximize recovery. And now I'll hand the call over to Ron Santa Rosa, our Chief Financial Officer, for more details on our second quarter financial result.

Thank you, Anthony, and good afternoon. Net interest income for the second quarter increased 1% from the first quarter to $63.9 million, while net interest margin declined two basis points to 3.36%. The decline in margin was largely driven by a change in dividend practices at FHLB San Francisco, which reduced second quarter interest income by approximately $612,000, or about three basis points. Excluding that, underlying margin performance was essentially stable. The core driver of earnings remained strong. Average interest-earning assets grew 1.1 percent. Average deposits increased 2.7 percent. Loan yields held steady at 5.9 percent, and we further reduced the cost of interest-bearing deposits to 3.17 percent. Importantly, interest-bearing deposit costs remain stable so far in July, and loan origination yields have been consistent over the past two quarters. Based on those trends and assuming no changes in Federal Reserve policy, we expect net interest margin to remain stable through the balance of the year. Non-interest income was $8.3 million. Results were primarily affected by lower SBA loan sales volume compared with the first quarter, partially offset by growth in trade finance and other service fee income. During the second quarter, HOMD sold $20.6 million of SBA loans at an average premium of 7.92%, demonstrating continued strength in our SBA platform. Non-interest expense increased 1.7% to $39 million, principally due to higher salaries and benefits and the absence of the gain on the sale of OREO recognized in the first quarter. Even with that increase, operating efficiency remained a key strength with an efficiency ratio of 54.1% and non-interest expense representing 1.99% of average assets on an annualized basis. As Bonnie and Anthony said, credit quality remains excellent. Delinquencies, criticized loans, non-performing assets all remained at favorable levels, while net charge-offs were minimal. As a result, credit loss expense was only $1.2 million. Our capital position remained strong. Tangible common equity per share increased 1.8% to $27.04, and the tangible common equity ratio was 10.03%. Hominy also continued to return capital to shareholders, distributing $13.2 million through dividends and share repurchases. During the quarter, we repurchased 160,000 shares at an average price of $30.24, and 1.99 million shares remain available under our current authorization. With that, I will now turn it back to Bonnie.

Thank you, Ron. As we look ahead, we remain constructive in the operating environment. While geopolitical uncertainty warrants monitoring, the broader economy continues to be supported by positive growth, low unemployment, and healthy business activity. More importantly, we entered the second half of 2026 from a position of a strength. Building on our strong first health performance, healthy loan and deposit pipelines, and continued momentum across the franchise, we remain optimistic about our outlook, and we are confident in our ability to generate continued earnings growth and deliver attractive returns for shareholders. Our priorities for the remainder of a 2026 include drive profitable loan growth while continuing portfolio diversification. We expect low-to-mid single-digit loan growth for the year and will continue expanding relationships across targeted commercial lending segments. Further strengthen our funding franchise. Growing our coal deposits remains a top priority. We will continue deepening relationships with existing customers, winning new clients, and increasing our mix of non-interest-fearing deposits. Maintain discipline expense management. We'll invest selectively in talent, technology, and growth initiatives while maintaining a strong focus on productivity and operating efficiency. Preserving our strong credit culture. Conservative underwriting, proactive risk management, and disciplined portfolio oversight will remain central to our strategy. In closing, HOMI's performance this quarter reflects the strength of our franchise, the dedication of our team, and the trust our customers placed in us every day. We are enthusiastic about the opportunities ahead and remain focused on delivering sustainable growth, strong profitability, and long-term shareholder value. Thank you for your continued support. We'll now open the call to answer your questions. Operator, please go ahead.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like 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 while we pull for questions. Our first question is from Matthew Clark with Piper Sandler.

Please proceed with your question. hi this is adam for on for matthew clark good afternoon and thanks for taking my questions good afternoon um yeah so maybe starting on the loan growth you know i appreciate the low to mid single digit guide for the year um and it looked like you had solid loan production during the quarter and i could see the breakdown in the deck shows that cre was a a bigger driver than it has been in the past few quarters. So I guess I'm curious going forward what segments you see being the primary drivers of growth in the back half of the year.

So looking down to the second half of the year, we do think that CA and I both continue to be the driver along with the part coming from the commercial real estate segment.

Okay, got it.

And, you know, on the corporate career initiative specifically, you know, it looks like there was some modest loan growth this quarter. But I'm just curious what you're hearing from your borrowers there and if you're seeing any early indications of a more significant recovery in loan demand among those clients.

Yeah, talking to the customers, because of the ongoing economic uncertainty, you know, rising energy costs, you know, ever ending the Iran war, they're still cautious about utilizing the line and invest in their investment. However, we are seeing influx of deposit coming in in preparation of investing in additional investment in the U.S. So to answer your question, they're pretty cautious, and that caused our line utilization rate lower than the previous quarter.

I appreciate the cover there. And last one for me, I was just wondering on the retail CRE loan that moved to 30 to 89 days past due. I think on the last call you mentioned there was a loss of a major tenant, but you didn't see any loss from a credit perspective. So just wanted to get your updated thoughts there.

Yeah, I mean, you're right. So last quarter, we moved the loan to the special mention category due to the loss of the anchor tenant. And subsequent to that, this quarter, a loan became past due. So we further downgraded the loan to the classified section. However, we have obtained the updated appraisal report as well as the property condition. and we feel the property is well-collateralized at this point.

Got it. Thanks for taking my questions.

Thank you.

Our next question is from Kelly Moda with KBW. Please proceed with your question.

Hey, thanks for the question. I thought I'd maybe kick it off with deposits. It looks like, at least on a spot-to-spot basis, the non-interest-bearing growth is really strong. I'm wondering if you could provide if there was any sort of end-of-quarter volatility in that that we should be aware of and how you guys are thinking about the – I think you provided some nice color on the outlook for loan growth, but how the deposit pipeline is shaping up off this level.

Yeah, I mean, you know, we've been very happy to see the deposit growth, and particularly on the non-interest-bearing deposit growth. And then I think that we'll see the same trend going forward, particularly coming from the USKC corporate customer base. So, I mean, within the second quarter, the commercial non-interest-bearing demand deposit accounts had really contributed, and we still have the strong pipeline coming from the DDA customer base. And it seems like, I mean, there are always fluctuations from the existing accounts, but we continue to see new accounts outpacing the account closures and then also net positive increase from the deposit DDA, particularly DDA customer base. from the existing customer base.

Got it. I'm just seeing they're up about almost by just over $100 million. So you're saying that's all kind of sticking with here, or is there kind of like one-off spots that we should just be adjusting as we think about the average balances?

No, I don't think there's a one-off exception. As I said, it's a contribution of a net existing customer balance increase, as well as a continued to bring in new accounts.

Okay. Gotcha. All right. And then just moving to just close the loop on the last question on the movement between special mention with the downgrade there. Your provision came in pretty low. I mean, threading it through, it seems like there's not expectation of loss and whatnot. I just wanted to get some thoughts around that.

So overall, our asset quality mattresses, if you see the trend, it continues to improve in, you know, overall mattresses. And in this quarter particularly, we had obviously a much lower net charge up than the prior quarter. So all in all, we feel very comfortable with the ACL coverage of 1.08% times over our loan portfolio. Okay.

Got it. Maybe turning to expenses, they were relatively flat, up slightly. Maybe if you look towards the back half of the year, how you guys are thinking about, you know, potential puts and takes off this $39 million number?

I believe, Kelly, they should behave probably in and around that same run rate. There's really nothing on the horizon that would suggest upward trends. The merits occurred all in April. Health insurance are called in January. So the major notions that push the number broadly, which is labor, that's already in our numbers. So I would anticipate basically the same styled run rates.

Got it. I'll step back. Thank you.

Thank you. Thank you. Thank you.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like 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 while we poll for questions. Our next question is from Kelly Moda from KBW. Please proceed with your question.

I figured I would jump back in here and keep asking about the margin, provided there's nobody left in here. um i i think ron you had said you expect a pretty stable margin from here can you walk through um your your deck has um some good color on on cd maturities i'm assuming that you're probably reaching reaching closer to the point where there's diminishing returns from um the role of that book um any color on that and then um it looks like money market savings cost went went up and how you guys are thinking about, you know, the incremental dollar of new funding

Sure. As I said in our prepared remarks, the July interest-bearing deposit cost average for the month is spot on to the average for the quarter. So the CD relief, if I want to use that word, will be present in the third quarter, but it will contribute very nominally to interest-bearing deposit costs broadly. Competitive pressures may cause a one- or two-bit push in the savings money market idea. So I sense those could be potentially offsetting, so we end up in about the same place. And, again, I'm assuming no policy moves, just market competition. So assuming that that occurs, we're not sensing or I'm not sensing any particular need for short-term borrowings to balance the balance sheet. Loan yields have been holding steady on a portfolio level. Origination yields continue to be above the average. So I just see a lot of push-pull, but taking us back to about where we are. So that's why I believe it could be steady as we finish out the second half of the year.

So kind of putting those together, I guess it seems like there could even be a bias higher to margin? If the funding costs are relatively steady, you don't need to use borrowings, and the loan yields are still coming in well above the portfolio yields. Is that kind of the right way to think about it, or am I missing a piece in there?

No. If I could, with a smile, on my optimistic mornings, sipping my coffee, I can see it going up one to three basis points, And then maybe by the evening, I can start to see it go down by one to three basis points. So it keeps circling around the same idea. It just depends on how much emphasis you may want to push on one event or several events. But I think as I pull back, I just keep seeing things have the potential, equal potential to bias upward, equal potential to bias downward, but all within a very narrow range that could cancel each other out. and I do not know how the dice will be rolled when we get to the end of the third quarter. So I've concluded it should be behaved somewhat stable.

Fair enough. Thanks a lot. Appreciate you. Appreciate you letting me jump back in.

You're welcome.

Thank you.

Our next question is from Matthew Clark with Piper Sandler. Please proceed with your question.

Hey, just a follow-up from me. I think you mentioned an expectation for SBA production to pick up in the back half. So I was just curious how you think about SBA again on sale and overall core fee income in the back half of the year?

So in terms of SBA production, I think that we're getting back to the normal run rate of production of around $45 million per quarter. Happens to be in the second quarter, some of the loans that we were working on got pushed to the third quarter. So, I think the production will resume, and the premium income should actually work back to our historical track.

Got it. Thanks for taking the follow-up.

Thank you.

Thank you.

We have no further questions in the queue at this time. I will now turn the call back to Ms. Bonnie Lee for concluding remarks.

Thank you for joining our call today. We appreciate your interest in Hamid and look forward to sharing our progress with you throughout the year.

Ladies and gentlemen, thank you for your participation.

This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.