##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Transition Period From  To
 Commission File Number: 000-30421
 HANMI FINANCIAL CORPORATION
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    95-4788120(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)3660 Wilshire Boulevard, Penthouse Suite A 
Los Angeles, California
    
    90010(Address of Principal Executive Offices)
    
    (Zip Code)
 (213) 382-2200
 (Registrants Telephone Number, Including Area Code)
 Not Applicable
 (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
 þ o
  Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company
o
 o þ




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##### 



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 QUARTERLY REPORT ON FORM 10-Q
 THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
  
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSConsolidated Balance Sheets (Unaudited)
    
    
    1Consolidated Statements of Operations (Unaudited)
    
    
    2Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income
(Loss) (Unaudited)
    
    
    3Consolidated Statements of Cash Flows (Unaudited)
    
    
    4Notes to Consolidated Financial Statements (Unaudited)
    
    
    5ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    14ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    43ITEM 4. CONTROLS AND PROCEDURES
    
    
    43PART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    44ITEM 1A. RISK FACTORS
    
    
    44ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    44ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    45ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    45ITEM 5. OTHER INFORMATION
    
    
    45ITEM 6. EXHIBITS
    
    
    46SIGNATURES
    
    
    47EXHIBIT 10.16EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)  (Dollars in Thousands, Except Share Data)
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCash and Due From Banks
    
    $
    110,222
    
    
    $
    105,898Federal Funds Sold
    
    
    10,000
    
    
    
    16,500Cash and Cash Equivalents
    
    
    120,222
    
    
    
    122,398Securities Held to Maturity, at Amortized Cost (Fair Value: 2008  $925; 2007  $941)
    
    
    926
    
    
    
    940Securities Available for Sale, at Fair Value
    
    
    261,675
    
    
    
    349,517Loans Receivable, Net of Allowance for Loan Losses of $62,977 and $43,611 at June 30, 2008 and
December 31, 2007, Respectively
    
    
    3,280,744
    
    
    
    3,234,762Loans Held for Sale, at the Lower of Cost or Fair Value
    
    
    9,158
    
    
    
    6,335Customers Liability on Acceptances
    
    
    6,717
    
    
    
    5,387Premises and Equipment, Net
    
    
    20,801
    
    
    
    20,800Accrued Interest Receivable
    
    
    13,155
    
    
    
    17,411Other Real Estate Owned
    
    
    
    
    
    
    287Servicing Assets
    
    
    4,328
    
    
    
    4,336Goodwill
    
    
    
    
    
    
    107,100Other Intangible Assets
    
    
    5,882
    
    
    
    6,908Federal Reserve Bank Stock, at Cost
    
    
    11,733
    
    
    
    11,733Federal Home Loan Bank Stock, at Cost
    
    
    29,397
    
    
    
    21,746Bank-Owned Life Insurance
    
    
    24,998
    
    
    
    24,525Other Assets
    
    
    55,371
    
    
    
    49,472TOTAL ASSETS
    
    $
    3,845,107
    
    
    $
    3,983,657LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIES:Deposits:Noninterest-Bearing
    
    $
    683,846
    
    
    $
    680,282Interest-Bearing:Savings
    
    
    93,747
    
    
    
    93,099Money Market Checking and NOW Accounts
    
    
    728,601
    
    
    
    445,806Time Deposits of $100,000 or More
    
    
    1,050,942
    
    
    
    1,441,683Other Time Deposits
    
    
    404,424
    
    
    
    340,829Total Deposits
    
    
    2,961,560
    
    
    
    3,001,699Accrued Interest Payable
    
    
    16,583
    
    
    
    21,828Acceptances Outstanding
    
    
    6,717
    
    
    
    5,387FHLB Advances and Other Borrowings
    
    
    500,107
    
    
    
    487,164Junior Subordinated Debentures
    
    
    82,406
    
    
    
    82,406Other Liabilities
    
    
    16,229
    
    
    
    14,617Total Liabilities
    
    
    3,583,602
    
    
    
    3,613,101COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Common Stock, $.001 Par Value; Authorized 200,000,000 Shares; Issued 50,533,049 Shares
(45,900,549 Shares Outstanding) and 50,493,441 Shares (45,860,941 Shares Outstanding) at
June 30, 2008 and December 31, 2007, Respectively
    
    
    51
    
    
    
    50Additional Paid-In Capital
    
    
    348,777
    
    
    
    348,073Unearned Compensation
    
    
    (220
    )
    
    
    (245
    )Accumulated Other Comprehensive (Loss) Income  Unrealized (Loss) Gain on Securities
Available for Sale, Interest-Only Strips and Interest Rate Swaps, Net of Income Taxes of
($285) and $527 at June 30, 2008 and December 31, 2007, Respectively
    
    
    (666
    )
    
    
    275Retained (Deficit) Earnings
    
    
    (16,425
    )
    
    
    92,415331,517
    
    
    
    440,568Less Treasury Stock, at Cost; 4,632,500 Shares at June 30, 2008 and December 31, 2007
    
    
    (70,012
    )
    
    
    (70,012
    )Total Stockholders Equity
    
    
    261,505
    
    
    
    370,556TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,845,107
    
    
    $
    3,983,657
  1




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)  (Dollars in Thousands, Except Per Share Data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007INTEREST AND DIVIDEND INCOME:Interest and Fees on Loans
    
    $
    55,905
    
    
    $
    65,212
    
    
    $
    116,503
    
    
    $
    127,773Taxable Interest on Investments
    
    
    2,579
    
    
    
    3,374
    
    
    
    5,695
    
    
    
    6,905Tax-Exempt Interest on Investments
    
    
    662
    
    
    
    762
    
    
    
    1,421
    
    
    
    1,526Dividends on Federal Home Loan Bank and Federal Reserve Bank Stock
    
    
    486
    
    
    
    336
    
    
    
    900
    
    
    
    705Interest on Federal Funds Sold
    
    
    31
    
    
    
    176
    
    
    
    114
    
    
    
    902Interest on Term Federal Funds Sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Total Interest and Dividend Income
    
    
    59,663
    
    
    
    69,860
    
    
    
    124,633
    
    
    
    137,816INTEREST EXPENSE:Interest on Deposits
    
    
    20,487
    
    
    
    26,797
    
    
    
    45,334
    
    
    
    52,986Interest on FHLB Advances and Other Borrowings
    
    
    3,944
    
    
    
    2,919
    
    
    
    8,421
    
    
    
    5,090Interest on Junior Subordinated Debentures
    
    
    1,164
    
    
    
    1,660
    
    
    
    2,613
    
    
    
    3,299Total Interest Expense
    
    
    25,595
    
    
    
    31,376
    
    
    
    56,368
    
    
    
    61,375NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES
    
    
    34,068
    
    
    
    38,484
    
    
    
    68,265
    
    
    
    76,441Provision for Credit Losses
    
    
    19,229
    
    
    
    3,023
    
    
    
    37,050
    
    
    
    9,155NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
    
    
    14,839
    
    
    
    35,461
    
    
    
    31,215
    
    
    
    67,286NON-INTEREST INCOME:Service Charges on Deposit Accounts
    
    
    4,539
    
    
    
    4,438
    
    
    
    9,256
    
    
    
    8,926Insurance Commissions
    
    
    1,384
    
    
    
    1,279
    
    
    
    2,699
    
    
    
    2,404Trade Finance Fees
    
    
    825
    
    
    
    1,177
    
    
    
    1,690
    
    
    
    2,467Remittance Fees
    
    
    539
    
    
    
    520
    
    
    
    1,044
    
    
    
    991Other Service Charges and Fees
    
    
    703
    
    
    
    574
    
    
    
    1,419
    
    
    
    1,190Bank-Owned Life Insurance Income
    
    
    234
    
    
    
    229
    
    
    
    474
    
    
    
    459Change in Fair Value of Derivatives
    
    
    (41
    )
    
    
    222
    
    
    
    198
    
    
    
    314Other Income
    
    
    917
    
    
    
    491
    
    
    
    1,254
    
    
    
    766Gain on Sales of Loans
    
    
    552
    
    
    
    1,762
    
    
    
    765
    
    
    
    3,162Gain on Sales of Securities Available for Sale
    
    
    
    
    
    
    
    
    
    
    618
    
    
    
    Total Non-Interest Income
    
    
    9,652
    
    
    
    10,692
    
    
    
    19,417
    
    
    
    20,679NON-INTEREST EXPENSES:Salaries and Employee Benefits
    
    
    11,301
    
    
    
    10,782
    
    
    
    22,581
    
    
    
    22,543Occupancy and Equipment
    
    
    2,792
    
    
    
    2,571
    
    
    
    5,574
    
    
    
    5,083Data Processing
    
    
    1,698
    
    
    
    1,665
    
    
    
    3,232
    
    
    
    3,228Professional Fees
    
    
    995
    
    
    
    647
    
    
    
    1,980
    
    
    
    1,121Advertising and Promotion
    
    
    888
    
    
    
    889
    
    
    
    1,700
    
    
    
    1,550Supplies and Communication
    
    
    623
    
    
    
    704
    
    
    
    1,327
    
    
    
    1,292Amortization of Other Intangible Assets
    
    
    502
    
    
    
    592
    
    
    
    1,026
    
    
    
    1,206Decrease in Fair Value of Embedded Options
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    196Other Operating Expenses
    
    
    3,251
    
    
    
    3,444
    
    
    
    6,218
    
    
    
    6,240Impairment Loss on Goodwill
    
    
    107,393
    
    
    
    
    
    
    
    107,393
    
    
    
    Total Non-Interest Expenses
    
    
    129,443
    
    
    
    21,490
    
    
    
    151,031
    
    
    
    42,459INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
    
    
    (104,952
    )
    
    
    24,663
    
    
    
    (100,399
    )
    
    
    45,506Provision for Income Taxes
    
    
    595
    
    
    
    9,401
    
    
    
    2,227
    
    
    
    17,252NET INCOME (LOSS)
    
    $
    (105,547
    )
    
    $
    15,262
    
    
    $
    (102,626
    )
    
    $
    28,254EARNINGS (LOSS) PER SHARE:Basic
    
    $
    (2.30
    )
    
    $
    0.32
    
    
    $
    (2.24
    )
    
    $
    0.58Diluted
    
    $
    (2.30
    )
    
    $
    0.31
    
    
    $
    (2.24
    )
    
    $
    0.58WEIGHTED-AVERAGE SHARES OUTSTANDING:Basic
    
    
    45,881,549
    
    
    
    48,397,824
    
    
    
    45,861,963
    
    
    
    48,678,399Diluted
    
    
    45,881,549
    
    
    
    48,737,574
    
    
    
    45,861,963
    
    
    
    49,110,835DIVIDENDS DECLARED PER SHARE
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.09
    
    
    $
    0.12
  2




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)  (Dollars in Thousands)
  Common Stock  Number of Shares
    
    
    Stockholders EquityAccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Retained
    
    
    Treasury
    
    
    TotalTreasury
    
    
    
    
    
    
    Common
    
    
    Paid-in
    
    
    Unearned
    
    
    Comprehensive
    
    
    Earnings
    
    
    Stock,
    
    
    StockholdersIssued
    
    
    Stock
    
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Compensation
    
    
    Income (Loss)
    
    
    (Deficit)
    
    
    at Cost
    
    
    EquityBALANCE AS OF DECEMBER 31, 2006
    
    
    50,239,613
    
    
    
    (1,163,000
    )
    
    
    49,076,613
    
    
    $
    50
    
    
    $
    344,810
    
    
    $
    
    
    
    $
    (3,200
    )
    
    $
    164,751
    
    
    $
    (20,041
    )
    
    $
    486,370Shares Issued for Business Acquisitions
    
    
    102,181
    
    
    
    
    
    
    
    102,181
    
    
    
    
    
    
    
    2,198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,198Exercises of Stock Options
    
    
    93,135
    
    
    
    
    
    
    
    93,135
    
    
    
    
    
    
    
    687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    687Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    867Tax Benefit from Exercise of Stock Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,880
    )
    
    
    
    
    
    
    (5,880
    )Repurchase of Common Stock
    
    
    
    
    
    
    (1,321,000
    )
    
    
    (1,321,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,934
    )
    
    
    (23,934
    )Repurchase of Stock Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,552
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,552
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,254
    
    
    
    
    
    
    
    28,254Change in Unrealized Loss on Securities
Available for Sale, Interest-Only Strips
and Interest Rate Swaps, Net of Tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (997
    )
    
    
    
    
    
    
    
    
    
    
    (997
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,257BALANCE AS OF JUNE 30, 2007
    
    
    50,434,929
    
    
    
    (2,484,000
    )
    
    
    47,950,929
    
    
    $
    50
    
    
    $
    346,160
    
    
    $
    
    
    
    $
    (4,197
    )
    
    $
    187,125
    
    
    $
    (43,975
    )
    
    $
    485,163BALANCE AS OF DECEMBER 31, 2007
    
    
    50,493,441
    
    
    
    (4,632,500
    )
    
    
    45,860,941
    
    
    $
    50
    
    
    $
    348,073
    
    
    $
    (245
    )
    
    $
    275
    
    
    $
    92,415
    
    
    $
    (70,012
    )
    
    $
    370,556Cumulative-Effect Adjustment from the
Adoption of EITF Issue No. 06-4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,223
    )
    
    
    
    
    
    
    (2,223
    )Shares Issued for Business Acquisitions
    
    
    39,608
    
    
    
    
    
    
    
    39,608
    
    
    
    1
    
    
    
    292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    293Repurchase of Stock Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    482
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    507Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,991
    )
    
    
    
    
    
    
    (3,991
    )Comprehensive Loss:Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102,626
    )
    
    
    
    
    
    
    (102,626
    )Change in Unrealized Loss on Securities
Available for Sale, Interest-Only Strips
and Interest Rate Swaps, Net of Tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (941
    )
    
    
    
    
    
    
    
    
    
    
    (941
    )Total Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,567
    )BALANCE AS OF JUNE 30, 2008
    
    
    50,533,049
    
    
    
    (4,632,500
    )
    
    
    45,900,549
    
    
    $
    51
    
    
    $
    348,777
    
    
    $
    (220
    )
    
    $
    (666
    )
    
    $
    (16,425
    )
    
    $
    (70,012
    )
    
    $
    261,505
  3




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  (In Thousands)
 Six Months EndedJune 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net Income (Loss)
    
    $
    (102,626
    )
    
    $
    28,254Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities:Depreciation and Amortization of Premises and Equipment
    
    
    1,477
    
    
    
    1,436Amortization of Premiums and Accretion of Discounts on Investments, Net
    
    
    75
    
    
    
    100Amortization of Other Intangible Assets
    
    
    1,026
    
    
    
    1,206Amortization of Servicing Assets
    
    
    (700
    )
    
    
    (1,001
    )Share-Based Compensation Expense
    
    
    507
    
    
    
    867Provision for Credit Losses
    
    
    37,050
    
    
    
    9,155Federal Home Loan Bank Stock Dividends
    
    
    (820
    )
    
    
    (353
    )Gain on Sales of Securities Available for Sale
    
    
    (618
    )
    
    
    Increase in Fair Value of Derivatives
    
    
    (198
    )
    
    
    (314
    )Decrease in Fair Value of Embedded Options
    
    
    
    
    
    
    196Gain on Sales of Loans
    
    
    (765
    )
    
    
    (3,162
    )Loss on Sales of Other Real Estate Owned
    
    
    132
    
    
    
    Loss on Sales of Premises and Equipment
    
    
    2
    
    
    
    11Impairment Loss on Goodwill
    
    
    107,393
    
    
    
    Tax Benefit from Exercise of Stock Options
    
    
    
    
    
    
    (150
    )Origination of Loans Held for Sale
    
    
    (26,095
    )
    
    
    (62,289
    )Proceeds from Sales of Loans Held for Sale
    
    
    24,037
    
    
    
    79,117Decrease (Increase) in Accrued Interest Receivable
    
    
    4,256
    
    
    
    (394
    )Decrease in Servicing Asset
    
    
    708
    
    
    
    1,163Increase in Cash Surrender Value of Bank-Owned Life Insurance
    
    
    (473
    )
    
    
    (459
    )(Increase) Decrease in Other Assets
    
    
    (4,713
    )
    
    
    3,853(Decrease) Increase in Accrued Interest Payable
    
    
    (5,245
    )
    
    
    761(Decrease) Increase in Other Liabilities
    
    
    (2,778
    )
    
    
    3,515Net Cash Provided By Operating Activities
    
    
    31,632
    
    
    
    61,512CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from Redemption of Federal Home Loan Bank Stock
    
    
    282
    
    
    
    Proceeds from Matured Term Federal Funds Sold
    
    
    
    
    
    
    5,000Proceeds from Matured or Called Securities Available for Sale
    
    
    87,814
    
    
    
    24,293Proceeds from Sales of Securities Available for Sale
    
    
    24,001
    
    
    
    Proceeds from Sales of Other Real Estate Owned
    
    
    155
    
    
    
    Net Increase in Loans Receivable
    
    
    (80,865
    )
    
    
    (210,642
    )Purchases of Federal Home Loan Bank Stock
    
    
    (7,113
    )
    
    
    (77
    )Purchases of Securities Available for Sale
    
    
    (25,345
    )
    
    
    Purchases of Premises and Equipment
    
    
    (1,480
    )
    
    
    (1,715
    )Business Acquisition, Net of Cash Acquired
    
    
    
    
    
    
    (1,677
    )Net Cash Used In Investing Activities
    
    
    (2,551
    )
    
    
    (184,818
    )CASH FLOWS FROM FINANCING ACTIVITIES:(Decrease) Increase in Deposits
    
    
    (40,139
    )
    
    
    28,431Proceeds from Exercises of Stock Options
    
    
    
    
    
    
    687Tax Benefit from Exercise of Stock Options
    
    
    
    
    
    
    150Cash Paid to Acquire Treasury Stock
    
    
    
    
    
    
    (23,934
    )Cash Paid to Repurchase Stock Options
    
    
    (70
    )
    
    
    Cash Paid to Repurchase Stock Warrants
    
    
    
    
    
    
    (2,552
    )Cash Dividends Paid
    
    
    (3,991
    )
    
    
    (5,880
    )Proceeds from Long-Term FHLB Advances and Other Borrowings
    
    
    150,000
    
    
    
    Repayment of Long-Term FHLB Advances and Other Borrowings
    
    
    (231
    )
    
    
    (15,219
    )Net Change in Short-Term FHLB Advances and Other Borrowings
    
    
    (136,826
    )
    
    
    124,942Net Cash (Used In) Provided By Financing Activities
    
    
    (31,257
    )
    
    
    106,625NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (2,176
    )
    
    
    (16,681
    )Cash and Cash Equivalents at Beginning of Period
    
    
    122,398
    
    
    
    138,501CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    120,222
    
    
    $
    121,820SUPPLEMENTAL CASH FLOW INFORMATION:Cash Paid During the Period for:Interest
    
    $
    65,717
    
    
    $
    60,400Income Tax Payments, Net of Refunds
    
    $
    11,278
    
    
    $
    15,556Non-Cash Activities:Stock Issued for Business Acquisition
    
    $
    293
    
    
    $
    2,198Transfer of Loans to Other Real Estate Owned
    
    $
    
    
    
    $
    1,080
  4




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
 NOTE 1  BASIS OF PRESENTATION
   Note 1  Summary of
Significant Accounting Policies
 Note 7  Correction of Immaterial Errors in Prior
Periods.
 NOTE 2  FAIR VALUE MEASUREMENTS
 Fair Value Option and Fair Value Measurements
 Fair Value Measurements. Effective Date of
FASB Statement No. 157.
 The Fair Value Option for Financial Assets
and Financial Liabilities.
 5




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Continued)
 NOTE 2  FAIR VALUE MEASUREMENTS (Continued)
 Fair Value Measurement
  
    
    Level 1
    
    Quoted prices (unadjusted) for identical assets or liabilities in active
markets that the entity has the ability to access as of the measurement date.
    
    Level 2
    
    Significant other observable inputs other than Level 1 prices, such as quoted
prices for similar assets or liabilities, quoted prices in markets that are not active, and
other inputs that are observable or can be corroborated by observable market data.
    
    Level 3
    
    Significant unobservable inputs that reflect a companys own assumptions about
the assumptions that market participants would use in pricing an asset or liability.
  Securities Available for Sale
 Loans Held for Sale
 Impaired Loans Accounting by Creditors for Impairment of a Loan,
 Derivatives
 6




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Continued)
 NOTE 2  FAIR VALUE MEASUREMENTS (Continued)
 Servicing Assets and Servicing Liabilities
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Level 1
    
    
    Level 2
    
    
    Level 3SignificantObservableInputs WithQuoted Prices in
    
    
    No ActiveActive Markets
    
    
    Market With
    
    
    Significantfor Identical
    
    
    Identical
    
    
    Unobservable
    
    
    Balance as ofAssets
    
    
    Characteristics
    
    
    Inputs
    
    
    June 30, 2008(In Thousands)ASSETS:Securities Available for Sale:Mortgage-Backed Securities
    
    $
    
    
    
    $
    85,341
    
    
    $
    
    
    
    $
    85,341Municipal Bonds
    
    
    
    
    
    
    61,268
    
    
    
    
    
    
    
    61,268U.S. Government Agency Securities
    
    
    59,643
    
    
    
    
    
    
    
    
    
    
    
    59,643Collateralized Mortgage Obligations
    
    
    
    
    
    
    43,064
    
    
    
    
    
    
    
    43,064Corporate Bonds
    
    
    
    
    
    
    7,823
    
    
    
    
    
    
    
    7,823Other Securities
    
    
    750
    
    
    
    2,861
    
    
    
    925
    
    
    
    4,536Total Securities Available for Sale
    
    $
    60,393
    
    
    $
    200,357
    
    
    $
    925
    
    
    $
    261,675Derivatives (Equity Swap)
    
    $
    
    
    
    $
    1,088
    
    
    $
    
    
    
    $
    1,088Servicing Assets
    
    $
    
    
    
    $
    
    
    
    $
    4,328
    
    
    $
    4,328LIABILITIES:Servicing Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    250
    
    
    $
    250
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Realized andRealized and
    
    UnrealizedUnrealized
    
    Gains or LossesBeginning
    
    Purchases,
    
    Gains or Losses
    
    in Other
    
    EndingBalance as of
    
    Issuances and
    
    in Earnings
    
    Comprehensive
    
    Balance as ofApril 1, 2008
    
    Settlements
    
    (Other Expense)
    
    Income
    
    June 30, 2008(In Thousands)ASSETS:Securities Available for
Sale (Other Securities)
    
    $
    925
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    925Servicing Assets
    
    $
    4,220
    
    
    $
    314
    
    
    $
    (206
    )
    
    $
    
    
    
    $
    4,328LIABILITIES:Servicing Liabilities
    
    $
    266
    
    
    $
    
    
    
    $
    (16
    )
    
    $
    
    
    
    $
    250
 7




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Continued)
 NOTE 2  FAIR VALUE MEASUREMENTS (Continued)
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Realized andRealized and
    
    UnrealizedUnrealized
    
    Gains or LossesBeginning
    
    Purchases,
    
    Gains or Losses
    
    in Other
    
    EndingBalance as of
    
    Issuances and
    
    in Earnings
    
    Comprehensive
    
    Balance as ofJanuary 1, 2008
    
    Settlements
    
    (Other Expense)
    
    Income
    
    June 30, 2008(In Thousands)ASSETS:Securities Available for
Sale (Other Securities)
    
    $
    925
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    925Servicing Assets
    
    $
    4,336
    
    
    $
    405
    
    
    $
    (413
    )
    
    $
    
    
    
    $
    4,328LIABILITIES:Servicing Liabilities
    
    $
    266
    
    
    $
    
    
    
    $
    (16
    )
    
    $
    
    
    
    $
    250
 Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
  Level 1
    
    Level 2
    

Level 3SignificantObservableInputs WithQuoted Prices in
    
    No ActiveActive Markets
    
    Market With
    
    Significantfor Identical
    
    Identical
    
    Unobservable
    
    Balance as ofAssets
    
    Characteristics
    
    Inputs
    
    June 30, 2008(In Thousands)ASSETS:Loans Held for Sale
    
    $
    
    
    
    $
    9,158
    
    
    $
    
    
    
    $
    9,158Impaired Loans
    
    $
    
    
    
    $
    2,775
    
    
    $
    
    
    
    $
    2,775
 NOTE 3  SHARE-BASED COMPENSATION
 Share-Based Compensation Expense
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007(In Thousands)Share-Based Compensation Expense
    
    $
    220
    
    
    $
    387
    
    
    $
    507
    
    
    $
    867Related Tax Benefits
    
    $
    93
    
    
    $
    163
    
    
    $
    213
    
    
    $
    365
 8




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Continued)
 NOTE 3  SHARE-BASED COMPENSATION (Continued)
 Unrecognized Compensation Expense
  Unrecognized
    
    
    Average ExpectedExpense
    
    
    Recognition Period(Dollars in Thousands)Stock Option Awards
    
    $
    3,122
    
    
    2.5 yearsRestricted Stock Awards
    
    
    220
    
    
    4.3 yearsTotal Unrecognized Share-Based Compensation Expense
    
    $
    3,342
    
    
    2.6 years
 Share-Based Payment Award Activity
  Weighted-
    
    
    Weighted-
    
    
    AggregateAverage
    
    
    Average
    
    
    IntrinsicNumber
    
    
    Exercise
    
    
    Remaining
    
    
    Value ofof
    
    
    Price Per
    
    
    Contractual
    
    
    In-the-MoneyShares
    
    
    Share
    
    
    Life
    
    
    Options(Dollars in Thousands, Except Per Share Data)Options Outstanding at Beginning of Period
    
    
    1,486,366
    
    
    $
    15.12
    
    
    7.0 years
    
    $
    475
    (1)Options Granted
    
    
    70,000
    
    
    $
    5.66
    
    
    10.0 yearsOptions Expired
    
    
    (3,000
    )
    
    $
    15.61
    
    
    6.7 yearsOptions Forfeited
    
    
    (61,800
    )
    
    $
    14.00
    
    
    8.8 yearsOptions Outstanding at End of Period
    
    
    1,491,566
    
    
    $
    14.72
    
    
    6.8 years
    
    $
    169
    (2)Options Exercisable at End of Period
    
    
    781,144
    
    
    $
    13.27
    
    
    5.6 years
    
    $
    169
    (2)
 
 (1)
    
    Intrinsic value represents the excess of the closing stock price on the last trading
day of the period, which was $7.39 as of March 31, 2008, over the exercise price, multiplied
by the number of options.(2)
    
    Intrinsic value represents the excess of the closing stock price on the last trading
day of the period, which was $5.21 as of June 30, 2008, over the exercise price, multiplied by
the number of options.  9




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Continued)
 NOTE 3  SHARE-BASED COMPENSATION (Continued)
  Weighted-
    
    
    Weighted-
    
    
    AggregateAverage
    
    
    Average
    
    
    IntrinsicNumber
    
    
    Exercise
    
    
    Remaining
    
    
    Value ofof
    
    
    Price Per
    
    
    Contractual
    
    
    In-the-MoneyShares
    
    
    Share
    
    
    Life
    
    
    Options(Dollars in Thousands, Except Per Share Data)Options Outstanding at Beginning of Period
    
    
    1,472,766
    
    
    $
    15.33
    
    
    7.2 years
    
    $
    735
    (1)Options Granted
    
    
    110,000
    
    
    $
    6.59
    
    
    9.8 yearsOptions Expired
    
    
    (18,800
    )
    
    $
    15.05
    
    
    6.4 yearsOptions Forfeited
    
    
    (72,400
    )
    
    $
    14.65
    
    
    8.7 yearsOptions Outstanding at End of Period
    
    
    1,491,566
    
    
    $
    14.72
    
    
    6.8 years
    
    $
    169
    (2)Options Exercisable at End of Period
    
    
    781,144
    
    
    $
    13.27
    
    
    5.6 years
    
    $
    169
    (2)
 
 (1)
    
    Intrinsic value represents the excess of the closing stock price on the last trading
day of the period, which was $8.62 as of December 31, 2007, over the exercise price,
multiplied by the number of options.(2)
    
    Intrinsic value represents the excess of the closing stock price on the last trading
day of the period, which was $5.21 as of June 30, 2008, over the exercise price, multiplied by
the number of options.   Three Months Ended
    
    Six Months EndedJune 30, 2008
    
    June 30, 2008Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    AverageNumber
    
    Grant Date
    
    Number
    
    Grant Dateof
    
    Fair Value
    
    of
    
    Fair ValueShares
    
    Per Share
    
    Shares
    
    Per ShareRestricted Stock at Beginning of Period
    
    
    24,000
    
    
    $
    12.38
    
    
    
    19,000
    
    
    $
    13.48Restricted Stock Granted
    
    
    
    
    
    $
    
    
    
    
    5,000
    
    
    $
    8.21Restricted Stock Forfeited
    
    
    (5,000
    )
    
    $
    8.21
    
    
    
    (5,000
    )
    
    $
    8.21Restricted Stock at End of Period
    
    
    19,000
    
    
    $
    13.48
    
    
    
    19,000
    
    
    $
    13.48
 NOTE 4  EARNINGS (LOSS) PER SHARE
  10




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Continued)
 NOTE 4  EARNINGS PER SHARE (Continued)
  Three Months Ended June 30,2008
    
    
    2007(Numerator)
    
    
    (Denominator)
    
    
    
    
    
    
    (Numerator)
    
    
    (Denominator)Weighted-
    
    
    Per
    
    
    
    
    
    
    Weighted-
    
    
    PerNet
    
    
    Average
    
    
    Share
    
    
    Net
    
    
    Average
    
    
    ShareLoss
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    Amount(Dollars in Thousands, Except Per Share Data)Basic EPS
    
    $
    (105,547
    )
    
    
    45,881,549
    
    
    $
    (2.30
    )
    
    $
    15,262
    
    
    
    48,397,824
    
    
    $
    0.32Effect of Dilutive Securities  Options, Warrants and
Unvested Restricted Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,750
    
    
    
    (0.01
    )Diluted EPS
    
    $
    (105,547
    )
    
    
    45,881,549
    
    
    $
    (2.30
    )
    
    $
    15,262
    
    
    
    48,737,574
    
    
    $
    0.31
 Six Months Ended June 30,2008
    
    
    2007(Numerator)
    
    
    (Denominator)
    
    
    
    
    
    
    (Numerator)
    
    
    (Denominator)Weighted-
    
    
    Per
    
    
    
    
    
    
    Weighted-
    
    
    PerNet
    
    
    Average
    
    
    Share
    
    
    Net
    
    
    Average
    
    
    ShareLoss
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    Amount(Dollars in Thousands, Except Per Share Data)Basic EPS
    
    $
    (102,626
    )
    
    
    45,861,963
    
    
    $
    (2.24
    )
    
    $
    28,254
    
    
    
    48,678,399
    
    
    $
    0.58Effect of Dilutive Securities  Options, Warrants and
Unvested Restricted Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    432,436
    
    
    
    Diluted EPS
    
    $
    (102,626
    )
    
    
    45,861,963
    
    
    $
    (2.24
    )
    
    $
    28,254
    
    
    
    49,110,835
    
    
    $
    0.58
  NOTE 5  OFF-BALANCE SHEET COMMITMENTS
  11




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Continued)
 NOTE 5  OFF-BALANCE SHEET COMMITMENTS (Continued)
  June 30,
    
    
    December 31,2008
    
    
    2007(In Thousands)Commitments to Extend Credit
    
    $
    472,133
    
    
    $
    524,349Standby Letters of Credit
    
    
    54,042
    
    
    
    48,071Commercial Letters of Credit
    
    
    48,130
    
    
    
    52,544Unused Credit Card Lines
    
    
    17,583
    
    
    
    18,622Total Undisbursed Loan Commitments
    
    $
    591,888
    
    
    $
    643,586
 NOTE 6  SEGMENT REPORTING
  NOTE 7  CORRECTION OF IMMATERIAL ERRORS IN PRIOR PERIODS
   December 31, 2007AsPreviously
    
    
    
    
    
    AsCONSOLIDATED BALANCE SHEET
    
    Reported
    
    Adjustments
    
    Restated(In Thousands)Accrued Interest Receivable
    
    $
    17,500
    
    
    $
    (89
    )
    
    $
    17,411Total Assets
    
    $
    3,983,746
    
    
    $
    (89
    )
    
    $
    3,983,657Other Liabilities
    
    $
    13,717
    
    
    $
    900
    
    
    $
    14,617Total Liabilities
    
    $
    3,612,201
    
    
    $
    900
    
    
    $
    3,613,101Retained Earnings
    
    $
    93,404
    
    
    $
    (989
    )
    
    $
    92,415Total Stockholders Equity
    
    $
    371,545
    
    
    $
    (989
    )
    
    $
    370,556Total Liabilities and Stockholders Equity
    
    $
    3,983,746
    
    
    $
    (89
    )
    
    $
    3,983,657
 12




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Continued)
 NOTE 7  CORRECTION OF IMMATERIAL ERRORS IN PRIOR PERIODS (Continued)
 Three Months Ended June 30, 2007
    
    Six Months Ended June 30, 2007As
    
    
    
    
    
    
    
    
    
    AsCONSOLIDATED
    
    Previously
    
    
    
    
    
    As
    
    Previously
    
    
    
    
    
    AsSTATEMENTS OF OPERATIONS
    
    Reported
    
    Adjustments
    
    Restated
    
    Reported
    
    Adjustments
    
    Restated(Dollars in Thousands, Except Per Share Data)Interest on Deposits
    
    $
    26,691
    
    
    $
    106
    
    
    $
    26,797
    
    
    $
    52,772
    
    
    $
    214
    
    
    $
    52,986Total Interest Expense
    
    $
    31,270
    
    
    $
    106
    
    
    $
    31,376
    
    
    $
    61,161
    
    
    $
    214
    
    
    $
    61,375Net Interest Income Before Provision for
Credit Losses
    
    $
    38,590
    
    
    $
    (106
    )
    
    $
    38,484
    
    
    $
    76,655
    
    
    $
    (214
    )
    
    $
    76,441Net Interest Income After Provision for
Credit Losses
    
    $
    35,567
    
    
    $
    (106
    )
    
    $
    35,461
    
    
    $
    67,500
    
    
    $
    (214
    )
    
    $
    67,286Income Before Provision for Income Taxes
    
    $
    24,769
    
    
    $
    (106
    )
    
    $
    24,663
    
    
    $
    45,720
    
    
    $
    (214
    )
    
    $
    45,506Provision for Income Taxes
    
    $
    9,446
    
    
    $
    (45
    )
    
    $
    9,401
    
    
    $
    17,342
    
    
    $
    (90
    )
    
    $
    17,252Net Income
    
    $
    15,323
    
    
    $
    (61
    )
    
    $
    15,262
    
    
    $
    28,378
    
    
    $
    (124
    )
    
    $
    28,254Earnings Per Share:Basic
    
    $
    0.32
    
    
    $
    
    
    
    $
    0.32
    
    
    $
    0.58
    
    
    $
    
    
    
    $
    0.58Diluted
    
    $
    0.31
    
    
    $
    
    
    
    $
    0.31
    
    
    $
    0.58
    
    
    $
    
    
    
    $
    0.58
 NOTE 8  CUMULATIVE-EFFECT ADJUSTMENT FROM THE ADOPTION OF EITF ISSUE NO. 06-4
 Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split
Dollar Life Insurance Arrangements, Employers Accounting for
Postretirement Benefits Other Than Pensions,
 13




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Continued)
 NOTE 9  LIQUIDITY
    NOTE 10  REGULATORY MATTERS
  14




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 FORWARD-LOOKING STATEMENTS
 Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
 
    
    general economic and business conditions in those areas in which we operate;
    
    demographic changes;
    
    competition for loans and deposits;
    
    fluctuations in interest rates;
    
    ability to maintain our status as a financial holding company;
    
    risks of natural disasters related to our real estate portfolio;
    
    risks associated with Small Business Administration (SBA) loans;
    
    changes in governmental regulation;
    
    impact of regulatory orders or action by government regulators against Hanmi Bank or
Hanmi Financial;
    
    ability to receive regulatory approval for Hanmi Bank to declare dividends to Hanmi
Financial;
    
    adequacy of our allowance for loan losses;
    
    credit quality and the effect of credit quality on our provision for credit losses and
allowance for loan losses;
    
    the ability of borrowers to perform under the terms of their loans and other terms of
credit agreements;
    
    our ability to successfully integrate acquisitions we may make;
    
    availability of sources of liquidity for Hanmi Bank and Hanmi Financial;
    
    the availability of capital to fund the expansion of our business; and
    
    changes in securities markets.
 Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations Item 1A. Risk Factors Item 1A. Risk Factors, Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
  15




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
 Notes to Consolidated
Financial Statements Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical
Accounting Policies
 Goodwill
 Goodwill and Other
Intangible Assets,
 Notes to Consolidated Financial Statements, Note 1 
Summary of Significant Accounting Policies Note 6  Goodwill
  16




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##### Table of Contents



SELECTED FINANCIAL DATA
  As of and for the ThreeMonths Ended June 30,2008
    
    2007(Dollars in Thousands, Except Per Share Data)AVERAGE BALANCES:Average Gross Loans, Net (1)
    
    $
    3,317,061
    
    
    $
    3,014,895Average Investment Securities
    
    $
    296,790
    
    
    $
    375,598Average Interest-Earning Assets
    
    $
    3,657,676
    
    
    $
    3,429,123Average Total Assets
    
    $
    3,920,796
    
    
    $
    3,818,170Average Deposits
    
    $
    2,882,506
    
    
    $
    2,967,748Average Borrowings
    
    $
    621,239
    
    
    $
    304,744Average Interest-Bearing Liabilities
    
    $
    2,851,021
    
    
    $
    2,551,665Average Stockholders Equity
    
    $
    377,096
    
    
    $
    495,719Average Tangible Equity (2)
    
    $
    264,710
    
    
    $
    277,414PER SHARE DATA:Earnings (Loss) Per Share  Basic
    
    $
    (2.30
    )
    
    $
    0.32Earnings (Loss) Per Share  Diluted
    
    $
    (2.30
    )
    
    $
    0.31Common Shares Outstanding
    
    
    45,900,549
    
    
    
    47,950,929Book Value Per Share (3)
    
    $
    5.70
    
    
    $
    10.12Tangible Book Value Per Share (4)
    
    $
    5.57
    
    
    $
    5.57Cash Dividends Per Share
    
    $
    0.03
    
    
    $
    0.06SELECTED PERFORMANCE RATIOS:Return on Average Total Assets (5) (6)
    
    
    (10.83
    %)
    
    
    1.60
    %Return on Average Stockholders Equity (5) (7)
    
    
    (112.57
    %)
    
    
    12.35
    %Return on Average Tangible Equity (5) (8)
    
    
    (160.37
    %)
    
    
    22.07
    %Efficiency Ratio (11)
    
    
    296.07
    %
    
    
    43.70
    %Net Interest Spread (9)
    
    
    2.95
    %
    
    
    3.24
    %Net Interest Margin (10)
    
    
    3.75
    %
    
    
    4.50
    %Dividend Payout Ratio (12)
    
    
    (1.30
    %)
    
    
    18.85
    %Average Stockholders Equity to Average Total Assets
    
    
    9.62
    %
    
    
    12.98
    %SELECTED CAPITAL RATIOS:(13)Total Risk-Based Capital Ratio:Hanmi Financial
    
    
    10.66
    %
    
    
    11.59
    %Hanmi Bank
    
    
    10.64
    %
    
    
    11.45
    %Tier 1 Risk-Based Capital Ratio:Hanmi Financial
    
    
    9.40
    %
    
    
    10.57
    %Hanmi Bank
    
    
    9.39
    %
    
    
    10.42
    %Tier 1 Leverage Ratio:Hanmi Financial
    
    
    8.61
    %
    
    
    9.74
    %Hanmi Bank
    
    
    8.60
    %
    
    
    9.61
    %SELECTED ASSET QUALITY RATIOS:Non-Performing Loans to Total Gross Loans (14)
    
    
    3.34
    %
    
    
    0.74
    %Non-Performing Assets to Total Assets (15)
    
    
    2.92
    %
    
    
    0.61
    %Net Loan Charge-Offs to Average Total Gross Loans (16)
    
    
    1.00
    %
    
    
    0.33
    %Allowance for Loan Losses to Total Gross Loans
    
    
    1.88
    %
    
    
    1.05
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    56.14
    %
    
    
    142.30
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs.(2)
    
    Average tangible equity is calculated by subtracting average goodwill and average
core deposit intangible assets from average stockholders equity. See Non-GAAP Financial
Measures.(3)
    
    Total stockholders equity divided by common shares outstanding.(4)
    
    Tangible equity divided by common shares outstanding. See Non-GAAP Financial
Measures.(5)
    
    Calculation based upon annualized net income.(6)
    
    Net income (loss) divided by average total assets.(7)
    
    Net income (loss) divided by average stockholders equity.(8)
    
    Net income (loss) divided by average tangible equity. See Non-GAAP Financial
Measures.(9)
    
    Average yield earned on interest-earning assets less average rate paid on
interest-bearing liabilities.(10)
    
    Net interest income before provision for credit losses divided by average
interest-earning assets.(11)
    
    Total non-interest expenses divided by the sum of net interest income before
provision for credit losses and total non-interest income.(12)
    
    Cash dividends per share times common shares outstanding divided by net income.(13)
    
    The required ratios for a well-capitalized institution, as defined by regulations
of the Board of Governors of the Federal Reserve System, are 10 percent for Total
Risk-Based Capital Ratio (total capital divided by total risk-weighted assets); 6 percent for
Tier 1 Risk-Based Capital Ratio (Tier 1 capital divided by total risk-weighted assets); and 5
percent for Tier 1 Leverage Ratio (Tier 1 capital divided by average total assets).(14)
    
    Non-performing loans consist of non-accrual loans, loans past due 90 days or more
and restructured loans.(15)
    
    Non-performing assets consist of non-performing loans (see footnote (14) above) and
other real estate owned.(16)
    
    Calculation based upon annualized net loan charge-offs. 17




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##### Table of Contents



As of and for the SixMonths Ended June 30,2008
    
    2007(Dollars in Thousands, Except Per Share Data)AVERAGE BALANCES:Average Gross Loans, Net (1)
    
    $
    3,310,101
    
    
    $
    2,949,129Average Investment Securities
    
    $
    319,457
    
    
    $
    381,113Average Interest-Earning Assets
    
    $
    3,673,663
    
    
    $
    3,389,901Average Total Assets
    
    $
    3,944,199
    
    
    $
    3,780,147Average Deposits
    
    $
    2,938,910
    
    
    $
    2,956,629Average Borrowings
    
    $
    587,189
    
    
    $
    278,316Average Interest-Bearing Liabilities
    
    $
    2,874,115
    
    
    $
    2,519,725Average Stockholders Equity
    
    $
    378,030
    
    
    $
    497,444Average Tangible Equity (2)
    
    $
    264,943
    
    
    $
    278,835PER SHARE DATA:Earnings (Loss) Per Share  Basic
    
    $
    (2.24
    )
    
    $
    0.58Earnings (Loss) Per Share  Diluted
    
    $
    (2.24
    )
    
    $
    0.58Cash Dividends Per Share
    
    $
    0.09
    
    
    $
    0.12SELECTED PERFORMANCE RATIOS:Return on Average Total Assets (3) (4)
    
    
    (5.23
    %)
    
    
    1.51
    %Return on Average Stockholders Equity (3) (5)
    
    
    (54.59
    %)
    
    
    11.45
    %Return on Average Tangible Equity (3) (6)
    
    
    (77.90
    %)
    
    
    20.43
    %Efficiency Ratio (9)
    
    
    172.25
    %
    
    
    43.72
    %Net Interest Spread (7)
    
    
    2.88
    %
    
    
    3.29
    %Net Interest Margin (8)
    
    
    3.74
    %
    
    
    4.55
    %Dividend Payout Ratio (10)
    
    
    (4.03
    %)
    
    
    20.37
    %Average Stockholders Equity to Average Total Assets
    
    
    9.58
    %
    
    
    13.16
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs.(2)
    
    Average tangible equity is calculated by subtracting average goodwill and average
core deposit intangible assets from average stockholders equity. See Non-GAAP Financial
Measures.(3)
    
    Calculation based upon annualized net income.(4)
    
    Net income (loss) divided by average total assets.(5)
    
    Net income (loss) divided by average stockholders equity.(6)
    
    Net income (loss) divided by average tangible equity. See Non-GAAP Financial
Measures.(7)
    
    Average yield earned on interest-earning assets less average rate paid on
interest-bearing liabilities.(8)
    
    Net interest income before provision for credit losses divided by average
interest-earning assets.(9)
    
    Total non-interest expenses divided by the sum of net interest income before
provision for credit losses and total non-interest income.(10)
    
    Cash dividends per share times common shares outstanding divided by net income. 18




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##### Table of Contents



Non-GAAP Financial Measures
 Return on Average Tangible Equity
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in Thousands)Average Stockholders Equity
    
    $
    377,096
    
    
    $
    495,719
    
    
    $
    378,030
    
    
    $
    497,444Less Average Goodwill and Average Other Intangible Assets
    
    
    (112,386
    )
    
    
    (218,305
    )
    
    
    (113,087
    )
    
    
    (218,609
    )Average Tangible Equity
    
    $
    264,710
    
    
    $
    277,414
    
    
    $
    264,943
    
    
    $
    278,835Return on Average Stockholders Equity
    
    
    (112.57
    %)
    
    
    12.35
    %
    
    
    (54.59
    %)
    
    
    11.45
    %Effect of Average Goodwill and Average Other Intangible Assets
    
    
    (47.80
    %)
    
    
    9.72
    %
    
    
    (23.31
    %)
    
    
    8.98
    %Return on Average Tangible Equity
    
    
    (160.37
    %)
    
    
    22.07
    %
    
    
    (77.90
    %)
    
    
    20.43
    %
 Tangible Book Value Per Share
   June 30,2008
    
    
    2007(Dollars in Thousands;Except Per Share Data)Total Stockholders Equity
    
    $
    261,505
    
    
    $
    485,163Less Goodwill and Other Intangible Assets
    
    
    (5,882
    )
    
    
    (217,968
    )Tangible Equity
    
    $
    255,623
    
    
    $
    267,195Book Value Per Share
    
    $
    5.70
    
    
    $
    10.12Effect of Goodwill and Other Intangible Assets
    
    
    (0.13
    )
    
    
    (4.55
    )Tangible Book Value Per Share
    
    $
    5.57
    
    
    $
    5.57
 19




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##### Table of Contents



EXECUTIVE OVERVIEW
     Effect ofImpairmentLoss onGAAP
    
    Goodwill
    
    Non-GAAP(In Thousands)Three Months Ended June 30, 2008:Net Income (Loss)
    
    $
    (105,547
    )
    
    $
    107,393
    
    
    $
    1,846Six Months Ended June 30, 2008:Net Income (Loss)
    
    $
    (102,626
    )
    
    $
    107,393
    
    
    $
    4,767
  20




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##### Table of Contents



Key Performance Indicators
  Three Months Ended June 30, 2008 vs. Three Months Ended June 30, 2007
 
    
    The annualized return on average total assets was (10.83) percent for the three months
ended June 30, 2008, compared to 1.60 percent for the same period in 2007. Excluding the
impact of the goodwill impairment charge, the non-GAAP annualized return on average total
assets was 0.19 percent for the three months ended June 30, 2008.
    
    The annualized return on average stockholders equity was (112.57) percent for the
three months ended June 30, 2008, and the annualized return on average tangible equity was
(160.37) percent, compared to 12.35 percent and 22.07 percent, respectively, for the same
period in 2007. Excluding the impact of the goodwill impairment charge, the non-GAAP
annualized return on average stockholders equity was 1.97 percent for the three months
ended June 30, 2008, and the non-GAAP annualized return on average tangible equity was 2.80
percent.
    
    The efficiency ratio (non-interest expenses divided by the sum of net interest income
before provision for credit losses and total non-interest income) was 296.07 percent for
the three months ended June 30, 2008, compared to 43.70 percent for the same period in
2007. Excluding the impact of the goodwill impairment charge, the non-GAAP efficiency ratio
was 50.43 percent for the three months ended June 30, 2008.
    
    The net interest spread and net interest margin for the three months ended June 30,
2008 were 2.95 percent and 3.75 percent, respectively, compared to 3.24 percent and 4.50
percent, respectively, for the same period in 2007.
 Six Months Ended June 30, 2008 vs. Six Months Ended June 30, 2007
 
    
    The annualized return on average total assets was (5.23) percent for the six months
ended June 30, 2008, compared to 1.51 percent for the same period in 2007. Excluding the
impact of the goodwill impairment charge, the non-GAAP annualized return on average total
assets was 0.24 percent for the six months ended June 30, 2008.
    
    The annualized return on average stockholders equity was (54.59) percent for the six
months ended June 30, 2008, and the annualized return on average tangible equity was
(77.90) percent, compared to 11.45 percent and 20.23 percent, respectively, for the same
period in 2007. Excluding the impact of the goodwill impairment charge, the non-GAAP
annualized return on average stockholders equity was 2.54 percent for the six months ended
June 30, 2008, and the non-GAAP annualized return on average tangible equity was 3.62
percent.
    
    The efficiency ratio (non-interest expenses divided by the sum of net interest income
before provision for credit losses and total non-interest income) was 172.25 percent for
the six months ended June 30, 2008, compared to 43.72 percent for the same period in 2007.
Excluding the impact of the goodwill impairment charge, the non-GAAP efficiency ratio was
49.77 percent for the six months ended June 30, 2008.
    
    The net interest spread and net interest margin for the six months ended June 30, 2008
were 2.88 percent and 3.74 percent, respectively, compared to 3.29 percent and 4.55
percent, respectively, for the same period in 2007.
 21




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##### Table of Contents



Effect ofImpairmentLoss onGAAP
    
    Goodwill
    
    Non-GAAP(Dollars in Thousands)Three Months Ended June 30, 2008:Total Non-Interest Expenses
    
    $
    129,443
    
    
    $
    (107,393
    )
    
    $
    22,050Return on Average Total Assets
    
    
    (10.83
    %)
    
    
    11.02
    %
    
    
    0.19
    %Return on Average Stockholders Equity
    
    
    (112.57
    %)
    
    
    114.54
    %
    
    
    1.97
    %Return on Average Tangible Equity
    
    
    (160.36
    %)
    
    
    163.16
    %
    
    
    2.80
    %Efficiency Ratio
    
    
    296.07
    %
    
    
    (245.64
    %)
    
    
    50.43
    %Six Months Ended June 30, 2008:Total Non-Interest Expenses
    
    $
    151,031
    
    
    $
    (107,393
    )
    
    $
    43,638Return on Average Total Assets
    
    
    (5.23
    %)
    
    
    5.47
    %
    
    
    0.24
    %Return on Average Stockholders Equity
    
    
    (54.59
    %)
    
    
    57.13
    %
    
    
    2.54
    %Return on Average Tangible Equity
    
    
    (77.89
    %)
    
    
    81.51
    %
    
    
    3.62
    %Efficiency Ratio
    
    
    172.25
    %
    
    
    (122.48
    %)
    
    
    49.77
    %
  Summary of Changes in Balance Sheets  June 30, 2008 Compared to December 31, 2007
 
    
    Total assets decreased $138.6 million, or 3.5 percent, from $3.98 billion as of
December 31, 2007 to $3.85 billion as of June 30, 2008.
    
    Loans receivable (including loans held for sale), net of deferred loan fees and
allowance for loan losses, increased $48.8 million, or 1.5 percent, from $3.24 billion as
of December 31, 2007 to $3.29 billion as of June 30, 2008.
    
    Total deposits decreased $40.1 million, or 1.3 percent, from $3.00 billion as of
December 31, 2007 to $2.96 billion as of June 30, 2008.
    
    Total stockholders equity decreased $109.1 million, or 29.4 percent, from $370.6
million as of December 31, 2007 to $261.5 million as of June 30, 2008.
 22




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##### Table of Contents



2008 Outlook
   Item 2. Managements Discussion
and Analysis of Financial Condition and Results of Operations  Interest Rate Risk Management " Liquidity and Capital Resources
 RESULTS OF OPERATIONS
 Net Interest Income Before Provision for Credit Losses
   23




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##### Table of Contents



Three Months Ended June 30, 2008 vs. Three Months Ended June 30, 2007
  Three Months EndedJune 30, 2008
    
    
    June 30, 2007Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)ASSETSInterest-Earning Assets:Gross Loans, Net (1)
    
    $
    3,317,061
    
    
    $
    55,905
    
    
    
    6.78
    %
    
    $
    3,014,895
    
    
    $
    65,212
    
    
    
    8.68
    %Municipal Securities (2)
    
    
    63,177
    
    
    
    662
    
    
    
    4.19
    %
    
    
    72,284
    
    
    
    762
    
    
    
    4.22
    %Obligations of Other U.S. Government Agencies
    
    
    84,088
    
    
    
    884
    
    
    
    4.21
    %
    
    
    118,696
    
    
    
    1,233
    
    
    
    4.16
    %Other Debt Securities
    
    
    149,525
    
    
    
    1,694
    
    
    
    4.53
    %
    
    
    184,618
    
    
    
    2,141
    
    
    
    4.64
    %Equity Securities
    
    
    38,031
    
    
    
    486
    
    
    
    5.11
    %
    
    
    25,290
    
    
    
    336
    
    
    
    5.31
    %Federal Funds Sold
    
    
    5,621
    
    
    
    31
    
    
    
    2.21
    %
    
    
    13,340
    
    
    
    176
    
    
    
    5.28
    %Interest-Earning Deposits
    
    
    173
    
    
    
    1
    
    
    
    2.31
    %
    
    
    
    
    
    
    
    
    
    
    Total Interest-Earning Assets
    
    
    3,657,676
    
    
    
    59,663
    
    
    
    6.56
    %
    
    
    3,429,123
    
    
    
    69,860
    
    
    
    8.17
    %Noninterest-Earning Assets:Cash and Cash Equivalents
    
    
    85,600
    
    
    
    
    
    
    
    
    
    
    
    91,690Allowance for Loan Losses
    
    
    (52,685
    )
    
    
    
    
    
    
    
    
    
    
    (31,046
    )Other Assets
    
    
    230,205
    
    
    
    
    
    
    
    
    
    
    
    328,403Total Noninterest-Earning Assets
    
    
    263,120
    
    
    
    
    
    
    
    
    
    
    
    389,047TOTAL ASSETS
    
    $
    3,920,796
    
    
    
    
    
    
    
    
    
    
    $
    3,818,170LIABILITIES AND STOCKHOLDERS EQUITYInterest-Bearing Liabilities:Deposits:Savings
    
    $
    91,803
    
    
    
    527
    
    
    
    2.31
    %
    
    $
    99,457
    
    
    
    502
    
    
    
    2.02
    %Money Market Checking and NOW Accounts
    
    
    718,257
    
    
    
    5,707
    
    
    
    3.20
    %
    
    
    432,408
    
    
    
    3,666
    
    
    
    3.40
    %Time Deposits of $100,000 or More
    
    
    1,098,990
    
    
    
    11,040
    
    
    
    4.04
    %
    
    
    1,411,099
    
    
    
    18,778
    
    
    
    5.34
    %Other Time Deposits
    
    
    320,732
    
    
    
    3,213
    
    
    
    4.03
    %
    
    
    303,957
    
    
    
    3,851
    
    
    
    5.08
    %FHLB Advances and Other Borrowings
    
    
    538,833
    
    
    
    3,944
    
    
    
    2.94
    %
    
    
    222,338
    
    
    
    2,919
    
    
    
    5.27
    %Junior Subordinated Debentures
    
    
    82,406
    
    
    
    1,164
    
    
    
    5.68
    %
    
    
    82,406
    
    
    
    1,660
    
    
    
    8.08
    %Total Interest-Bearing Liabilities
    
    
    2,851,021
    
    
    
    25,595
    
    
    
    3.61
    %
    
    
    2,551,665
    
    
    
    31,376
    
    
    
    4.93
    %Noninterest-Bearing Liabilities:Demand Deposits
    
    
    652,724
    
    
    
    
    
    
    
    
    
    
    
    720,827Other Liabilities
    
    
    39,955
    
    
    
    
    
    
    
    
    
    
    
    49,959Total Noninterest-Bearing Liabilities
    
    
    692,679
    
    
    
    
    
    
    
    
    
    
    
    770,786Total Liabilities
    
    
    3,543,700
    
    
    
    
    
    
    
    
    
    
    
    3,322,451Stockholders Equity
    
    
    377,096
    
    
    
    
    
    
    
    
    
    
    
    495,719TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,920,796
    
    
    
    
    
    
    
    
    
    
    $
    3,818,170NET INTEREST INCOME
    
    
    
    
    
    $
    34,068
    
    
    
    
    
    
    
    
    
    
    $
    38,484NET INTEREST SPREAD(3)
    
    
    
    
    
    
    
    
    
    
    2.95
    %
    
    
    
    
    
    
    
    
    
    
    3.24
    %NET INTEREST MARGIN(4)
    
    
    
    
    
    
    
    
    
    
    3.75
    %
    
    
    
    
    
    
    
    
    
    
    4.50
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs, but excluding the allowance
for loan losses. Non-accrual loans are included in the average loan balance. Loan fees have
been included in the calculation of interest income. Loan fees were $851,000 and $870,000 for
the three months ended June 30, 2008 and 2007, respectively.(2)
    
    If computed on a tax-equivalent basis using an effective marginal rate of 35
percent, tax-exempt income would be $1.0 million and $1.2 million, and the yields would be
6.45 percent and 6.49 percent, for the three months ended June 30, 2008 and 2007,
respectively.(3)
    
    Represents the average rate earned on interest-earning assets less the average rate
paid on interest-bearing liabilities.(4)
    
    Represents annualized net interest income as a percentage of average
interest-earning assets.
 24




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##### Table of Contents



Three Months Ended June 30, 2008 vs.Three Months Ended June 30, 2007Increases (Decreases) Due to Change inVolume
    
    
    Rate
    
    
    Total(In Thousands)Interest and Dividend Income:Gross Loans, Net
    
    $
    6,014
    
    
    $
    (15,321
    )
    
    $
    (9,307
    )Municipal Securities
    
    
    (95
    )
    
    
    (5
    )
    
    
    (100
    )Obligations of Other U.S. Government Agencies
    
    
    (364
    )
    
    
    15
    
    
    
    (349
    )Other Debt Securities
    
    
    (399
    )
    
    
    (48
    )
    
    
    (447
    )Equity Securities
    
    
    163
    
    
    
    (13
    )
    
    
    150Federal Funds Sold
    
    
    (72
    )
    
    
    (73
    )
    
    
    (145
    )Interest-Earning Deposits
    
    
    1
    
    
    
    
    
    
    
    1Total Interest and Dividend Income
    
    
    5,248
    
    
    
    (15,445
    )
    
    
    (10,197
    )Interest Expense:Savings
    
    
    (41
    )
    
    
    66
    
    
    
    25Money Market Checking and NOW Accounts
    
    
    2,274
    
    
    
    (233
    )
    
    
    2,041Time Deposits of $100,000 or More
    
    
    (3,687
    )
    
    
    (4,051
    )
    
    
    (7,738
    )Other Time Deposits
    
    
    201
    
    
    
    (839
    )
    
    
    (638
    )FHLB Advances and Other Borrowings
    
    
    2,743
    
    
    
    (1,718
    )
    
    
    1,025Junior Subordinated Debentures
    
    
    
    
    
    
    (496
    )
    
    
    (496
    )Total Interest Expense
    
    
    1,490
    
    
    
    (7,271
    )
    
    
    (5,781
    )Change in Net Interest Income
    
    $
    3,758
    
    
    $
    (8,174
    )
    
    $
    (4,416
    )
     25




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##### Table of Contents



Six Months Ended June 30, 2008 vs. Six Months Ended June 30, 2007
  Six Months EndedJune 30, 2008
    
    
    June 30, 2007Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)ASSETSInterest-Earning Assets:Gross Loans, Net (1)
    
    $
    3,310,101
    
    
    $
    116,503
    
    
    
    7.08
    %
    
    $
    2,949,129
    
    
    $
    127,773
    
    
    
    8.74
    %Municipal Securities (2)
    
    
    67,528
    
    
    
    1,421
    
    
    
    4.21
    %
    
    
    72,340
    
    
    
    1,526
    
    
    
    4.22
    %Obligations of Other U.S. Government Agencies
    
    
    96,974
    
    
    
    2,129
    
    
    
    4.39
    %
    
    
    118,483
    
    
    
    2,489
    
    
    
    4.20
    %Other Debt Securities
    
    
    154,955
    
    
    
    3,565
    
    
    
    4.60
    %
    
    
    190,290
    
    
    
    4,416
    
    
    
    4.64
    %Equity Securities
    
    
    35,760
    
    
    
    900
    
    
    
    5.03
    %
    
    
    25,149
    
    
    
    705
    
    
    
    5.61
    %Federal Funds Sold
    
    
    8,258
    
    
    
    114
    
    
    
    2.76
    %
    
    
    34,317
    
    
    
    902
    
    
    
    5.26
    %Term Federal Funds Sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    193
    
    
    
    5
    
    
    
    5.18
    %Interest-Earning Deposits
    
    
    87
    
    
    
    1
    
    
    
    2.30
    %
    
    
    
    
    
    
    
    
    
    
    Total Interest-Earning Assets
    
    
    3,673,663
    
    
    
    124,633
    
    
    
    6.82
    %
    
    
    3,389,901
    
    
    
    137,816
    
    
    
    8.20
    %Noninterest-Earning Assets:Cash and Cash Equivalents
    
    
    89,727
    
    
    
    
    
    
    
    
    
    
    
    91,221Allowance for Loan Losses
    
    
    (47,615
    )
    
    
    
    
    
    
    
    
    
    
    (29,076
    )Other Assets
    
    
    228,424
    
    
    
    
    
    
    
    
    
    
    
    328,101Total Noninterest-Earning Assets
    
    
    270,536
    
    
    
    
    
    
    
    
    
    
    
    390,246TOTAL ASSETS
    
    $
    3,944,199
    
    
    
    
    
    
    
    
    
    
    $
    3,780,147LIABILITIES AND STOCKHOLDERS EQUITYInterest-Bearing Liabilities:Deposits:Savings
    
    $
    92,135
    
    
    
    1,054
    
    
    
    2.30
    %
    
    $
    100,114
    
    
    
    963
    
    
    
    1.94
    %Money Market Checking and NOW Accounts
    
    
    637,875
    
    
    
    10,367
    
    
    
    3.27
    %
    
    
    430,152
    
    
    
    7,138
    
    
    
    3.35
    %Time Deposits of $100,000 or More
    
    
    1,226,728
    
    
    
    26,727
    
    
    
    4.38
    %
    
    
    1,408,718
    
    
    
    37,276
    
    
    
    5.34
    %Other Time Deposits
    
    
    330,188
    
    
    
    7,186
    
    
    
    4.38
    %
    
    
    302,425
    
    
    
    7,609
    
    
    
    5.07
    %FHLB Advances and Other Borrowings
    
    
    504,783
    
    
    
    8,421
    
    
    
    3.35
    %
    
    
    195,910
    
    
    
    5,090
    
    
    
    5.24
    %Junior Subordinated Debentures
    
    
    82,406
    
    
    
    2,613
    
    
    
    6.38
    %
    
    
    82,406
    
    
    
    3,299
    
    
    
    8.07
    %Total Interest-Bearing Liabilities
    
    
    2,874,115
    
    
    
    56,368
    
    
    
    3.94
    %
    
    
    2,519,725
    
    
    
    61,375
    
    
    
    4.91
    %Noninterest-Bearing Liabilities:Demand Deposits
    
    
    651,984
    
    
    
    
    
    
    
    
    
    
    
    715,220Other Liabilities
    
    
    40,070
    
    
    
    
    
    
    
    
    
    
    
    47,758Total Noninterest-Bearing Liabilities
    
    
    692,054
    
    
    
    
    
    
    
    
    
    
    
    762,978Total Liabilities
    
    
    3,566,169
    
    
    
    
    
    
    
    
    
    
    
    3,282,703Stockholders Equity
    
    
    378,030
    
    
    
    
    
    
    
    
    
    
    
    497,444TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,944,199
    
    
    
    
    
    
    
    
    
    
    $
    3,780,147NET INTEREST INCOME
    
    
    
    
    
    $
    68,265
    
    
    
    
    
    
    
    
    
    
    $
    76,441NET INTEREST SPREAD(3)
    
    
    
    
    
    
    
    
    
    
    2.88
    %
    
    
    
    
    
    
    
    
    
    
    3.29
    %NET INTEREST MARGIN(4)
    
    
    
    
    
    
    
    
    
    
    3.74
    %
    
    
    
    
    
    
    
    
    
    
    4.55
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs, but excluding the allowance
for loan losses. Non-accrual loans are included in the average loan balance. Loan fees have
been included in the calculation of interest income. Loan fees were $1.4 million and $1.8
million for the six months ended June 30, 2008 and 2007, respectively.(2)
    
    If computed on a tax-equivalent basis using an effective marginal rate of 35
percent, tax-exempt income would be $2.2 million and $2.3 million, and the yields would be
6.47 percent and 6.49 percent, for the six months ended June 30, 2008 and 2007, respectively.(3)
    
    Represents the average rate earned on interest-earning assets less the average rate
paid on interest-bearing liabilities.(4)
    
    Represents annualized net interest income as a percentage of average
interest-earning assets. 26




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##### Table of Contents



Six Months Ended June 30, 2008 vs.Six Months Ended June 30, 2007Increases (Decreases) Due to Change inVolume
    
    
    Rate
    
    
    Total(In Thousands)Interest and Dividend Income:Gross Loans, Net
    
    $
    14,655
    
    
    $
    (25,925
    )
    
    $
    (11,270
    )Municipal Securities
    
    
    (101
    )
    
    
    (4
    )
    
    
    (105
    )Obligations of Other U.S. Government Agencies
    
    
    (468
    )
    
    
    108
    
    
    
    (360
    )Other Debt Securities
    
    
    (813
    )
    
    
    (38
    )
    
    
    (851
    )Equity Securities
    
    
    273
    
    
    
    (78
    )
    
    
    195Federal Funds Sold
    
    
    (485
    )
    
    
    (303
    )
    
    
    (788
    )Term Federal Funds Sold
    
    
    (2
    )
    
    
    (3
    )
    
    
    (5
    )Interest-Earning Deposits
    
    
    1
    
    
    
    
    
    
    
    1Total Interest and Dividend Income
    
    
    13,060
    
    
    
    (26,243
    )
    
    
    (13,183
    )Interest Expense:Savings
    
    
    (81
    )
    
    
    172
    
    
    
    91Money Market Checking and NOW Accounts
    
    
    3,399
    
    
    
    (170
    )
    
    
    3,229Time Deposits of $100,000 or More
    
    
    (4,424
    )
    
    
    (6,125
    )
    
    
    (10,549
    )Other Time Deposits
    
    
    670
    
    
    
    (1,093
    )
    
    
    (423
    )FHLB Advances and Other Borrowings
    
    
    5,702
    
    
    
    (2,371
    )
    
    
    3,331Junior Subordinated Debentures
    
    
    
    
    
    
    (686
    )
    
    
    (686
    )Total Interest Expense
    
    
    5,266
    
    
    
    (10,273
    )
    
    
    (5,007
    )Change in Net Interest Income
    
    $
    7,794
    
    
    $
    (15,970
    )
    
    $
    (8,176
    )
     27




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##### Table of Contents



Provision for Credit Losses
 Non-Performing
Assets Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
 Non-Interest Income
  Three Months Ended June 30, 2008 vs. Three Months Ended June 30, 2007
  Three Months EndedJune 30,
    
    
    Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Service Charges on Deposit Accounts
    
    $
    4,539
    
    
    $
    4,438
    
    
    $
    101
    
    
    
    2.3
    %Insurance Commissions
    
    
    1,384
    
    
    
    1,279
    
    
    
    105
    
    
    
    8.2
    %Trade Finance Fees
    
    
    825
    
    
    
    1,177
    
    
    
    (352
    )
    
    
    (29.9
    %)Remittance Fees
    
    
    539
    
    
    
    520
    
    
    
    19
    
    
    
    3.7
    %Other Service Charges and Fees
    
    
    703
    
    
    
    574
    
    
    
    129
    
    
    
    22.5
    %Bank-Owned Life Insurance Income
    
    
    234
    
    
    
    229
    
    
    
    5
    
    
    
    2.2
    %Change in Fair Value of Derivatives
    
    
    (41
    )
    
    
    222
    
    
    
    (263
    )
    
    
    (118.5
    %)Other Income
    
    
    917
    
    
    
    491
    
    
    
    426
    
    
    
    86.8
    %Gain on Sales of Loans
    
    
    552
    
    
    
    1,762
    
    
    
    (1,210
    )
    
    
    (68.7
    %)Total Non-Interest Income
    
    $
    9,652
    
    
    $
    10,692
    
    
    $
    (1,040
    )
    
    
    (9.7
    %)
     28




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##### Table of Contents



Six Months Ended June 30, 2008 vs. Six Months Ended June 30, 2007
  Six Months EndedJune 30,
    
    
    Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Service Charges on Deposit Accounts
    
    $
    9,256
    
    
    $
    8,926
    
    
    $
    330
    
    
    
    3.7
    %Insurance Commissions
    
    
    2,699
    
    
    
    2,404
    
    
    
    295
    
    
    
    12.3
    %Trade Finance Fees
    
    
    1,690
    
    
    
    2,467
    
    
    
    (777
    )
    
    
    (31.5
    %)Remittance Fees
    
    
    1,044
    
    
    
    991
    
    
    
    53
    
    
    
    5.3
    %Other Service Charges and Fees
    
    
    1,419
    
    
    
    1,190
    
    
    
    229
    
    
    
    19.2
    %Bank-Owned Life Insurance Income
    
    
    474
    
    
    
    459
    
    
    
    15
    
    
    
    3.3
    %Change in Fair Value of Derivatives
    
    
    198
    
    
    
    314
    
    
    
    (116
    )
    
    
    (36.9
    %)Other Income
    
    
    1,254
    
    
    
    766
    
    
    
    488
    
    
    
    63.7
    %Gain on Sales of Loans
    
    
    765
    
    
    
    3,162
    
    
    
    (2,397
    )
    
    
    (75.8
    %)Gain on Sales of Securities Available for Sale
    
    
    618
    
    
    
    
    
    
    
    618
    
    
    
    Total Non-Interest Income
    
    $
    19,417
    
    
    $
    20,679
    
    
    $
    (1,262
    )
    
    
    (6.1
    %)
      29




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##### Table of Contents



Non-Interest Expenses
 Three Months Ended June 30, 2008 vs. Three Months Ended June 30, 2007
  Three Months EndedJune 30,
    
    
    Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Salaries and Employee Benefits
    
    $
    11,301
    
    
    $
    10,782
    
    
    $
    519
    
    
    
    4.8
    %Occupancy and Equipment
    
    
    2,792
    
    
    
    2,571
    
    
    
    221
    
    
    
    8.6
    %Data Processing
    
    
    1,698
    
    
    
    1,665
    
    
    
    33
    
    
    
    2.0
    %Professional Fees
    
    
    995
    
    
    
    647
    
    
    
    348
    
    
    
    53.8
    %Advertising and Promotion
    
    
    888
    
    
    
    889
    
    
    
    (1
    )
    
    
    (0.1
    %)Supplies and Communications
    
    
    623
    
    
    
    704
    
    
    
    (81
    )
    
    
    (11.5
    %)Amortization of Other Intangible Assets
    
    
    502
    
    
    
    592
    
    
    
    (90
    )
    
    
    (15.2
    %)Decrease in Fair Value of Embedded Options
    
    
    
    
    
    
    196
    
    
    
    (196
    )
    
    
    (100.0
    %)Other Operating Expenses
    
    
    3,251
    
    
    
    3,444
    
    
    
    (193
    )
    
    
    (5.6
    %)Impairment Loss on Goodwill
    
    
    107,393
    
    
    
    
    
    
    
    107,393
    
    
    
    Total Non-Interest Expenses
    
    $
    129,443
    
    
    $
    21,490
    
    
    $
    107,953
    
    
    
    502.3
    %
     30




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##### Table of Contents



Six Months Ended June 30, 2008 vs. Six Months Ended June 30, 2007
  Six Months EndedJune 30,
    
    
    Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Salaries and Employee Benefits
    
    $
    22,581
    
    
    $
    22,543
    
    
    $
    38
    
    
    
    0.2
    %Occupancy and Equipment
    
    
    5,574
    
    
    
    5,083
    
    
    
    491
    
    
    
    9.7
    %Data Processing
    
    
    3,232
    
    
    
    3,228
    
    
    
    4
    
    
    
    0.1
    %Professional Fees
    
    
    1,980
    
    
    
    1,121
    
    
    
    859
    
    
    
    76.6
    %Advertising and Promotion
    
    
    1,700
    
    
    
    1,550
    
    
    
    150
    
    
    
    9.7
    %Supplies and Communications
    
    
    1,327
    
    
    
    1,292
    
    
    
    35
    
    
    
    2.7
    %Amortization of Other Intangible Assets
    
    
    1,026
    
    
    
    1,206
    
    
    
    (180
    )
    
    
    (14.9
    %)Decrease in Fair Value of Embedded Options
    
    
    
    
    
    
    196
    
    
    
    (196
    )
    
    
    (100.0
    %)Other Operating Expenses
    
    
    6,218
    
    
    
    6,240
    
    
    
    (22
    )
    
    
    (0.4
    %)Impairment Loss on Goodwill
    
    
    107,393
    
    
    
    
    
    
    
    107,393
    
    
    
    Total Non-Interest Expenses
    
    $
    151,031
    
    
    $
    42,459
    
    
    $
    108,572
    
    
    
    255.7
    %
    Provision for Income Taxes
  31




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##### Table of Contents



FINANCIAL CONDITION
 Investment Portfolio
 Accounting for Certain Investments in Debt and Equity Securities.
  June 30, 2008
    
    
    December 31, 2007Estimated
    
    
    Unrealized
    
    
    
    
    
    
    Estimated
    
    
    UnrealizedAmortized
    
    
    Fair
    
    
    Gain
    
    
    Amortized
    
    
    Fair
    
    
    GainCost
    
    
    Value
    
    
    (Loss)
    
    
    Cost
    
    
    Value
    
    
    (Loss)(In Thousands)Held to Maturity:Municipal Bonds
    
    $
    694
    
    
    $
    694
    
    
    $
    
    
    
    $
    694
    
    
    $
    694
    
    
    $
    Mortgage-Backed Securities
    
    
    232
    
    
    
    231
    
    
    
    (1
    )
    
    
    246
    
    
    
    247
    
    
    
    1Total Held to Maturity
    
    $
    926
    
    
    $
    925
    
    
    $
    (1
    )
    
    $
    940
    
    
    $
    941
    
    
    $
    1Available for Sale:Mortgage-Backed Securities
    
    $
    86,208
    
    
    $
    85,341
    
    
    $
    (867
    )
    
    $
    99,332
    
    
    $
    99,198
    
    
    $
    (134
    )Municipal Bonds
    
    
    60,642
    
    
    
    61,268
    
    
    
    626
    
    
    
    69,907
    
    
    
    71,751
    
    
    
    1,844U.S. Government Agency Securities
    
    
    59,570
    
    
    
    59,643
    
    
    
    73
    
    
    
    104,893
    
    
    
    105,089
    
    
    
    196Collateralized Mortgage Obligations
    
    
    43,394
    
    
    
    43,064
    
    
    
    (330
    )
    
    
    51,881
    
    
    
    51,418
    
    
    
    (463
    )Corporate Bonds
    
    
    7,874
    
    
    
    7,823
    
    
    
    (51
    )
    
    
    18,295
    
    
    
    18,226
    
    
    
    (69
    )Other Securities
    
    
    4,675
    
    
    
    4,536
    
    
    
    (139
    )
    
    
    3,925
    
    
    
    3,835
    
    
    
    (90
    )Total Available for Sale
    
    $
    262,363
    
    
    $
    261,675
    
    
    $
    (688
    )
    
    $
    348,233
    
    
    $
    349,517
    
    
    $
    1,284
   Available for Sale
    
    
    Held to MaturityEstimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(In Thousands)Within One Year
    
    $
    41,673
    
    
    $
    41,648
    
    
    $
    
    
    
    $
    Over One Year Through Five Years
    
    
    33,559
    
    
    
    33,512
    
    
    
    
    
    
    
    Over Five Years Through Ten Years
    
    
    7,474
    
    
    
    7,610
    
    
    
    694
    
    
    
    694Over Ten Years
    
    
    50,055
    
    
    
    50,500
    
    
    
    
    
    
    
    Mortgage-Backed Securities
    
    
    86,208
    
    
    
    85,341
    
    
    
    232
    
    
    
    231Collateralized Mortgage Obligations
    
    
    43,394
    
    
    
    43,064
    
    
    
    
    
    
    
    $
    262,363
    
    
    $
    261,675
    
    
    $
    926
    
    
    $
    925
 32




---



##### Table of Contents



Holding PeriodLess than 12 Months
    
    
    12 Months or More
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In Thousands)Available for Sale  June 30, 2008:Mortgage-Backed Securities
    
    $
    42,015
    
    
    $
    517
    
    
    $
    18,180
    
    
    $
    496
    
    
    $
    60,195
    
    
    $
    1,013Municipal Bonds
    
    
    8,663
    
    
    
    76
    
    
    
    1,804
    
    
    
    65
    
    
    
    10,467
    
    
    
    141U.S. Government Agency Securities
    
    
    14,467
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    14,467
    
    
    
    114Collateralized Mortgage Obligations
    
    
    12,950
    
    
    
    108
    
    
    
    11,113
    
    
    
    321
    
    
    
    24,063
    
    
    
    429Corporate Bonds
    
    
    2,480
    
    
    
    
    
    
    
    2,750
    
    
    
    59
    
    
    
    5,230
    
    
    
    59Other
    
    
    
    
    
    
    
    
    
    
    3,786
    
    
    
    140
    
    
    
    3,786
    
    
    
    140$
    80,575
    
    
    $
    815
    
    
    $
    37,633
    
    
    $
    1,081
    
    
    $
    118,208
    
    
    $
    1,896Available for Sale  December 31,
2007:Mortgage-Backed Securities
    
    $
    5,319
    
    
    $
    31
    
    
    $
    42,143
    
    
    $
    636
    
    
    $
    47,462
    
    
    $
    667Municipal Bonds
    
    
    
    
    
    
    
    
    
    
    2,910
    
    
    
    23
    
    
    
    2,910
    
    
    
    23U.S. Government Agency Securities
    
    
    
    
    
    
    
    
    
    
    46,895
    
    
    
    81
    
    
    
    46,895
    
    
    
    81Collateralized Mortgage Obligations
    
    
    
    
    
    
    
    
    
    
    40,167
    
    
    
    591
    
    
    
    40,167
    
    
    
    591Corporate Bonds
    
    
    
    
    
    
    
    
    
    
    7,834
    
    
    
    112
    
    
    
    7,834
    
    
    
    112Other
    
    
    
    
    
    
    
    
    
    
    2,910
    
    
    
    90
    
    
    
    2,910
    
    
    
    90$
    5,319
    
    
    $
    31
    
    
    $
    142,859
    
    
    $
    1,533
    
    
    $
    148,178
    
    
    $
    1,564
  33




---



##### Table of Contents



Loan Portfolio
   June 30,
    
    
    December 31,
    
    
    Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Real Estate Loans:Commercial Property
    
    $
    863,047
    
    
    $
    795,675
    
    
    $
    67,372
    
    
    
    8.5
    %Construction
    
    
    204,411
    
    
    
    215,857
    
    
    
    (11,446
    )
    
    
    (5.3
    %)Residential Property (1)
    
    
    91,022
    
    
    
    90,375
    
    
    
    647
    
    
    
    0.7
    %Total Real Estate Loans
    
    
    1,158,480
    
    
    
    1,101,907
    
    
    
    56,573
    
    
    
    5.1
    %Commercial and Industrial Loans:Commercial Term Loans
    
    
    1,625,116
    
    
    
    1,599,853
    
    
    
    25,263
    
    
    
    1.6
    %Commercial Lines of Credit
    
    
    241,681
    
    
    
    256,978
    
    
    
    (15,297
    )
    
    
    (6.0
    %)SBA Loans (2)
    
    
    143,589
    
    
    
    118,528
    
    
    
    25,061
    
    
    
    21.1
    %International Loans
    
    
    98,120
    
    
    
    119,360
    
    
    
    (21,240
    )
    
    
    (17.8
    %)Total Commercial and Industrial Loans
    
    
    2,108,506
    
    
    
    2,094,719
    
    
    
    13,787
    
    
    
    0.7
    %Consumer Loans
    
    
    88,062
    
    
    
    90,449
    
    
    
    (2,387
    )
    
    
    (2.6
    %)Total Loans  Gross
    
    
    3,355,048
    
    
    
    3,287,075
    
    
    
    67,973
    
    
    
    2.1
    %Deferred Loan Fees
    
    
    (2,169
    )
    
    
    (2,367
    )
    
    
    198
    
    
    
    (8.4
    %)Allowance for Loan Losses
    
    
    (62,977
    )
    
    
    (43,611
    )
    
    
    (19,366
    )
    
    
    44.4
    %Net Loans Receivable
    
    $
    3,289,902
    
    
    $
    3,241,097
    
    
    $
    48,805
    
    
    
    1.5
    %
 
 (1)
    
    Includes loans held for sale, at the lower of cost or market, of $0 and $310,000 at
June 30, 2008 and December 31, 2007, respectively.(2)
    
    Includes loans held for sale, at the lower of cost or market, of $9.2 million and
$6.0 million at June 30, 2008 and December 31, 2007, respectively.   Balance as of
    
    Percentage of TotalIndustry
    
    June 30, 2008
    
    Gross Loans Outstanding(In Thousands)Accommodation/Hospitality
    
    $
    424,603
    
    
    
    12.7
    %Lessors of Non-Residential Buildings
    
    $
    413,241
    
    
    
    12.3
    %Gasoline Stations
    
    $
    366,079
    
    
    
    10.9
    %
  34




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##### Table of Contents



Non-Performing Assets
   June 30,
    
    
    December 31,
    
    
    Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Non-Accrual Loans
    
    $
    112,024
    
    
    $
    54,252
    
    
    $
    57,772
    
    
    
    106.5
    %Loans 90 Days or More Past Due and Still Accruing
    
    
    158
    
    
    
    227
    
    
    
    (69
    )
    
    
    (30.4
    %)Total Non-Performing Loans
    
    
    112,182
    
    
    
    54,479
    
    
    
    57,703
    
    
    
    105.9
    %Other Real Estate Owned
    
    
    
    
    
    
    287
    
    
    
    (287
    )
    
    
    (100.0
    %)Total Non-Performing Assets
    
    $
    112,182
    
    
    $
    54,766
    
    
    $
    57,416
    
    
    
    104.8
    %
  Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
   35




---



##### Table of Contents



As of and for the
    
    
    As of and for theThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    March 31,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in Thousands)Allowance for Loan Losses:Balance at Beginning of Period
    
    $
    52,986
    
    
    $
    43,611
    
    
    $
    31,527
    
    
    $
    43,611
    
    
    $
    27,557Actual Charge-Offs
    
    
    (8,656
    )
    
    
    (7,852
    )
    
    
    (2,662
    )
    
    
    (16,508
    )
    
    
    (5,281
    )Recoveries on Loans Previously Charged Off
    
    
    436
    
    
    
    555
    
    
    
    144
    
    
    
    991
    
    
    
    359Net Loan Charge-Offs
    
    
    (8,220
    )
    
    
    (7,297
    )
    
    
    (2,518
    )
    
    
    (15,517
    )
    
    
    (4,922
    )Provision Charged to Operating Expenses
    
    
    18,211
    
    
    
    16,672
    
    
    
    3,181
    
    
    
    34,883
    
    
    
    9,555Balance at End of Period
    
    $
    62,977
    
    
    $
    52,986
    
    
    $
    32,190
    
    
    $
    62,977
    
    
    $
    32,190Allowance for Off-Balance Sheet Items:Balance at Beginning of Period
    
    $
    2,914
    
    
    $
    1,765
    
    
    $
    1,888
    
    
    $
    1,765
    
    
    $
    2,130Provision Charged to Operating Expenses
    
    
    1,018
    
    
    
    1,149
    
    
    
    (158
    )
    
    
    2,167
    
    
    
    (400
    )Balance at End of Period
    
    $
    3,932
    
    
    $
    2,914
    
    
    $
    1,730
    
    
    $
    3,932
    
    
    $
    1,730Ratios:Net Loan Charge-Offs to Average Total Gross Loans (1)
    
    
    1.00
    %
    
    
    0.89
    %
    
    
    0.33
    %
    
    
    0.94
    %
    
    
    0.34
    %Net Loan Charge-Offs to Total Gross Loans (1)
    
    
    0.99
    %
    
    
    0.89
    %
    
    
    0.33
    %
    
    
    0.93
    %
    
    
    0.32
    %Allowance for Loan Losses to Average Total Gross Loans
    
    
    1.90
    %
    
    
    1.60
    %
    
    
    1.07
    %
    
    
    1.90
    %
    
    
    1.09
    %Allowance for Loan Losses to Total Gross Loans
    
    
    1.88
    %
    
    
    1.60
    %
    
    
    1.05
    %
    
    
    1.88
    %
    
    
    1.05
    %Net Loan Charge-Offs to Allowance for Loan Losses (1)
    
    
    52.50
    %
    
    
    55.39
    %
    
    
    31.38
    %
    
    
    49.55
    %
    
    
    30.83
    %Net Loan Charge-Offs to Provision Charged to Operating Expenses
    
    
    45.14
    %
    
    
    43.77
    %
    
    
    79.16
    %
    
    
    44.48
    %
    
    
    51.51
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    56.14
    %
    
    
    59.72
    %
    
    
    142.30
    %
    
    
    56.14
    %
    
    
    142.30
    %Balances:Average Total Gross Loans
    
    $
    3,319,141
    
    
    $
    3,305,252
    
    
    $
    3,017,012
    
    
    $
    3,312,196
    
    
    $
    2,951,485Total Gross Loans
    
    $
    3,355,048
    
    
    $
    3,305,949
    
    
    $
    3,058,053
    
    
    $
    3,355,048
    
    
    $
    3,058,053Non-Performing Loans
    
    $
    112,182
    
    
    $
    88,720
    
    
    $
    22,621
    
    
    $
    112,182
    
    
    $
    22,621
 
 (1)
    
    Net loan charge-offs are annualized to calculate the ratios. 36




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##### Table of Contents



Provision for Credit Losses.
  Deposits
  June 30,
    
    
    December 31,
    
    
    Increase (Decrease)2008
    
    
    2007
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Demand  Noninterest-Bearing
    
    $
    683,846
    
    
    $
    680,282
    
    
    $
    3,564
    
    
    
    0.5
    %Interest-Bearing:Savings
    
    
    93,747
    
    
    
    93,099
    
    
    
    648
    
    
    
    0.7
    %Money Market Checking and NOW Accounts
    
    
    728,601
    
    
    
    445,806
    
    
    
    282,795
    
    
    
    63.4
    %Time Deposits of $100,000 or More
    
    
    1,050,942
    
    
    
    1,441,683
    
    
    
    (390,741
    )
    
    
    (27.1
    %)Other Time Deposits
    
    
    404,424
    
    
    
    340,829
    
    
    
    63,595
    
    
    
    18.7
    %Total Deposits
    
    $
    2,961,560
    
    
    $
    3,001,699
    
    
    $
    (40,139
    )
    
    
    (1.3
    %)
   FHLB Advances and Other Borrowings
  37




---



##### Table of Contents



Junior Subordinated Debentures
  INTEREST RATE RISK MANAGEMENT
   AfterThree
    
    
    After OneMonths
    
    
    Year ButWithin
    
    
    But
    
    
    Within
    
    
    After
    
    
    Non-Three
    
    
    Within
    
    
    Five
    
    
    Five
    
    
    Interest-Months
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Sensitive
    
    
    Total(Dollars in Thousands)ASSETSCash and Due From Banks
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    110,222
    
    
    $
    110,222Federal Funds Sold
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Securities:Fixed Rate
    
    
    35,959
    
    
    
    29,918
    
    
    
    89,524
    
    
    
    85,881
    
    
    
    
    
    
    
    241,282Floating Rate
    
    
    3,951
    
    
    
    
    
    
    
    13,582
    
    
    
    3,786
    
    
    
    
    
    
    
    21,319Loans:Fixed Rate
    
    
    125,718
    
    
    
    193,592
    
    
    
    598,064
    
    
    
    292,320
    
    
    
    
    
    
    
    1,209,694Floating Rate
    
    
    1,782,733
    
    
    
    102,144
    
    
    
    142,494
    
    
    
    5,959
    
    
    
    
    
    
    
    2,033,330Non-Accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,024
    
    
    
    112,024Deferred Loan Fees and Allowance for Loan Losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65,146
    )
    
    
    (65,146
    )Federal Reserve Bank and Federal Home Loan Bank Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,130
    
    
    
    
    
    
    
    41,130Other Assets
    
    
    
    
    
    
    24,998
    
    
    
    
    
    
    
    7,287
    
    
    
    98,967
    
    
    
    131,252Total Assets
    
    $
    1,958,361
    
    
    $
    350,652
    
    
    $
    843,664
    
    
    $
    436,363
    
    
    $
    256,067
    
    
    $
    3,845,107LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits:Demand Deposits
    
    $
    46,146
    
    
    $
    137,140
    
    
    $
    329,135
    
    
    $
    171,425
    
    
    $
    
    
    
    $
    683,846Savings
    
    
    13,489
    
    
    
    34,958
    
    
    
    36,739
    
    
    
    8,561
    
    
    
    
    
    
    
    93,747Money Market Checking and NOW Accounts
    
    
    109,712
    
    
    
    209,659
    
    
    
    235,898
    
    
    
    173,332
    
    
    
    
    
    
    
    728,601Time Deposits:Fixed Rate
    
    
    928,303
    
    
    
    515,183
    
    
    
    11,688
    
    
    
    138
    
    
    
    
    
    
    
    1,455,312Floating Rate
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54FHLB Advances and Other Borrowings
    
    
    332,674
    
    
    
    6,000
    
    
    
    156,997
    
    
    
    4,436
    
    
    
    
    
    
    
    500,107Junior Subordinated Debentures
    
    
    82,406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,406Other Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,529
    
    
    
    39,529Stockholders Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261,505
    
    
    
    261,505Total Liabilities and Stockholders Equity
    
    $
    1,512,784
    
    
    $
    902,940
    
    
    $
    770,457
    
    
    $
    357,892
    
    
    $
    301,034
    
    
    $
    3,845,107Repricing Gap
    
    $
    445,577
    
    
    $
    (552,288
    )
    
    $
    73,207
    
    
    $
    78,471
    
    
    $
    (44,967
    )Cumulative Repricing Gap
    
    $
    445,577
    
    
    $
    (106,711
    )
    
    $
    (33,504
    )
    
    $
    44,967
    
    
    $
    Cumulative Repricing Gap as a Percentage of
Total Assets
    
    
    11.59
    %
    
    
    (2.78
    %)
    
    
    (0.87
    %)
    
    
    1.17
    %
    
    
    Cumulative Repricing Gap as a Percentage of
Interest-Earning Assets
    
    
    12.53
    %
    
    
    (3.00
    %)
    
    
    (0.94
    %)
    
    
    1.26
    %
    
    
    
 38




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##### Table of Contents



Less Than Three Months
    
    Less Than Twelve MonthsJune 30,
    
    March 31,
    
    June 30,
    
    March 31,2008
    
    2008
    
    2008
    
    2008(Dollars in Thousands)Cumulative Repricing Gap
    
    $
    445,577
    
    
    $
    364,935
    
    
    $
    (106,711
    )
    
    $
    (594,590
    )Percentage of Total Assets
    
    
    11.59
    %
    
    
    9.26
    %
    
    
    (2.78
    %)
    
    
    (15.09
    %)Percentage of Interest-Earning Assets
    
    
    12.53
    %
    
    
    10.20
    %
    
    
    (3.00
    %)
    
    
    (16.62
    %)
   Rate Shock TablePercentage Changes
    
    Change in AmountChange in
    
    Net
    
    Economic
    
    Net
    
    EconomicInterest
    
    Interest
    
    Value of
    
    Interest
    
    Value ofRate
    
    Income
    
    Equity
    
    Income
    
    Equity(Dollars in Thousands)200%
    
    
    8.22
    %
    
    
    (20.11
    %)
    
    $
    12,304
    
    
    $
    (64,591
    )100%
    
    
    4.33
    %
    
    
    (9.86
    %)
    
    $
    6,478
    
    
    $
    (31,652
    )(100%)
    
    
    (4.83
    %)
    
    
    9.84
    %
    
    $
    (7,239
    )
    
    $
    31,596(200%)
    
    
    (9.95
    %)
    
    
    26.16
    %
    
    $
    (14,901
    )
    
    $
    84,019
  39




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
       40




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##### Table of Contents



Capital Ratios
   Minimum
    
    Minimum to BeRegulatory
    
    Categorized asActual
    
    Requirement
    
    Well-CapitalizedAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in Thousands)Total Capital (to Risk-Weighted Assets):Hanmi Financial
    
    $
    380,618
    
    
    
    10.66
    %
    
    $
    285,621
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    379,603
    
    
    
    10.64
    %
    
    $
    285,301
    
    
    
    8.00
    %
    
    $
    356,627
    
    
    
    10.00
    %Tier 1 Capital (to Risk-Weighted Assets):Hanmi Financial
    
    $
    335,715
    
    
    
    9.40
    %
    
    $
    142,811
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    334,749
    
    
    
    9.39
    %
    
    $
    142,651
    
    
    
    4.00
    %
    
    $
    213,976
    
    
    
    6.00
    %Tier 1 Capital (to Average Total Assets):Hanmi Financial
    
    $
    335,715
    
    
    
    8.61
    %
    
    $
    155,956
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    334,749
    
    
    
    8.60
    %
    
    $
    155,695
    
    
    
    4.00
    %
    
    $
    194,618
    
    
    
    5.00
    %
  Regulatory
Matters
  41




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##### Table of Contents



Dividends
    OFF-BALANCE SHEET ARRANGEMENTS
 Note 5  Off-Balance Sheet
Commitments Item 1.
Business  Off-Balance Sheet Commitments
 CONTRACTUAL OBLIGATIONS
  42




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##### Table of Contents



RECENTLY ISSUED ACCOUNTING STANDARDS
 SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment
of FASB Statement No. 133
 SFAS No. 160, Non-Controlling Interest in Consolidated Financial Statements  an Amendment of
ARB No. 51
 SFAS No. 141(R), Business Combinations
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Interest Rate Risk Management  Liquidity and Capital Resources.
 
 ITEM 4. CONTROLS AND PROCEDURES
   43




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
 Hanmi Bank cannot currently pay dividends to Hanmi Financial. Managements Discussion and Analysis of Financial Condition and Results of Operations. Liquidity
and Capital Resources. Dividends.
 We have recently experienced significant changes in our key management and are trying to fill
the key position of Chief Credit Officer.
 We may be required to make additional provisions for credit losses and charge off additional
loans in the future, which could adversely affect our result of operations and capital levels.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  44




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##### Table of Contents



ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Election of Directors To elect three nominees to serve as directors of Hanmi
Financial, each for a term of three years until their respective successors shall be
elected and qualified; and2.
    
    Stockholders Proposal Regarding the Annual Election of All Directors and the
Elimination of Our Classified Board of Directors If properly presented at the Annual
Meeting, to vote on a stockholders proposal regarding the annual election of all directors
and the elimination of our classified Board of Directors.
 Proposal 1  Election of Directors
  Votes
    
    VotesClass III Director Nominees
    
    For
    
    WithheldRichard B. C. Lee
    
    
    37,359,486
    
    
    
    2,917,597Chang Kyu Park, Pharm.D.
    
    
    37,190,794
    
    
    
    3,086,289Mark K. Mason
    
    
    36,493,904
    
    
    
    3,783,179
  Class I Directors - Terms Expire in 2009:
    
    Class II Directors - Terms Expire in 2010:I Joon Ahn
    
    Robert AbelesJoon Hyung Lee
    
    Ki Tae HongJoseph K. Rho
    
    Won R. YoonJay S. Yoo
 Proposal 2  Stockholders Proposal Regarding the Annual Election of All Directors and the
Elimination of Our Classified Board of Directors
 Votes
    
    Votes
    
    
    
    BrokerFor
    
    Against
    
    Abstain
    
    Non-Votes16,217,159
    
    9,525,003
    
    116,698
    
    14,418,223
 
 ITEM 5. OTHER INFORMATION
  45




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##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Document10.1
    
    Amended and Restated Trust Agreement of Hanmi Capital Trust I dated as of January 8, 2004 among Hanmi Financial
Corporation, Deutsche Bank Trust Company Americas, as Property Trustee, Deutsche Bank Trust Company Delaware, as
Delaware Trustee, and the Administrative Trustees Named Therein (1)10.2
    
    Hanmi Capital Trust I Junior Subordinated Indenture dated as of January 8, 2004 entered into between Hanmi Financial
Corporation and Deutsche Bank Trust Company Americas, as Trustee (included as exhibit D to Exhibit 10.1)
(1)10.3
    
    Hanmi Capital Trust I Guarantee Agreement dated as of January 8, 2004 entered into between Hanmi Financial Corporation,
as Guarantor, and Deutsche Bank Trust Company Americas, as Guarantee Trustee (1)10.4
    
    Hanmi Capital Trust I Form of Common Securities Certificate (included as exhibit B to Exhibit 10.1) (1)10.5
    
    Hanmi Capital Trust I Form of Preferred Securities Certificate (included as exhibit C to Exhibit 10.1) (1)10.6
    
    Amended and Restated Trust Agreement of Hanmi Capital Trust II dated as of March 15, 2004 among Hanmi Financial
Corporation, Deutsche Bank Trust Company Americas, as Property Trustee, Deutsche Bank Trust Company Delaware, as
Delaware Trustee, and the Administrative Trustees Named Therein (1)10.7
    
    Hanmi Capital Trust II Junior Subordinated Indenture dated as of March 15, 2004 entered into between Hanmi Financial
Corporation and Deutsche Bank Trust Company Americas, as Trustee (included as exhibit D to Exhibit 10.6) (1)10.8
    
    Hanmi Capital Trust II Guarantee Agreement dated as of March 15, 2004 entered into between Hanmi Financial Corporation,
as Guarantor, and Deutsche Bank Trust Company Americas, as Guarantee Trustee (1)10.9
    
    Hanmi Capital Trust II Form of Common Securities Certificate (included as exhibit B to Exhibit 10.6) (1)10.10
    
    Hanmi Capital Trust II Form of Preferred Securities Certificate (included as exhibit C to Exhibit 10.6) (1)10.11
    
    Amended and Restated Trust Agreement of Hanmi Capital Trust III dated as of April 28, 2004 among Hanmi Financial
Corporation, Deutsche Bank Trust Company Americas, as Property Trustee, Deutsche Bank Trust Company Delaware, as
Delaware Trustee, and the Administrative Trustees Named Therein (1)10.12
    
    Hanmi Capital Trust III Junior Subordinated Indenture dated as of April 28, 2004 entered into between Hanmi Financial
Corporation and Deutsche Bank Trust Company Americas, as Trustee (included as exhibit D to Exhibit 10.11)
(1)10.13
    
    Hanmi Capital Trust III Guarantee Agreement dated as of April 28, 2004 entered into between Hanmi Financial
Corporation, as Guarantor, and Deutsche Bank Trust Company Americas, as Guarantee Trustee (1)10.14
    
    Hanmi Capital Trust III Form of Common Securities Certificate (included as exhibit B to Exhibit 10.11) (1)10.15
    
    Hanmi Capital Trust III Form of Preferred Securities Certificate (included as exhibit C to Exhibit 10.11) (1)10.16
    
    Employment Agreement Between Hanmi Financial Corporation and Hanmi Bank,
on the One Hand, and Jay S. Yoo, on the Other Hand, dated as of June 19,
200831.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as amended31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as amended32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Previously filed and incorporated by reference herein from Hanmi Financials
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 filed with the SEC on August
9, 2004. 46




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##### Table of Contents



SIGNATURES
  HANMI FINANCIAL CORPORATION
 Date:
          August 11, 2008
    By:
    /s/ Jay S. YooJay S. YooPresident and Chief Executive OfficerBy:
    /s/ Brian E. ChoBrian E. ChoExecutive Vice President and Chief Financial Officer 47