##### 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 SECURITIESEXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE 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 ALos 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
 o o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company o(Do Not Check if a Smaller Reporting Company)
 o þ




---



##### 



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  QUARTERLY REPORT ON FORM 10-Q  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 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
    
    
    25ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    53ITEM 4. CONTROLS AND PROCEDURES
    
    
    53PART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    53ITEM 1A. RISK FACTORS
    
    
    53ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    63ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    63ITEM 4. REMOVED AND RESERVED
    
    
    63ITEM 5. OTHER INFORMATION
    
    
    63ITEM 6. EXHIBITS
    
    
    64SIGNATURES
    
    
    65EX-3.1EX-31.1EX-31.2EX-32.1EX-32.2




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 (In Thousands, Except Share Data)
 September 30,
    
    
    December 31,2010
    
    
    2009ASSETSCash and Due From Banks
    
    $
    63,455
    
    
    $
    55,263Interest-Bearing Deposits in Other Banks
    
    
    218,843
    
    
    
    98,847Cash and Cash Equivalents
    
    
    282,298
    
    
    
    154,110Securities Held to Maturity, at Amortized Cost (Fair Value of $853 as of September 30, 2010 and
$871 as of December 31, 2009)
    
    
    850
    
    
    
    869Investment Securities Available for Sale, at Fair Value (Amortized Cost of $321,246 as of
September 30, 2010 and $130,995 as of December 31, 2009)
    
    
    324,578
    
    
    
    132,420Loans Receivable, Net of Allowance for Loan Losses of $176,063 as of September 30, 2010 and
$144,996 as of December 31, 2009
    
    
    2,207,568
    
    
    
    2,669,054Loans Held for Sale, at the Lower of Cost or Fair Value
    
    
    10,660
    
    
    
    5,010Premises and Equipment, Net
    
    
    17,639
    
    
    
    18,657Accrued Interest Receivable
    
    
    8,442
    
    
    
    9,492Due from Customers on Acceptances
    
    
    1,375
    
    
    
    994Other Real Estate Owned, Net
    
    
    20,577
    
    
    
    26,306Deferred Tax Assets
    
    
    
    
    
    
    3,608Servicing Assets
    
    
    3,197
    
    
    
    3,842Other Intangible Assets, Net
    
    
    2,480
    
    
    
    3,382Investment in Federal Home Loan Bank Stock, at Cost
    
    
    28,418
    
    
    
    30,697Investment in Federal Reserve Bank Stock, at Cost
    
    
    6,783
    
    
    
    7,878Income Taxes Receivable
    
    
    9,188
    
    
    
    56,554Bank-Owned Life Insurance
    
    
    27,111
    
    
    
    26,408Other Assets
    
    
    17,341
    
    
    
    13,425TOTAL ASSETS
    
    $
    2,968,505
    
    
    $
    3,162,706LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIES:Deposits:Noninterest-Bearing
    
    $
    559,764
    
    
    $
    556,306Interest-Bearing
    
    
    1,967,622
    
    
    
    2,193,021Total Deposits
    
    
    2,527,386
    
    
    
    2,749,327Accrued Interest Payable
    
    
    13,727
    
    
    
    12,606Bank Acceptances Outstanding
    
    
    1,375
    
    
    
    994Deferred Tax Liabilities
    
    
    807
    
    
    
    Federal Home Loan Bank Advances
    
    
    153,734
    
    
    
    153,978Other Borrowings
    
    
    2,558
    
    
    
    1,747Junior Subordinated Debentures
    
    
    82,406
    
    
    
    82,406Accrued Expenses and Other Liabilities
    
    
    13,880
    
    
    
    11,904Total Liabilities
    
    
    2,795,873
    
    
    
    3,012,962COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Common Stock, $0.001 Par Value; Authorized 500,000,000 Shares; Issued 155,830,890 Shares
(151,198,390 Shares Outstanding) as of September 30, 2010 and Authorized 200,000,000
Shares;
Issued 55,814,890 shares (51,182,390 Shares Outstanding) as of December 31, 2009,
Respectively
    
    
    156
    
    
    
    56Additional Paid-In Capital
    
    
    472,091
    
    
    
    357,174Unearned Compensation
    
    
    (240
    )
    
    
    (302
    )Accumulated Other Comprehensive Income  Unrealized Gain on Securities Available
for Sale and Interest-Only Strips, Net of Income Taxes of $1,410
and $602 as of September 30, 2010 and December 31, 2009, Respectively
    
    
    1,989
    
    
    
    859Accumulated Deficit
    
    
    (231,352
    )
    
    
    (138,031
    )Less Treasury Stock, at Cost: 4,632,500 Shares as of September 30, 2010 and December 31, 2009
    
    
    (70,012
    )
    
    
    (70,012
    )Total Stockholders Equity
    
    
    172,632
    
    
    
    149,744TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,968,505
    
    
    $
    3,162,706
  1




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (Dollars in Thousands, Except Per Share Data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009INTEREST AND DIVIDEND INCOME:Interest and Fees on Loans
    
    $
    33,681
    
    
    $
    42,705
    
    
    $
    104,862
    
    
    $
    132,508Taxable Interest on Investment Securities
    
    
    1,592
    
    
    
    1,541
    
    
    
    4,035
    
    
    
    4,261Tax-Exempt Interest on Investment Securities
    
    
    62
    
    
    
    607
    
    
    
    216
    
    
    
    1,871Dividends on Federal Reserve Bank Stock
    
    
    102
    
    
    
    150
    
    
    
    323
    
    
    
    456Dividends on Federal Home Loan Bank Stock
    
    
    33
    
    
    
    64
    
    
    
    74
    
    
    
    64Interest on Interest-Bearing Deposits in Other Banks
    
    
    165
    
    
    
    68
    
    
    
    319
    
    
    
    81Interest on Federal Funds Sold and Securities Purchased Under Resale Agreements
    
    
    8
    
    
    
    67
    
    
    
    41
    
    
    
    261Interest on Term Federal Funds Sold
    
    
    32
    
    
    
    293
    
    
    
    29
    
    
    
    1,688Total Interest and Dividend Income
    
    
    35,675
    
    
    
    45,495
    
    
    
    109,899
    
    
    
    141,190INTEREST EXPENSE:Interest on Deposits
    
    
    8,299
    
    
    
    17,365
    
    
    
    26,816
    
    
    
    62,836Interest on Federal Home Loan Bank Advances
    
    
    342
    
    
    
    865
    
    
    
    1,027
    
    
    
    2,987Interest on Other Borrowings
    
    
    22
    
    
    
    
    
    
    
    53
    
    
    
    2Interest on Junior Subordinated Debentures
    
    
    739
    
    
    
    747
    
    
    
    2,100
    
    
    
    2,581Total Interest Expense
    
    
    9,402
    
    
    
    18,977
    
    
    
    29,996
    
    
    
    68,406NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES
    
    
    26,273
    
    
    
    26,518
    
    
    
    79,903
    
    
    
    72,784Provision for Credit Losses
    
    
    22,000
    
    
    
    49,500
    
    
    
    117,496
    
    
    
    119,387NET INTEREST INCOME (LOSS) AFTER PROVISION FOR CREDIT LOSSES
    
    
    4,273
    
    
    
    (22,982
    )
    
    
    (37,593
    )
    
    
    (46,603
    )NON-INTEREST INCOME:Service Charges on Deposit Accounts
    
    
    3,442
    
    
    
    4,275
    
    
    
    10,770
    
    
    
    13,032Insurance Commissions
    
    
    1,089
    
    
    
    1,063
    
    
    
    3,573
    
    
    
    3,430Remittance Fees
    
    
    484
    
    
    
    511
    
    
    
    1,469
    
    
    
    1,579Trade Finance Fees
    
    
    381
    
    
    
    512
    
    
    
    1,144
    
    
    
    1,517Other Service Charges and Fees
    
    
    409
    
    
    
    489
    
    
    
    1,193
    
    
    
    1,439Bank-Owned Life Insurance Income
    
    
    237
    
    
    
    234
    
    
    
    703
    
    
    
    695Net Gain on Sales of Investment Securities
    
    
    4
    
    
    
    
    
    
    
    117
    
    
    
    1,168Net Gain on Sales of Loans
    
    
    229
    
    
    
    864
    
    
    
    443
    
    
    
    866Impairment Loss on Investment Securities:Total Other-than-temporary Impairment Loss on Investment Securities
    
    
    (790
    )
    
    
    
    
    
    
    (790
    )
    
    
    Less: Portion of Loss Recognized in Other Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Impairment Loss Recognized in Earnings
    
    
    (790
    )
    
    
    
    
    
    
    (790
    )
    
    
    Other Operating Income
    
    
    186
    
    
    
    265
    
    
    
    731
    
    
    
    545Total Non-Interest Income
    
    
    5,671
    
    
    
    8,213
    
    
    
    19,353
    
    
    
    24,271NON-INTEREST EXPENSE:Salaries and Employee Benefits
    
    
    9,552
    
    
    
    8,648
    
    
    
    27,349
    
    
    
    24,659Deposit Insurance Premiums and Regulatory Assessments
    
    
    2,253
    
    
    
    2,001
    
    
    
    8,552
    
    
    
    7,420Occupancy and Equipment
    
    
    2,702
    
    
    
    2,834
    
    
    
    8,101
    
    
    
    8,506Other Real Estate Owned Expense
    
    
    2,580
    
    
    
    3,372
    
    
    
    9,998
    
    
    
    5,017Data Processing
    
    
    1,446
    
    
    
    1,608
    
    
    
    4,432
    
    
    
    4,691Professional Fees
    
    
    753
    
    
    
    1,239
    
    
    
    2,841
    
    
    
    2,745Directors and Officers Liability Insurance
    
    
    716
    
    
    
    293
    
    
    
    2,149
    
    
    
    881Supplies and Communication
    
    
    683
    
    
    
    603
    
    
    
    1,774
    
    
    
    1,772Advertising and Promotion
    
    
    567
    
    
    
    447
    
    
    
    1,605
    
    
    
    1,640Loan-Related Expense
    
    
    322
    
    
    
    192
    
    
    
    939
    
    
    
    1,590Amortization of Other Intangible Assets
    
    
    273
    
    
    
    379
    
    
    
    902
    
    
    
    1,214Other Operating Expenses
    
    
    2,232
    
    
    
    2,073
    
    
    
    6,428
    
    
    
    7,509Total Non-Interest Expense
    
    
    24,079
    
    
    
    23,689
    
    
    
    75,070
    
    
    
    67,644LOSS BEFORE PROVISION (BENEFIT) FOR INCOME TAXES
    
    
    (14,135
    )
    
    
    (38,458
    )
    
    
    (93,310
    )
    
    
    (89,976
    )Provision (Benefit) for Income Taxes
    
    
    442
    
    
    
    21,207
    
    
    
    11
    
    
    
    (3,580
    )NET LOSS
    
    $
    (14,577
    )
    
    $
    (59,665
    )
    
    $
    (93,321
    )
    
    $
    (86,396
    )LOSS PER SHARE:Basic
    
    $
    (0.12
    )
    
    $
    (1.26
    )
    
    $
    (1.24
    )
    
    $
    (1.86
    )Diluted
    
    $
    (0.12
    )
    
    $
    (1.26
    )
    
    $
    (1.24
    )
    
    $
    (1.86
    )WEIGHTED-AVERAGE SHARES OUTSTANDING:Basic
    
    
    122,789,120
    
    
    
    47,413,141
    
    
    
    75,204,528
    
    
    
    46,415,225Diluted
    
    
    122,789,120
    
    
    
    47,413,141
    
    
    
    75,204,528
    
    
    
    46,415,225DIVIDENDS DECLARED PER SHARE
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  2




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 (In Thousands; Except Share Data)
 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 JANUARY 1, 2009
    
    
    50,538,049
    
    
    
    (4,632,500
    )
    
    
    45,905,549
    
    
    $
    51
    
    
    $
    349,304
    
    
    $
    (218
    )
    
    $
    544
    
    
    $
    (15,754
    )
    
    $
    (70,012
    )
    
    $
    263,915Shares Issued in Private Offering, Net of
Offering and Underwriting Costs
    
    
    5,070,423
    
    
    
    
    
    
    
    5,070,423
    
    
    
    5
    
    
    
    6,834
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,839Shares Issued for Business Acquisitions
    
    
    39,418
    
    
    
    
    
    
    
    39,418
    
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    649
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    701Restricted Stock Awards
    
    
    205,000
    
    
    
    
    
    
    
    205,000
    
    
    
    
    
    
    
    284
    
    
    
    (284
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeiture of Restricted Stock Awards
    
    
    (19,000
    )
    
    
    
    
    
    
    (19,000
    )
    
    
    
    
    
    
    (89
    )
    
    
    89
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive Loss:Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,396
    )
    
    
    
    
    
    
    (86,396
    )Change in Unrealized Gain on Securities
Available for Sale and Interest-Only Strips,
Net of Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,015
    
    
    
    
    
    
    
    
    
    
    
    2,015Total Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,381
    )BALANCE AS OF SEPTEMBER 30, 2009
    
    
    55,833,890
    
    
    
    (4,632,500
    )
    
    
    51,201,390
    
    
    $
    56
    
    
    $
    357,028
    
    
    $
    (361
    )
    
    $
    2,559
    
    
    $
    (102,150
    )
    
    $
    (70,012
    )
    
    $
    187,120BALANCE AS OF JANUARY 1, 2010
    
    
    55,814,890
    
    
    
    (4,632,500
    )
    
    
    51,182,390
    
    
    $
    56
    
    
    $
    357,174
    
    
    $
    (302
    )
    
    $
    859
    
    
    $
    (138,031
    )
    
    $
    (70,012
    )
    
    $
    149,744Shares Issued, Net of Offering and
Underwriting
Costs
    
    
    100,000,000
    
    
    
    
    
    
    
    100,000,000
    
    
    
    100
    
    
    
    114,209
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,309Exercises of Stock Options
    
    
    16,000
    
    
    
    
    
    
    
    16,000
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    686
    
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    748Comprehensive Loss:Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93,321
    )
    
    
    
    
    
    
    (93,321
    )Change in Unrealized Gain on Securities
Available for Sale and Interest-Only Strips,
Net of Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,130
    
    
    
    
    
    
    
    
    
    
    
    1,130Total Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92,191
    )BALANCE AS OF SEPTEMBER 30, 2010
    
    
    155,830,890
    
    
    
    (4,632,500
    )
    
    
    151,198,390
    
    
    $
    156
    
    
    $
    472,091
    
    
    $
    (240
    )
    
    $
    1,989
    
    
    $
    (231,352
    )
    
    $
    (70,012
    )
    
    $
    172,632
  3




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 (In Thousands)
 Nine Months EndedSeptember 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss
    
    $
    (93,321
    )
    
    $
    (86,396
    )Adjustments to Reconcile Net Loss to Net Cash Provided By Operating Activities:Depreciation and Amortization of Premises and Equipment
    
    
    1,729
    
    
    
    1,977Amortization of Premiums and Accretion of Discounts on Investment Securities, Net
    
    
    476
    
    
    
    (736
    )Amortization of Other Intangible Assets
    
    
    902
    
    
    
    1,214Amortization of Servicing Assets
    
    
    705
    
    
    
    597Share-Based Compensation Expense
    
    
    748
    
    
    
    701Provision for Credit Losses
    
    
    117,496
    
    
    
    119,387Net Gain on Sales of Investment Securities
    
    
    (117
    )
    
    
    (1,168
    )Net Gain on Sales of Loans
    
    
    (443
    )
    
    
    (866
    )Loss on Sales of Other Real Estate Owned
    
    
    81
    
    
    
    440Provision for Valuation Allowance on Other Real Estate Owned
    
    
    8,444
    
    
    
    2,501Impairment Loss on Investment Securities
    
    
    790
    
    
    
    Deferred Tax Expense (Benefit)
    
    
    3,608
    
    
    
    38,150Origination of Loans Held for Sale
    
    
    (21,050
    )
    
    
    (1,221
    )Net Proceeds from Sales of Loans Held for Sale
    
    
    119,560
    
    
    
    34,379Decrease in Accrued Interest Receivable
    
    
    1,050
    
    
    
    958Increase in Servicing Asset
    
    
    (60
    )
    
    
    (763
    )Increase in Cash Surrender Value of Bank-Owned Life Insurance
    
    
    (703
    )
    
    
    (695
    )Increase in Other Assets
    
    
    (3,887
    )
    
    
    (1,894
    )Decrease (Increase) in Income Taxes Receivable
    
    
    47,366
    
    
    
    (29,976
    )Increase in Accrued Interest Payable
    
    
    1,121
    
    
    
    1,191Increase (Decrease) in Other Liabilities
    
    
    223
    
    
    
    (1,681
    )Net Cash Provided By Operating Activities
    
    
    184,718
    
    
    
    76,099CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from Redemption of Federal Home Loan Bank and Federal Reserve Bank Stock
    
    
    3,374
    
    
    
    175Proceeds from Matured or Called Investment Securities Available for Sale
    
    
    100,006
    
    
    
    47,290Proceeds from Matured or Called Investment Securities Held to Maturity
    
    
    19
    
    
    
    Proceeds from Sales of Investment Securities Available for Sale
    
    
    3,264
    
    
    
    38,448Proceeds from Sales of Other Real Estate Owned
    
    
    7,732
    
    
    
    4,068Net Decrease in Loans Receivable
    
    
    229,531
    
    
    
    253,704Purchases of Investment Securities Available for Sale
    
    
    (294,669
    )
    
    
    (89,357
    )Purchases of Premises and Equipment
    
    
    (711
    )
    
    
    (1,000
    )Net Cash Provided By Investing Activities
    
    
    48,546
    
    
    
    253,328CASH FLOWS FROM FINANCING ACTIVITIES:Decrease in Deposits
    
    
    (221,941
    )
    
    
    (78,220
    )Proceeds from Exercise of Stock Options
    
    
    22
    
    
    
    Net Proceeds from Issuance of Common Stock in Private Offering
    
    
    116,276
    
    
    
    6,839Repayment of Long-Term Federal Home Loan Bank Advances
    
    
    (244
    )
    
    
    (107,139
    )Net Change in Short-Term Federal Home Loan Bank Advances and Other Borrowings
    
    
    811
    
    
    
    (153,520
    )Net Cash Used In Financing Activities
    
    
    (105,076
    )
    
    
    (332,040
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    128,188
    
    
    
    (2,613
    )Cash and Cash Equivalents at Beginning of Period
    
    
    154,110
    
    
    
    215,947CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    282,298
    
    
    $
    213,334SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash Paid During the Period for:Interest Paid
    
    $
    8,281
    
    
    $
    67,215Income Taxes Refunds, Net of Income Taxes Paid
    
    $
    (49,971
    )
    
    $
    Non-Cash Activities:Stock Issued for Business Acquisition
    
    $
    
    
    
    $
    46Transfer of Loans to Other Real Estate Owned
    
    $
    11,745
    
    
    $
    38,326Transfer of Loans to Loan Held for Sale
    
    $
    103,717
    
    
    $
    Loans Provided in the Sale of Other Real Estate Owned
    
    $
    1,217
    
    
    $
    5,000Issuance of Stock Warrants in Connection with Common Stock Offering
    
    $
    1,967
    
    
    $
    
  4




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 NOTE 1  BASIS OF PRESENTATION
    Note 2  Summary of
Significant Accounting Policies
  NOTE 2  REGULATORY MATTERS AND GOING CONCERN CONSIDERATION
   Final Order and Written Agreement
  5




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 2  REGULATORY MATTERS AND GOING CONCERN CONSIDERATION (Continued)
   Ratio of Tangible StockholdersDate
    
    Equity to Total Tangible AssetsBy July 31, 2010
    
    Not Less Than 9.0 PercentFrom December 31, 2010 and Until the Final Order is Terminated
    
    Not Less Than 9.5 Percent
    
    
    The Board Committees have been reorganized after a Board assessment was conducted to
leverage the
experience and skill base of our directors and to improve Board oversight of the Banks
operations.
    
    Tools such as a master calendar of scheduled events and policy exception trigger tables have
been created
to assist the Board in its ability to monitor the Banks operations more effectively.
    
    Jung Hak Son, a 24 year employee of the Bank, was appointed to the Chief Credit Officer
position on
December 23, 2009 and the Bank received notice that the regulatory agency interposed no
objection to his
appointment on March 18, 2010.
    
    Loan policies and procedures continue to be adjusted and enhanced to keep current with the
rapidly
changing credit and economic environment.
    
    Quantitative and qualitative factors in our allowance for loan losses have been updated to
reflect the higher
risk in the loan portfolio due to the recessionary economy.
    
    Allowance methodology has been enhanced to better allocate reserves according to more
specified loss and concentration risks.
    
    The credit department has also been reorganized and reinforced with additional personnel to
increase the
level of management loan review and loan monitoring.
    
    Third party loan reviews have been conducted quarterly to validate the loan grading.
 6




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 2  REGULATORY MATTERS AND GOING CONCERN CONSIDERATION (Continued)
 
    
    Written plans have been developed for each problem loan greater than $3 million and the
plans have been
implemented and are being monitored to improve loan work out and loan collection.
    
    The Banks strategic plan has been reviewed and revised, and the revised plan has been
approved by the
Board of Directors.
    
    The Banks liquidity management plan and contingency funding plan have been significantly
revised to
reflect the additional restrictions and challenges of the market.
    
    The capital plan has been revised and we believe significant progress has been made as set
forth above.
    
    A Board Compliance Committee has been organized to monitor the progress toward full
compliance with
all the provisions of the Agreement and the Final Order and approves the related progress
reports at least on a
monthly basis prior to submission to the DFI and FRB according to the schedule established.
  Risk-Based Capital
   To be Categorized asMinimum
    
    Well CapitalizedRegulatory
    
    under Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in Thousands)September 30, 2010Total Capital (to Risk-Weighted Assets):Hanmi Financial
    
    $
    279,713
    
    
    
    11.69
    %
    
    $
    191,345
    
    
    
    8.00
    %
    
    $
    239,182
    
    
    
    10.00
    %Hanmi Bank
    
    $
    276,963
    
    
    
    11.61
    %
    
    $
    190,916
    
    
    
    8.00
    %
    
    $
    238,645
    
    
    
    10.00
    %Tier 1 Capital (to Risk-Weighted Assets):Hanmi Financial
    
    $
    224,724
    
    
    
    9.40
    %
    
    $
    95,673
    
    
    
    4.00
    %
    
    $
    143,509
    
    
    
    6.00
    %Hanmi Bank
    
    $
    245,277
    
    
    
    10.28
    %
    
    $
    95,458
    
    
    
    4.00
    %
    
    $
    143,187
    
    
    
    6.00
    %Tier 1 Capital (to Average Assets):Hanmi Financial
    
    $
    224,724
    
    
    
    7.55
    %
    
    $
    119,073
    
    
    
    4.00
    %
    
    $
    148,842
    
    
    
    5.00
    %Hanmi Bank
    
    $
    245,277
    
    
    
    8.26
    %
    
    $
    118,835
    
    
    
    4.00
    %
    
    $
    148,544
    
    
    
    5.00
    %
 Going Concern
  7




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 2  REGULATORY MATTERS AND GOING CONCERN CONSIDERATION (Continued)
    NOTE 3  FAIR VALUE MEASUREMENTS
 Fair Value Option and Fair Value Measurements
 Fair Value Measurements and Disclosures,
 Financial Instruments, Note 3  Fair Value Measurements.
 Fair Value Measurements and Disclosures (Topic 820)
 8




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
 Note 3  Fair Value Measurements.
  Investment Securities Available for Sale
   Loans Held for Sale
 Impaired Loans Receivables,
 Other Real Estate Owned
 9




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
 Servicing Assets and Servicing Liabilities
 Other Intangible Assets
 Stock Warrants
 Investments  Debt and Equity Securities,
 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.
 10




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
 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
    
    
    Significant
    
    
    Balance as offor Identical
    
    
    Identical
    
    
    Unobservable
    
    
    September 30,Assets
    
    
    Characteristics
    
    
    Inputs
    
    
    2010(In Thousands)ASSETS:Debt Securities Available for Sale:Residential Mortgage-Backed Securities
    
    $
    
    
    
    $
    106,045
    
    
    $
    
    
    
    $
    106,045U.S. Government Agency Securities
    
    
    91,734
    
    
    
    
    
    
    
    
    
    
    
    91,734Collateralized Mortgage Obligations
    
    
    
    
    
    
    97,745
    
    
    
    
    
    
    
    97,745Municipal Bonds
    
    
    
    
    
    
    12,654
    
    
    
    
    
    
    
    12,654Asset-Backed Securities
    
    
    
    
    
    
    7,678
    
    
    
    
    
    
    
    7,678Corporate Bonds
    
    
    
    
    
    
    4,496
    
    
    
    
    
    
    
    4,496Other Securities
    
    
    
    
    
    
    3,316
    
    
    
    
    
    
    
    3,316Total Debt Securities Available for Sale
    
    $
    91,734
    
    
    $
    231,934
    
    
    $
    
    
    
    $
    323,668Equity Securities Available for Sale:Financial Service Industry
    
    $
    910
    
    
    
    
    
    
    
    
    
    
    $
    910Total Equity Securities Available for Sale
    
    $
    910
    
    
    $
    
    
    
    $
    
    
    
    $
    910Total Securities Available for Sale
    
    $
    92,644
    
    
    $
    231,934
    
    
    $
    
    
    
    $
    324,578Servicing Assets
    
    $
    
    
    
    $
    
    
    
    $
    3,197
    
    
    $
    3,197LIABILITIES:Servicing Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    183
    
    
    $
    183Stock Warrants
    
    $
    
    
    
    $
    
    
    
    $
    1,967
    
    
    $
    1,967
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Realized andUnrealizedBeginning
    
    
    
    
    
    Realized and
    
    Gains or Losses
    
    
    
    
    
    EndingBalance as of
    
    Purchases,
    
    Unrealized
    
    in Other
    
    Transfers
    
    Balance as ofJuly 1,
    
    Issuances and
    
    Gains or Losses
    
    Comprehensive
    
    In and/or Out
    
    September 30,2010
    
    Settlements
    
    in Earnings
    
    Income
    
    of Level 3
    
    2010(In Thousands)ASSETS:Servicing Assets
    
    $
    3,356
    
    
    $
    51
    
    
    $
    (210
    )
    
    $
    
    
    
    $
    
    
    
    $
    3,197LIABILITIES:Servicing Liabilities
    
    $
    (193
    )
    
    $
    
    
    
    $
    10
    
    
    $
    
    
    
    $
    
    
    
    $
    (183
    )Stock Warrants
    
    $
    
    
    
    $
    
    
    
    $
    (6
    )
    
    $
    
    
    
    $
    
    
    
    $
    (1,967
    )
 11




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Realized andUnrealizedBeginning
    
    
    
    
    
    Realized and
    
    Gains or Losses
    
    
    
    
    
    EndingBalance as of
    
    Purchases,
    
    Unrealized
    
    in Other
    
    Transfers
    
    Balance as ofJanuary 1,
    
    Issuances and
    
    Gains or Losses
    
    Comprehensive
    
    In and/or Out
    
    September 30,2010
    
    Settlements
    
    in Earnings
    
    Income
    
    of Level 3
    
    2010(In Thousands)ASSETS:Servicing Assets
    
    $
    3,842
    
    
    $
    60
    
    
    $
    (705
    )
    
    $
    
    
    
    $
    
    
    
    $
    3,197LIABILITIES:Servicing Liabilities
    
    $
    (216
    )
    
    $
    
    
    
    $
    33
    
    
    $
    
    
    
    $
    
    
    
    $
    (183
    )Stock Warrants
    
    $
    
    
    
    $
    
    
    
    $
    (6
    )
    
    $
    
    
    
    $
    
    
    
    $
    (1,967
    )
 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
    
    Significant
    
    Balance as offor Identical
    
    Identical
    
    Unobservable
    
    September 30,Assets
    
    Characteristics
    
    Inputs
    
    2010(In Thousands)ASSETS:Loans Held for Sale
    
    $
    
    
    
    $
    10,660
    (1)
    
    $
    
    
    
    $
    10,660Impaired Loans
    
    $
    
    
    
    $
    213,224
    (2)
    
    $
    
    
    
    $
    213,224Other Real Estate Owned
    
    $
    
    
    
    $
    20,577
    (3)
    
    $
    
    
    
    $
    20,577Other Intangible Assets
    
    $
    
    
    
    $
    
    
    
    $
    2,480
    
    
    $
    2,480
 
 (1)
    
    Includes commercial property loans of $2.2 million, commercial term loan of $1.8 million, and SBA loans of $6.7 million.(2)
    
    Includes real estate loans of $82.8 million and commercial and industrial loans of $130.4 million.(3)
    
    Includes properties from the foreclosure of real estate loans of $18.4 million and commercial and industrial loans of $2.1 million. Assets and Liabilities Not Measured at Fair Value on a Recurring or Non-Recurring Basis
   12




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
  September 30, 2010
    
    December 31, 2009Carrying
    
    Estimated
    
    Carrying
    
    Estimatedor Contract
    
    Fair
    
    or Contract
    
    FairAmount
    
    Value
    
    Amount
    
    Value(In Thousands)Financial Assets:Cash and Cash Equivalents
    
    $
    282,298
    
    
    $
    282,298
    
    
    $
    154,110
    
    
    $
    154,110Investment Securities Held to Maturity
    
    
    850
    
    
    
    853
    
    
    
    869
    
    
    
    871Investment Securities Available for Sale
    
    
    324,578
    
    
    
    324,578
    
    
    
    132,420
    
    
    
    132,420Loans Receivable, Net of Allowance for Loan Losses
    
    
    2,218,228
    
    
    
    2,191,522
    
    
    
    2,674,064
    
    
    
    2,573,080Accrued Interest Receivable
    
    
    8,442
    
    
    
    8,442
    
    
    
    9,492
    
    
    
    9,492Investment in Federal Home Loan Bank Stock
    
    
    28,418
    
    
    
    28,418
    
    
    
    30,697
    
    
    
    30,697Investment in Federal Reserve Bank Stock
    
    
    6,783
    
    
    
    6,783
    
    
    
    7,878
    
    
    
    7,878Financial Liabilities:Noninterest-Bearing Deposits
    
    
    559,764
    
    
    
    559,764
    
    
    
    556,306
    
    
    
    556,306Interest-Bearing Deposits
    
    
    1,967,622
    
    
    
    1,988,231
    
    
    
    2,193,021
    
    
    
    2,197,866Borrowings
    
    
    238,698
    
    
    
    239,357
    
    
    
    236,453
    
    
    
    237,354Accrued Interest Payable
    
    
    13,727
    
    
    
    13,727
    
    
    
    12,606
    
    
    
    12,606Stock Warrants
    
    
    1,967
    
    
    
    1,967
    
    
    
    
    
    
    
    Off-Balance Sheet Items:Commitments to Extend Credit
    
    
    139,919
    
    
    
    143
    
    
    
    262,821
    
    
    
    177Standby Letters of Credit
    
    
    15,763
    
    
    
    63
    
    
    
    17,225
    
    
    
    37
  Cash and Cash Equivalents
 Investment Securities
 Loans Receivable, Net of Allowance for Loan Losses
 Accrued Interest Receivable
 Investment in Federal Home Loan Bank (FHLB) and Federal Reserve Bank Stock
 Interest-Bearing Deposits
 13




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
 Borrowings
 Accrued Interest Payable
 Stock Warrants
 Commitments to Extend Credit and Standby Letters of Credit
 NOTE 4  INVESTMENT SECURITIES
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gain
    
    
    Loss
    
    
    Value(In Thousands)September 30, 2010:Municipal Bonds
    
    $
    696
    
    
    $
    
    
    
    $
    
    
    
    $
    696Mortgage-Backed Securities (1)
    
    
    154
    
    
    
    3
    
    
    
    
    
    
    
    157$
    850
    
    
    $
    3
    
    
    $
    
    
    
    $
    853December 31, 2009:Municipal Bonds
    
    $
    696
    
    
    $
    
    
    
    $
    
    
    
    $
    696Mortgage-Backed Securities (1)
    
    
    173
    
    
    
    2
    
    
    
    
    
    
    
    175$
    869
    
    
    $
    2
    
    
    $
    
    
    
    $
    871
 
 (1)
    
    Collateralized by residential mortgages and guaranteed by U.S. government
sponsored entities. 14




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 4  INVESTMENT SECURITIES (Continued)
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gain
    
    
    Loss
    
    
    Value(In Thousands)September 30, 2010:Mortgage-Backed Securities (1)
    
    $
    104,013
    
    
    $
    2,166
    
    
    $
    (134
    )
    
    $
    106,045U.S. Government Agency Securities
    
    
    91,409
    
    
    
    336
    
    
    
    (11
    )
    
    
    91,734Collateralized Mortgage Obligations (1)
    
    
    97,409
    
    
    
    615
    
    
    
    (279
    )
    
    
    97,745Asset-Backed Securities
    
    
    7,259
    
    
    
    419
    
    
    
    
    
    
    
    7,678Municipal Bonds
    
    
    12,704
    
    
    
    125
    
    
    
    (175
    )
    
    
    12,654Corporate Bonds
    
    
    4,500
    
    
    
    
    
    
    
    (4
    )
    
    
    4,496Other Securities
    
    
    3,305
    
    
    
    43
    
    
    
    (32
    )
    
    
    3,316Equity Securities
    
    
    647
    
    
    
    263
    
    
    
    
    
    
    
    910$
    321,246
    
    
    $
    3,967
    
    
    $
    (635
    )
    
    $
    324,578December 31, 2009:Mortgage-Backed Securities (1)
    
    $
    65,218
    
    
    $
    1,258
    
    
    $
    144
    
    
    $
    66,332U.S. Government Agency Securities
    
    
    33,325
    
    
    
    
    
    
    
    562
    
    
    
    32,763Collateralized Mortgage Obligations (1)
    
    
    12,520
    
    
    
    269
    
    
    
    
    
    
    
    12,789Asset-Backed Securities
    
    
    8,127
    
    
    
    61
    
    
    
    
    
    
    
    8,188Municipal Bonds
    
    
    7,369
    
    
    
    82
    
    
    
    92
    
    
    
    7,359Other Securities
    
    
    3,925
    
    
    
    332
    
    
    
    62
    
    
    
    4,195Equity Securities
    
    
    511
    
    
    
    283
    
    
    
    
    
    
    
    794$
    130,995
    
    
    $
    2,285
    
    
    $
    860
    
    
    $
    132,420
 
 (1)
    
    Collateralized by residential mortgages and guaranteed by U.S. government
sponsored entities.  Available for Sale
    
    
    Held to MaturityEstimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(In Thousands)Within One Year
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Over One Year Through Five Years
    
    
    61,855
    
    
    
    61,922
    
    
    
    696
    
    
    
    696Over Five Years Through Ten Years
    
    
    41,220
    
    
    
    41,737
    
    
    
    
    
    
    
    Over Ten Years
    
    
    16,102
    
    
    
    16,219
    
    
    
    
    
    
    
    Mortgage-Backed Securities
    
    
    104,013
    
    
    
    106,045
    
    
    
    154
    
    
    
    157Collateralized Mortgage Obligations
    
    
    97,409
    
    
    
    97,745
    
    
    
    
    
    
    
    Equity Securities
    
    
    647
    
    
    
    910
    
    
    
    
    
    
    
    $
    321,246
    
    
    $
    324,578
    
    
    $
    850
    
    
    $
    853
 Investments  Debt and Equity Securities,
  15




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 4  INVESTMENT SECURITIES (Continued)
  Holding PeriodLess than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    Estimated
    
    
    Number
    
    
    Gross
    
    
    Estimated
    
    
    Number
    
    
    Gross
    
    
    Estimated
    
    
    NumberInvestment Securities
    
    Unrealized
    
    
    Fair
    
    
    of
    
    
    Unrealized
    
    
    Fair
    
    
    of
    
    
    Unrealized
    
    
    Fair
    
    
    ofAvailable for Sale
    
    Losses
    
    
    Value
    
    
    Securities
    
    
    Losses
    
    
    Value
    
    
    Securities
    
    
    Losses
    
    
    Value
    
    
    Securities(In Thousands)September 30, 2010:Mortgage-Backed Securities
    
    $
    134
    
    
    $
    37,140
    
    
    
    8
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    134
    
    
    $
    37,140
    
    
    
    8Collateralized Mortgage
Obligation
    
    
    279
    
    
    
    35,303
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    279
    
    
    
    35,303
    
    
    
    6Municipal Bonds
    
    
    175
    
    
    
    7,266
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175
    
    
    
    7,266
    
    
    
    3U.S. Government Agency
Securities
    
    
    11
    
    
    
    19,076
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    19,076
    
    
    
    4Corporate Bonds
    
    
    4
    
    
    
    2,992
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    2,992
    
    
    
    1Other Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    968
    
    
    
    1
    
    
    
    32
    
    
    
    968
    
    
    
    1$
    603
    
    
    $
    101,777
    
    
    
    22
    
    
    $
    32
    
    
    $
    968
    
    
    
    1
    
    
    $
    635
    
    
    $
    102,745
    
    
    
    23December 31, 2009:Mortgage-Backed Securities
    
    $
    144
    
    
    $
    14,584
    
    
    
    3
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    144
    
    
    $
    14,584
    
    
    
    3Municipal Bonds
    
    
    12
    
    
    
    303
    
    
    
    1
    
    
    
    80
    
    
    
    793
    
    
    
    1
    
    
    
    92
    
    
    
    1,096
    
    
    
    2U.S. Government Agency
Securities
    
    
    562
    
    
    
    32,764
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    32,764
    
    
    
    6Other Securities
    
    
    24
    
    
    
    1,976
    
    
    
    2
    
    
    
    38
    
    
    
    961
    
    
    
    1
    
    
    
    62
    
    
    
    2,937
    
    
    
    3$
    742
    
    
    $
    49,627
    
    
    
    12
    
    
    $
    118
    
    
    $
    1,754
    
    
    
    2
    
    
    $
    860
    
    
    $
    51,381
    
    
    
    14
    16




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 4  INVESTMENT SECURITIES (Continued)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)Gross Realized Gains on Sales of Investment Securities
    
    $
    4
    
    
    $
    
    
    
    $
    222
    
    
    $
    1,277Gross Realized Losses on Sales of Investment Securities
    
    
    
    
    
    
    
    
    
    
    (105
    )
    
    
    (109
    )Net Realized Gains on Sales of Investment Securities
    
    $
    4
    
    
    $
    --
    
    
    $
    117
    
    
    $
    1,168Proceeds from Sales of Investment Securities
    
    $
    15,000
    
    
    $
    
    
    
    $
    18,825
    
    
    $
    38,448Tax Expense on Sales of Investment Securities
    
    $
    2
    
    
    $
    
    
    
    $
    50
    
    
    $
    491
  NOTE 5  LOANS
 Loans Receivable
  September 30,
    
    
    December 31,2010
    
    
    2009(In Thousands)Real Estate Loans:Commercial Property
    
    $
    751,755
    
    
    $
    839,598Construction
    
    
    66,082
    
    
    
    126,350Residential Property
    
    
    65,731
    
    
    
    77,149Total Real Estate Loans
    
    
    883,568
    
    
    
    1,043,097Commercial and Industrial Loans: (1)Commercial Term Loans
    
    
    1,217,885
    
    
    
    1,420,034SBA Loans
    
    
    110,991
    
    
    
    134,521Commercial Lines of Credit
    
    
    72,722
    
    
    
    101,159International Loans
    
    
    46,071
    
    
    
    53,488Total Commercial and Industrial Loans
    
    
    1,447,669
    
    
    
    1,709,202Consumer Loans
    
    
    53,237
    
    
    
    63,303Total Gross Loans
    
    
    2,384,474
    
    
    
    2,815,602Deferred Loan Fees
    
    
    (843
    )
    
    
    (1,552
    )Allowance for Loan Losses
    
    
    (176,063
    )
    
    
    (144,996
    )Loans Receivable, Net
    
    $
    2,207,568
    
    
    $
    2,669,054
 
 (1)
    
    Commercial and industrial loans include owner-occupied property loans of $967.9
million and $1.15 billion as of September 30, 2010 and December 31, 2009, respectively.  17




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 5  LOANS (Continued)
 Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
  As of and for the
    
    
    As of and for theThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    June 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2010
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)Allowance for Loan Losses:Balance at Beginning of Period
    
    $
    176,667
    
    
    $
    177,820
    
    
    $
    105,268
    
    
    $
    144,996
    
    
    $
    70,986Actual Charge-Offs
    
    
    (23,204
    )
    
    
    (40,718
    )
    
    
    (30,362
    )
    
    
    (94,036
    )
    
    
    (67,210
    )Recoveries on Loans Previously Charged Off
    
    
    1,900
    
    
    
    1,772
    
    
    
    487
    
    
    
    7,393
    
    
    
    1,925Net Loan Charge-Offs
    
    
    (21,304
    )
    
    
    (38,946
    )
    
    
    (29,875
    )
    
    
    (86,643
    )
    
    
    (65,285
    )Provision Charged to Operating Expenses
    
    
    20,700
    
    
    
    37,793
    
    
    
    49,375
    
    
    
    117,710
    
    
    
    119,067Balance at End of Period
    
    $
    176,063
    
    
    $
    176,667
    
    
    $
    124,768
    
    
    $
    176,063
    
    
    $
    124,768Allowance for Off-Balance Sheet Items:Balance at Beginning of Period
    
    $
    2,362
    
    
    $
    2,655
    
    
    $
    4,291
    
    
    $
    3,876
    
    
    $
    4,096Provision Charged to Operating Expenses
    
    
    1,300
    
    
    
    (293
    )
    
    
    125
    
    
    
    (214
    )
    
    
    320Balance at End of Period
    
    $
    3,662
    
    
    $
    2,362
    
    
    $
    4,416
    
    
    $
    3,662
    
    
    $
    4,416
 Impaired Loans
  Amount
    
    
    Allowance(In Thousands)September 30, 2010:With No Allocated Allowance:Without Charge-Offs
    
    $
    71,886
    
    
    $
    With Charge-Offs
    
    
    93,978
    
    
    
    $
    165,864
    
    
    $
    With Allocated Allowance:Without Charge-Offs
    
    $
    49,089
    
    
    $
    24,186With Charge-Offs
    
    
    21,128
    
    
    
    2,627$
    70,217
    
    
    $
    26,813December 31, 2009:With No Allocated Allowance:Without Charge-Offs
    
    $
    44,055
    
    
    $
    With Charge-Offs
    
    
    84,674
    
    
    
    $
    128,729
    
    
    $
    With Allocated Allowance:Without Charge-Offs
    
    $
    41,476
    
    
    $
    20,413With Charge-Offs
    
    
    30,529
    
    
    
    2,735$
    72,005
    
    
    $
    23,148
 18




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 5  LOANS (Continued)
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)Interest Income That Would Have Been Recognized
Had Impaired Loans Performed in Accordance With
Their Original Terms
    
    $
    4,865
    
    
    $
    5,473
    
    
    $
    16,229
    
    
    $
    12,126Less: Interest Income Recognized on Impaired Loans
    
    
    (2,622
    )
    
    
    (3,987
    )
    
    
    (7,670
    )
    
    
    (7,591
    )Interest Foregone on Impaired Loans
    
    $
    2,243
    
    
    $
    1,486
    
    
    $
    8,559
    
    
    $
    4,535
  Non-Performing Assets
  September 30,
    
    
    December 31,2010
    
    
    2009(In Thousands)Non-Performing Loans:Non-Accrual Loans:Real Estate Loans:Commercial Property
    
    $
    60,804
    
    
    $
    58,927Construction
    
    
    9,338
    
    
    
    15,185Residential Property
    
    
    1,957
    
    
    
    3,335Commercial and Industrial Loans:Commercial Term Loans
    
    
    89,128
    
    
    
    102,677Commercial Lines of Credit
    
    
    3,692
    
    
    
    1,906SBA Loans
    
    
    28,632
    
    
    
    35,609International Loans
    
    
    540
    
    
    
    739Consumer Loans
    
    
    638
    
    
    
    622Total Non-Accrual Loans
    
    
    194,729
    
    
    
    219,000Loans 90 Days or More Past Due and Still Accruing (as to Principal or Interest):Consumer Loans
    
    
    
    
    
    
    67Total Loans 90 Days or More Past Due and Still Accruing (as to Principal or Interest)
    
    
    
    
    
    
    67Total Non-Performing Loans
    
    
    194,729
    
    
    
    219,067Other Real Estate Owned
    
    
    20,577
    
    
    
    26,306Total Non-Performing Assets
    
    $
    215,306
    
    
    $
    245,373Non-Performing Loans as a Percentage of Total Gross Loans
    
    
    8.13
    %
    
    
    7.77
    %Non-Performing Assets as a Percentage of Total Assets
    
    
    7.25
    %
    
    
    7.76
    %Troubled Debt Restructurings on Accrual Status
    
    $
    35,492
    
    
    $
    
  19




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 6  INCOME TAXES
    NOTE 7  SHARE-BASED COMPENSATION
 Derivatives and Hedging  Contracts in Entitys Own Stock
  Share-Based Compensation Expense
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)Share-Based Compensation Expense
    
    $
    261
    
    
    $
    212
    
    
    $
    748
    
    
    $
    701Related Tax Benefits
    
    $
    110
    
    
    $
    89
    
    
    $
    314
    
    
    $
    295
 20




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 7  SHARE-BASED COMPENSATION (Continued)
 Unrecognized Share-Based Compensation Expense
  Unrecognized
    
    
    Average ExpectedExpense
    
    
    Recognition Period(Dollars in Thousands)Stock Option Awards
    
    $
    651
    
    
    1.2 yearsRestricted Stock Awards
    
    
    240
    
    
    3.1 yearsTotal Unrecognized Share-Based Compensation Expense
    
    $
    891
    
    
    1.7  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
    
    
    1,117,715
    
    
    $
    11.68
    
    
    5.7 years
    
    $
    Options Expired
    
    
    (38,024
    )
    
    $
    4.41
    
    
    0.4 yearsOptions Forfeited
    
    
    (1,200
    )
    
    $
    18.00
    
    
    2.8 yearsOptions Outstanding at End of Period
    
    
    1,078,491
    
    
    $
    11.93
    
    
    5.6 years
    
    $
    Options Exercisable at End of Period
    
    
    802,291
    
    
    $
    13.94
    
    
    4.9 years
    
    $
    
  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
    
    
    1,180,358
    
    
    $
    11.78
    
    
    6.2 years
    
    $
    Options Exercised
    
    
    (16,000
    )
    
    $
    1.35
    
    
    8.5 yearsOptions Expired
    
    
    (78,467
    )
    
    $
    11.45
    
    
    2.5 yearsOptions Forfeited
    
    
    (7,400
    )
    
    $
    17.00
    
    
    6.3 yearsOptions Outstanding at End of Period
    
    
    1,078,491
    
    
    $
    11.93
    
    
    5.6 years
    
    $
    Options Exercisable at End of Period
    
    
    802,291
    
    
    $
    13.94
    
    
    4.9 years
    
    $
    
  21




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 7  SHARE-BASED COMPENSATION (Continued)
 Restricted Stock Awards
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2010
    
    
    September 30, 2010Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageNumber
    
    
    Grant Date
    
    
    Number
    
    
    Grant Dateof
    
    
    Fair Value
    
    
    of
    
    
    Fair ValueShares
    
    
    Per Share
    
    
    Shares
    
    
    Per ShareRestricted Stock at Beginning of Period
    
    
    148,400
    
    
    $
    1.99
    
    
    
    183,400
    
    
    $
    1.87Restricted Stock Vested
    
    
    
    
    
    $
    
    
    
    
    (35,000
    )
    
    $
    1.40Restricted Stock at End of Period
    
    
    148,400
    
    
    $
    1.99
    
    
    
    148,400
    
    
    $
    1.99
 NOTE 8  EARNINGS (LOSS) PER SHARE
   2010
    
    
    2009(Numerator)
    
    
    (Denominator)
    
    
    
    
    
    
    (Numerator)
    
    
    (Denominator)Weighted-
    
    
    Per
    
    
    
    
    
    
    Weighted-
    
    
    PerNet
    
    
    Average
    
    
    Share
    
    
    Net
    
    
    Average
    
    
    ShareLoss
    
    
    Shares
    
    
    Amount
    
    
    Loss
    
    
    Shares
    
    
    Amount(Dollars in Thousands, Except Per Share Data)Three Months Ended September 30:Basic EPS
    
    $
    (14,577
    )
    
    
    122,789,120
    
    
    $
    (0.12
    )
    
    $
    (59,665
    )
    
    
    47,413,141
    
    
    $
    (1.26
    )Effect of Dilutive Securities
 Options, Warrants and
Unvested Restricted Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted EPS
    
    $
    (14,577
    )
    
    
    122,789,120
    
    
    $
    (0.12
    )
    
    $
    (59,665
    )
    
    
    47,413,141
    
    
    $
    (1.26
    )Nine Months Ended September 30:Basic EPS
    
    $
    (93,321
    )
    
    
    75,204,528
    
    
    $
    (1.24
    )
    
    $
    (86,396
    )
    
    
    46,415,225
    
    
    $
    (1.86
    )Effect of Dilutive Securities
 Options, Warrants and
Unvested Restricted Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted EPS
    
    $
    (93,321
    )
    
    
    75,204,528
    
    
    $
    (1.24
    )
    
    $
    (86,396
    )
    
    
    46,415,225
    
    
    $
    (1.86
    )
  22




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 9  OFF-BALANCE SHEET COMMITMENTS
   September 30,
    
    
    December 31,2010
    
    
    2009(In Thousands)Commitments to Extend Credit
    
    $
    139,919
    
    
    $
    262,821Standby Letters of Credit
    
    
    15,763
    
    
    
    17,225Commercial Letters of Credit
    
    
    9,918
    
    
    
    13,544Unused Credit Card Lines
    
    
    24,337
    
    
    
    23,408Total Undisbursed Loan Commitments
    
    $
    189,937
    
    
    $
    316,998
 NOTE 10  SEGMENT REPORTING
  NOTE 11  LIQUIDITY
 Risks and Uncertainties,
 23




---



##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Continued)
 NOTE 11  LIQUIDITY (Continued)
 Hanmi Financial
  Hanmi Bank
  .
   24




---



##### 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
 
    
    our ability to continue as going concern;
    
    closure of Hanmi Bank and appointment of the Federal Deposit Insurance Corporation as
receiver;
    
    failure to complete the transaction contemplated by the securities purchase agreement
with Woori;
    
    failure to raise enough capital to support our operations or meet our regulatory
requirements;
    
    failure to maintain adequate levels of capital to support our operations;
    
    a significant number of customers failing to perform under their loans and other terms
of credit agreements;
    
    the effect of regulatory orders we have entered into and potential future supervisory
actions against us or Hanmi Bank;
    
    fluctuations in interest rates and a decline in the level of our interest rate spread;
    
    failure to attract or retain deposits and restrictions on taking brokered deposits;
    
    sources of liquidity available to us and to Hanmi Bank becoming limited or our
potential inability to access sufficient sources of liquidity when needed or the
requirement that we obtain government waivers to do so;
    
    adverse changes in domestic or global financial markets, economic conditions or
business conditions;
    
    regulatory restrictions on Hanmi Banks ability to pay dividends to us and on our
ability to make payments on our obligations;
    
    significant reliance on loans secured by real estate and the associated vulnerability
to downturns in the local real estate market, natural disasters and other variables
impacting the value of real estate;
    
    failure to attract or retain our key employees;
    
    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;
    
    volatility and disruption in financial, credit and securities markets, and the price of
our common stock;
    
    deterioration in financial markets that may result in impairment charges relating to
our securities portfolio;
    
    competition in our primary market areas;
    
    demographic changes in our primary market areas;
    
    global hostilities, acts of war or terrorism, including but not limited to, conflict
between North and South Korea;
    
    significant government regulations, legislation and potential changes thereto; and
    
    other risks described herein and in the other reports and statements we file with the
SEC.
 
 25




---



##### Table of Contents



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
 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
 26




---



##### Table of Contents



SELECTED FINANCIAL DATA
  As of and for theThree Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2010
    
    2009
    
    2010
    
    2009(Dollars in Thousands, Except Per Share Data)AVERAGE BALANCES:Average Gross Loans, Net (1)
    
    $
    2,456,883
    
    
    $
    3,078,104
    
    
    $
    2,610,122
    
    
    $
    3,235,455Average Investment Securities
    
    $
    223,709
    
    
    $
    209,021
    
    
    $
    169,558
    
    
    $
    190,243Average Interest-Earning Assets
    
    $
    2,989,762
    
    
    $
    3,552,698
    
    
    $
    2,988,813
    
    
    $
    3,718,837Average Total Assets
    
    $
    2,983,632
    
    
    $
    3,672,253
    
    
    $
    3,015,243
    
    
    $
    3,842,266Average Deposits
    
    $
    2,559,116
    
    
    $
    3,100,419
    
    
    $
    2,612,891
    
    
    $
    3,174,880Average Borrowings
    
    $
    239,992
    
    
    $
    297,455
    
    
    $
    245,708
    
    
    $
    374,139Average Interest-Bearing Liabilities
    
    $
    2,238,036
    
    
    $
    2,844,821
    
    
    $
    2,296,599
    
    
    $
    3,013,651Average Stockholders Equity
    
    $
    155,056
    
    
    $
    232,136
    
    
    $
    128,268
    
    
    $
    249,742PER SHARE DATA:Earnings (Loss) Per Share  Basic
    
    $
    (0.12
    )
    
    $
    (1.26
    )
    
    $
    (1.24
    )
    
    $
    (1.86
    )Earnings (Loss) Per Share  Diluted
    
    $
    (0.12
    )
    
    $
    (1.26
    )
    
    $
    (1.24
    )
    
    $
    (1.86
    )Common Shares Outstanding
    
    
    151,198,390
    
    
    
    51,201,390
    
    
    
    151,198,390
    
    
    
    51,201,390Book Value Per Share (2)
    
    $
    1.14
    
    
    $
    3.65
    
    
    $
    1.14
    
    
    $
    3.65SELECTED PERFORMANCE RATIOS:Return on Average Assets (3) (4)
    
    
    (1.94
    %)
    
    
    (6.45
    %)
    
    
    (4.14
    %)
    
    
    (3.01
    %)Return on Average Stockholders Equity (3) (5)
    
    
    (37.30
    %)
    
    
    (101.97
    %)
    
    
    (97.27
    %)
    
    
    (46.25
    %)Efficiency Ratio (6)
    
    
    75.38
    %
    
    
    68.21
    %
    
    
    75.63
    %
    
    
    69.38
    %Net Interest Spread (7)
    
    
    3.07
    %
    
    
    2.47
    %
    
    
    3.17
    %
    
    
    2.08
    %Net Interest Margin (8)
    
    
    3.49
    %
    
    
    3.00
    %
    
    
    3.58
    %
    
    
    2.65
    %Average Stockholders Equity to Average Total Assets
    
    
    5.20
    %
    
    
    6.32
    %
    
    
    4.25
    %
    
    
    6.50
    %SELECTED CAPITAL RATIOS:(9)Total Risk-Based Capital Ratio:Hanmi Financial
    
    
    11.69
    %
    
    
    9.15
    %Hanmi Bank
    
    
    11.61
    %
    
    
    9.69
    %Tier 1 Risk-Based Capital Ratio:Hanmi Financial
    
    
    9.40
    %
    
    
    7.86
    %Hanmi Bank
    
    
    10.28
    %
    
    
    8.40
    %Tier 1 Leverage Ratio:Hanmi Financial
    
    
    7.55
    %
    
    
    6.60
    %Hanmi Bank
    
    
    8.26
    %
    
    
    7.05
    %SELECTED ASSET QUALITY RATIOS:Non-Performing Loans to Total Gross Loans (10)
    
    
    8.13
    %
    
    
    5.85
    %
    
    
    8.13
    %
    
    
    5.85
    %Non-Performing Assets to Total Assets (11)
    
    
    7.25
    %
    
    
    5.83
    %
    
    
    7.25
    %
    
    
    5.83
    %Net Loan Charge-Offs to Average Total Gross Loans (12)
    
    
    3.44
    %
    
    
    3.85
    %
    
    
    4.44
    %
    
    
    2.70
    %Allowance for Loan Losses to Total Gross Loans
    
    
    7.35
    %
    
    
    4.19
    %
    
    
    7.35
    %
    
    
    4.19
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    90.41
    %
    
    
    71.53
    %
    
    
    90.41
    %
    
    
    71.53
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs.(2)
    
    Total stockholders equity divided by common shares outstanding.(3)
    
    Calculation based upon annualized net loss.(4)
    
    Net loss divided by average total assets.(5)
    
    Net loss divided by average stockholders equity.(6)
    
    Total non-interest expenses divided by the sum of net interest income before provision for credit losses and total non-interest income.(7)
    
    Average yield earned on interest-earning assets less average rate paid on
interest-bearing liabilities. Computed on a tax-equivalent basis using an effective marginal
rate of 35 percent.(8)
    
    Net interest income before provision for credit losses divided by average
interest-earning assets. Computed on a tax-equivalent basis using an effective marginal rate
of 35 percent.(9)
    
    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 the Total
Risk-Based Capital Ratio (total capital divided by total risk-weighted assets); 6 percent for
the Tier 1 Risk-Based Capital Ratio (Tier 1 capital divided by total risk-weighted assets);
and 5 percent for the Tier 1 Leverage Ratio (Tier 1 capital divided by average total assets).(10)
    
    Non-performing loans consist of non-accrual loans and loans past due 90 days or more and still accruing interest.(11)
    
    Non-performing assets consist of non-performing loans (see footnote (10) above) and other real estate owned.(12)
    
    Calculation based upon annualized net loan charge-offs. 27




---



##### Table of Contents



EXECUTIVE OVERVIEW
     
    
    The Banks total risk-based capital ratio was 11.61% as of September 30, 2010
compared to 7.35% as of June 30, 2010 and 9.07% as of December 31, 2009. The Banks
tangible common equity to tangible assets was 8.37% as of September 30, 2010 compared to
5.20% as of June 30, 2010 and 7.13% as of December 31, 2009.
    
    Non-performing loans decreased to $194.7 million, or 8.13% of total gross
loans, as of September 30, 2010 compared to $242.1 million or 9.67% of total gross loans as
of June 30, 2010 and $219.1 million, or 7.77% as of December 31, 2009. The coverage ratio
of the allowance to non-performing loans also increased to 90.41% as of September 30, 2010
compared to 72.96% as of June 30, 2010 and 66.19% as of December 31, 2009.
    
    The cost of funds continued to decrease through changes in our deposit mix.
The average funding cost decreased by 98 basis points to 1.67% in the third quarter of 2010
compared to 2.65% for the same period of 2009 and decreased by 128 basis point to 1.75% for
the first nine months of 2010 compared to 3.03% for the same period of 2009.
    
    Net interest margin improved 49 basis points to 3.49% in the third quarter of
2010 compared to 3.00% in the third quarter of 2009 and improved 93 basis points to 3.58%
for the first nine months of 2010 compared to 2.65% for the same period of 2009.
 Outlook for the Remainder of 2010
    Status of Hanmi/Woori Transaction
  28




---



##### Table of Contents



RESULTS OF OPERATIONS
 Net Interest Income before Provision for Credit Losses
   29




---



##### Table of Contents



Three Months Ended September 30, 2010 vs. Three Months Ended September 30, 2009
  Three Months EndedSeptember 30, 2010
    
    
    September 30, 2009Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)ASSETSInterest-Earning Assets:Gross Loans, Net (1)
    
    $
    2,456,883
    
    
    $
    33,681
    
    
    
    5.44
    %
    
    $
    3,078,104
    
    
    $
    42,705
    
    
    
    5.50
    %Municipal Securities (2)
    
    
    6,301
    
    
    
    95
    
    
    
    6.03
    %
    
    
    58,179
    
    
    
    933
    
    
    
    6.41
    %Obligations of Other U.S. Government Agencies
    
    
    92,690
    
    
    
    620
    
    
    
    2.68
    %
    
    
    37,969
    
    
    
    431
    
    
    
    4.54
    %Other Debt Securities
    
    
    124,718
    
    
    
    970
    
    
    
    3.11
    %
    
    
    112,873
    
    
    
    1,110
    
    
    
    3.93
    %Equity Securities (5)
    
    
    36,568
    
    
    
    135
    
    
    
    1.48
    %
    
    
    41,741
    
    
    
    214
    
    
    
    2.05
    %Federal Funds Sold
    
    
    6,932
    
    
    
    8
    
    
    
    0.46
    %
    
    
    56,568
    
    
    
    67
    
    
    
    0.47
    %Term Federal Funds Sold
    
    
    22,880
    
    
    
    32
    
    
    
    0.56
    %
    
    
    90,239
    
    
    
    293
    
    
    
    1.30
    %Interest-Earning Deposits
    
    
    242,790
    
    
    
    165
    
    
    
    0.27
    %
    
    
    77,025
    
    
    
    68
    
    
    
    0.35
    %Total Interest-Earning Assets (2)
    
    
    2,989,762
    
    
    
    35,706
    
    
    
    4.74
    %
    
    
    3,552,698
    
    
    
    45,821
    
    
    
    5.12
    %Noninterest-Earning Assets:Cash and Cash Equivalents
    
    
    66,772
    
    
    
    
    
    
    
    
    
    
    
    67,318Allowance for Loan Losses
    
    
    (184,658
    )
    
    
    
    
    
    
    
    
    
    
    (119,653
    )Other Assets
    
    
    111,756
    
    
    
    
    
    
    
    
    
    
    
    171,890Total Noninterest-Earning Assets
    
    
    (6,130
    )
    
    
    
    
    
    
    
    
    
    
    119,555TOTAL ASSETS
    
    $
    2,983,632
    
    
    
    
    
    
    
    
    
    
    $
    3,672,253LIABILITIES AND STOCKHOLDERS EQUITYInterest-Bearing Liabilities:Deposits:Savings
    
    $
    122,122
    
    
    
    889
    
    
    
    2.89
    %
    
    $
    93,404
    
    
    
    585
    
    
    
    2.48
    %Money Market Checking and NOW Accounts
    
    
    429,601
    
    
    
    1,094
    
    
    
    1.01
    %
    
    
    629,124
    
    
    
    2,998
    
    
    
    1.89
    %Time Deposits of $100,000 or More
    
    
    1,133,970
    
    
    
    5,059
    
    
    
    1.77
    %
    
    
    983,341
    
    
    
    7,447
    
    
    
    3.00
    %Other Time Deposits
    
    
    312,351
    
    
    
    1,257
    
    
    
    1.60
    %
    
    
    841,497
    
    
    
    6,335
    
    
    
    2.99
    %Federal Home Loan Bank Advances
    
    
    153,777
    
    
    
    342
    
    
    
    0.88
    %
    
    
    213,583
    
    
    
    865
    
    
    
    1.61
    %Other Borrowings
    
    
    3,809
    
    
    
    22
    
    
    
    2.29
    %
    
    
    1,466
    
    
    
    
    
    
    
    Junior Subordinated Debentures
    
    
    82,406
    
    
    
    739
    
    
    
    3.56
    %
    
    
    82,406
    
    
    
    747
    
    
    
    3.60
    %Total Interest-Bearing Liabilities
    
    
    2,238,036
    
    
    
    9,402
    
    
    
    1.67
    %
    
    
    2,844,821
    
    
    
    18,977
    
    
    
    2.65
    %Noninterest-Bearing Liabilities:Demand Deposits
    
    
    561,072
    
    
    
    
    
    
    
    
    
    
    
    553,053Other Liabilities
    
    
    29,468
    
    
    
    
    
    
    
    
    
    
    
    42,243Total Noninterest-Bearing Liabilities
    
    
    590,540
    
    
    
    
    
    
    
    
    
    
    
    595,296Total Liabilities
    
    
    2,828,576
    
    
    
    
    
    
    
    
    
    
    
    3,440,117Stockholders Equity
    
    
    155,056
    
    
    
    
    
    
    
    
    
    
    
    232,136TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,983,632
    
    
    
    
    
    
    
    
    
    
    $
    3,672,253NET INTEREST INCOME
    
    
    
    
    
    $
    26,304
    
    
    
    
    
    
    
    
    
    
    $
    26,844NET INTEREST SPREAD(2)(3)
    
    
    
    
    
    
    
    
    
    
    3.07
    %
    
    
    
    
    
    
    
    
    
    
    2.47
    %NET INTEREST MARGIN(2)(4)
    
    
    
    
    
    
    
    
    
    
    3.49
    %
    
    
    
    
    
    
    
    
    
    
    3.00
    %
 
 (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 $429,000 and $654,000 for
the three months ended September 30, 2010 and 2009, respectively.(2)
    
    Computed on a tax-equivalent basis using an effective marginal rate of 35 percent.(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.(5)
    
    Includes investment in Federal Home Loan Bank stock and investment in Federal Reserve Bank stock. 30




---



##### Table of Contents



Three Months Ended September 30, 2010 vs.Three Months Ended September 30, 2009Increases (Decreases) Due to Change inVolume
    
    
    Rate
    
    
    Total(In Thousands)Interest and Dividend Income:Gross Loans, Net
    
    $
    (8,522
    )
    
    $
    (502
    )
    
    $
    (9,024
    )Municipal Securities
    
    
    (785
    )
    
    
    (53
    )
    
    
    (838
    )Obligations of Other U.S. Government Agencies
    
    
    423
    
    
    
    (234
    )
    
    
    189Other Debt Securities
    
    
    108
    
    
    
    (248
    )
    
    
    (140
    )Equity Securities
    
    
    (25
    )
    
    
    (54
    )
    
    
    (79
    )Federal Funds Sold
    
    
    (57
    )
    
    
    (2
    )
    
    
    (59
    )Term Federal Funds Sold
    
    
    (148
    )
    
    
    (113
    )
    
    
    (261
    )Interest-Earning Deposits
    
    
    116
    
    
    
    (19
    )
    
    
    97Total Interest and Dividend Income
    
    
    (8,890
    )
    
    
    (1,225
    )
    
    
    (10,115
    )Interest Expense:Savings
    
    
    199
    
    
    
    105
    
    
    
    304Money Market Checking and NOW Accounts
    
    
    (771
    )
    
    
    (1,133
    )
    
    
    (1,904
    )Time Deposits of $100,000 or More
    
    
    1,014
    
    
    
    (3,402
    )
    
    
    (2,388
    )Other Time Deposits
    
    
    (2,918
    )
    
    
    (2,160
    )
    
    
    (5,078
    )Federal Home Loan Bank Advances
    
    
    (200
    )
    
    
    (323
    )
    
    
    (523
    )Other Borrowings
    
    
    
    
    
    
    22
    
    
    
    22Junior Subordinated Debentures
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )Total Interest Expense
    
    
    (2,676
    )
    
    
    (6,899
    )
    
    
    (9,575
    )Change in Net Interest Income
    
    $
    (6,214
    )
    
    $
    5,674
    
    
    $
    (540
    )
    31




---



##### Table of Contents



Nine Months Ended September 30, 2010 vs. Nine Months Ended September 30, 2009
  Nine Months EndedSeptember 30, 2010
    
    
    September 30, 2009Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)ASSETSInterest-Earning Assets:Gross Loans, Net (1)
    
    $
    2,610,122
    
    
    $
    104,862
    
    
    
    5.37
    %
    
    $
    3,235,455
    
    
    $
    132,508
    
    
    
    5.48
    %Municipal Securities (2)
    
    
    7,107
    
    
    
    332
    
    
    
    6.23
    %
    
    
    58,760
    
    
    
    2,878
    
    
    
    6.53
    %Obligations of Other U.S. Government Agencies
    
    
    63,790
    
    
    
    1,563
    
    
    
    3.27
    %
    
    
    20,345
    
    
    
    671
    
    
    
    4.40
    %Other Debt Securities
    
    
    98,661
    
    
    
    2,471
    
    
    
    3.34
    %
    
    
    111,138
    
    
    
    3,590
    
    
    
    4.31
    %Equity Securities (5)
    
    
    37,961
    
    
    
    397
    
    
    
    1.39
    %
    
    
    41,667
    
    
    
    520
    
    
    
    1.66
    %Federal Funds Sold
    
    
    11,056
    
    
    
    41
    
    
    
    0.49
    %
    
    
    95,365
    
    
    
    261
    
    
    
    0.36
    %Term Federal Funds Sold
    
    
    10,128
    
    
    
    29
    
    
    
    0.38
    %
    
    
    125,249
    
    
    
    1,688
    
    
    
    1.80
    %Interest-Earning Deposits
    
    
    149,988
    
    
    
    319
    
    
    
    0.28
    %
    
    
    30,858
    
    
    
    81
    
    
    
    0.35
    %Total Interest-Earning Assets (2)
    
    
    2,988,813
    
    
    
    110,014
    
    
    
    4.92
    %
    
    
    3,718,837
    
    
    
    142,197
    
    
    
    5.11
    %Noninterest-Earning Assets:Cash and Cash Equivalents
    
    
    67,487
    
    
    
    
    
    
    
    
    
    
    
    72,115Allowance for Loan Losses
    
    
    (174,786
    )
    
    
    
    
    
    
    
    
    
    
    (95,546
    )Other Assets
    
    
    133,729
    
    
    
    
    
    
    
    
    
    
    
    146,860Total Noninterest-Earning Assets
    
    
    26,430
    
    
    
    
    
    
    
    
    
    
    
    123,429TOTAL ASSETS
    
    $
    3,015,243
    
    
    
    
    
    
    
    
    
    
    $
    3,842,266LIABILITIES AND STOCKHOLDERS EQUITYInterest-Bearing Liabilities:Deposits:Savings
    
    $
    120,945
    
    
    
    2,635
    
    
    
    2.91
    %
    
    $
    86,715
    
    
    
    1,617
    
    
    
    2.49
    %Money Market Checking and NOW Accounts
    
    
    481,744
    
    
    
    3,933
    
    
    
    1.09
    %
    
    
    431,646
    
    
    
    6,278
    
    
    
    1.94
    %Time Deposits of $100,000 or More
    
    
    1,050,248
    
    
    
    14,793
    
    
    
    1.88
    %
    
    
    1,124,876
    
    
    
    29,877
    
    
    
    3.55
    %Other Time Deposits
    
    
    397,954
    
    
    
    5,455
    
    
    
    1.83
    %
    
    
    996,275
    
    
    
    25,064
    
    
    
    3.36
    %Federal Home Loan Bank Advances
    
    
    160,162
    
    
    
    1,027
    
    
    
    0.86
    %
    
    
    290,142
    
    
    
    2,987
    
    
    
    1.38
    %Other Borrowings
    
    
    3,140
    
    
    
    53
    
    
    
    2.26
    %
    
    
    1,591
    
    
    
    2
    
    
    
    0.17
    %Junior Subordinated Debentures
    
    
    82,406
    
    
    
    2,100
    
    
    
    3.41
    %
    
    
    82,406
    
    
    
    2,581
    
    
    
    4.19
    %Total Interest-Bearing Liabilities
    
    
    2,296,599
    
    
    
    29,996
    
    
    
    1.75
    %
    
    
    3,013,651
    
    
    
    68,406
    
    
    
    3.03
    %Noninterest-Bearing Liabilities:Demand Deposits
    
    
    562,000
    
    
    
    
    
    
    
    
    
    
    
    535,368Other Liabilities
    
    
    28,375
    
    
    
    
    
    
    
    
    
    
    
    43,505Total Noninterest-Bearing Liabilities
    
    
    590,375
    
    
    
    
    
    
    
    
    
    
    
    578,873Total Liabilities
    
    
    2,886,974
    
    
    
    
    
    
    
    
    
    
    
    3,592,524Stockholders Equity
    
    
    128,268
    
    
    
    
    
    
    
    
    
    
    
    249,742TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,015,243
    
    
    
    
    
    
    
    
    
    
    $
    3,842,266NET INTEREST INCOME
    
    
    
    
    
    $
    80,018
    
    
    
    
    
    
    
    
    
    
    $
    73,791NET INTEREST SPREAD(3)
    
    
    
    
    
    
    
    
    
    
    3.17
    %
    
    
    
    
    
    
    
    
    
    
    2.08
    %NET INTEREST MARGIN(4)
    
    
    
    
    
    
    
    
    
    
    3.58
    %
    
    
    
    
    
    
    
    
    
    
    2.65
    %
 
 (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 $1.5
million for the nine months ended September 30, 2010 and 2009, respectively.(2)
    
    Computed on a tax-equivalent basis using an effective marginal rate of 35 percent.(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.(5)
    
    Includes investment in Federal Home Loan Bank stock and investment in Federal Reserve Bank stock. 32




---



##### Table of Contents



Nine Months Ended September 30, 2010 vs.Nine Months Ended September 30, 2009Increases (Decreases) Due to Change inVolume
    
    
    Rate
    
    
    Total(In Thousands)Interest and Dividend Income:Gross Loans, Net
    
    $
    (25,167
    )
    
    $
    (2,479
    )
    
    $
    (27,646
    )Municipal Securities
    
    
    (2,419
    )
    
    
    (127
    )
    
    
    (2,546
    )Obligations of Other U.S. Government Agencies
    
    
    1,412
    
    
    
    (520
    )
    
    
    892Other Debt Securities
    
    
    (373
    )
    
    
    (746
    )
    
    
    (1,119
    )Equity Securities
    
    
    (44
    )
    
    
    (79
    )
    
    
    (123
    )Federal Funds Sold
    
    
    (421
    )
    
    
    201
    
    
    
    (220
    )Term Federal Funds Sold
    
    
    (893
    )
    
    
    (766
    )
    
    
    (1,659
    )Interest-Earning Deposits
    
    
    286
    
    
    
    (48
    )
    
    
    238Total Interest and Dividend Income
    
    
    (27,619
    )
    
    
    (4,564
    )
    
    
    (32,183
    )Interest Expense:Savings
    
    
    714
    
    
    
    304
    
    
    
    1,018Money Market Checking and NOW Accounts
    
    
    662
    
    
    
    (3,007
    )
    
    
    (2,345
    )Time Deposits of $100,000 or More
    
    
    (1,867
    )
    
    
    (13,217
    )
    
    
    (15,084
    )Other Time Deposits
    
    
    (11,155
    )
    
    
    (8,454
    )
    
    
    (19,609
    )Federal Home Loan Bank Advances
    
    
    (1,064
    )
    
    
    (896
    )
    
    
    (1,960
    )Other Borrowings
    
    
    4
    
    
    
    47
    
    
    
    51Junior Subordinated Debentures
    
    
    
    
    
    
    (481
    )
    
    
    (481
    )Total Interest Expense
    
    
    (12,706
    )
    
    
    (25,704
    )
    
    
    (38,410
    )Change in Net Interest Income
    
    $
    (14,913
    )
    
    $
    21,140
    
    
    $
    6,227
    33




---



##### 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 September 30, 2010 vs. Three Months Ended September 30, 2009
  Three Months EndedSeptember 30,
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Service Charges on Deposit Accounts
    
    $
    3,442
    
    
    $
    4,275
    
    
    $
    (833
    )
    
    
    (19.5
    %)Insurance Commissions
    
    
    1,089
    
    
    
    1,063
    
    
    
    26
    
    
    
    2.4
    %Remittance Fees
    
    
    484
    
    
    
    511
    
    
    
    (27
    )
    
    
    (5.3
    %)Trade Finance Fees
    
    
    381
    
    
    
    512
    
    
    
    (131
    )
    
    
    (25.6
    %)Other Service Charges and Fees
    
    
    409
    
    
    
    489
    
    
    
    (80
    )
    
    
    (16.4
    %)Bank-Owned Life Insurance Income
    
    
    237
    
    
    
    234
    
    
    
    3
    
    
    
    1.3
    %Net Gain on Sales of Investment Securities
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    
    %Net Gain on Sales of Loans
    
    
    229
    
    
    
    864
    
    
    
    (635
    )
    
    
    (73.5
    %)Impairment Loss on Investment Securities
    
    
    (790
    )
    
    
    
    
    
    
    (790
    )
    
    
    
    %Other Operating Income
    
    
    186
    
    
    
    265
    
    
    
    (79
    )
    
    
    (29.8
    %)Total Non-Interest Income
    
    $
    5,671
    
    
    $
    8,213
    
    
    $
    (2,542
    )
    
    
    (31.0
    %)
  34




---



##### Table of Contents



Nine Months Ended September 30, 2010 vs. Nine Months Ended September 30, 2009
  Nine Months EndedSeptember 30,
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Service Charges on Deposit Accounts
    
    $
    10,770
    
    
    $
    13,032
    
    
    $
    (2,262
    )
    
    
    (17.4
    %)Insurance Commissions
    
    
    3,573
    
    
    
    3,430
    
    
    
    143
    
    
    
    4.2
    %Remittance Fees
    
    
    1,469
    
    
    
    1,579
    
    
    
    (110
    )
    
    
    (7.0
    %)Other Service Charges and Fees
    
    
    1,193
    
    
    
    1,439
    
    
    
    (246
    )
    
    
    (17.1
    %)Trade Finance Fees
    
    
    1,144
    
    
    
    1,517
    
    
    
    (373
    )
    
    
    (24.6
    %)Bank-Owned Life Insurance Income
    
    
    703
    
    
    
    695
    
    
    
    8
    
    
    
    1.2
    %Net Gain on Sales of Loans
    
    
    443
    
    
    
    866
    
    
    
    (423
    )
    
    
    (48.8
    %)Net Gain on Sales of Investment Securities
    
    
    117
    
    
    
    1,168
    
    
    
    (1,051
    )
    
    
    (90.0
    %)Impairment Loss on Investment Securities
    
    
    (790
    )
    
    
    
    
    
    
    (790
    )
    
    
    
    %Other Operating Income
    
    
    731
    
    
    
    545
    
    
    
    186
    
    
    
    34.1
    %Total Non-Interest Income
    
    $
    19,353
    
    
    $
    24,271
    
    
    $
    (4,918
    )
    
    
    (20.3
    %)
  Non-Interest Expense
 Three Months Ended September 30, 2010 vs. Three Months Ended September 30, 2009
  Three Months EndedSeptember 30,
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Salaries and Employee Benefits
    
    $
    9,552
    
    
    $
    8,648
    
    
    $
    904
    
    
    
    10.5
    %Occupancy and Equipment
    
    
    2,702
    
    
    
    2,834
    
    
    
    (132
    )
    
    
    (4.7
    %)Other Real Estate Owned Expense
    
    
    2,580
    
    
    
    3,372
    
    
    
    (792
    )
    
    
    (23.5
    %)Deposit Insurance Premiums and Regulatory Assessments
    
    
    2,253
    
    
    
    2,001
    
    
    
    252
    
    
    
    12.6
    %Data Processing
    
    
    1,446
    
    
    
    1,608
    
    
    
    (162
    )
    
    
    (10.1
    %)Professional Fees
    
    
    753
    
    
    
    1,239
    
    
    
    (486
    )
    
    
    (39.2
    %)Directors and Officers Liability Insurance Premiums
    
    
    716
    
    
    
    293
    
    
    
    423
    
    
    
    
    %Supplies and Communications
    
    
    683
    
    
    
    603
    
    
    
    80
    
    
    
    13.3
    %Advertising and Promotion
    
    
    567
    
    
    
    447
    
    
    
    120
    
    
    
    26.8
    %Loan-Related Expense
    
    
    322
    
    
    
    192
    
    
    
    130
    
    
    
    67.7
    %Amortization of Other Intangible Assets
    
    
    273
    
    
    
    379
    
    
    
    (106
    )
    
    
    (28.0
    %)Other Operating Expenses
    
    
    2,232
    
    
    
    2,073
    
    
    
    159
    
    
    
    7.7
    %Total Non-Interest Expense
    
    $
    24,079
    
    
    $
    23,689
    
    
    $
    390
    
    
    
    1.6
    %
   35




---



##### Table of Contents



Nine Months Ended September 30, 2010 vs. Nine Months Ended September 30, 2009
  Nine Months EndedSeptember 30,
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Salaries and Employee Benefits
    
    $
    27,349
    
    
    $
    24,659
    
    
    $
    2,690
    
    
    
    10.9
    %Other Real Estate Owned Expense
    
    
    9,998
    
    
    
    5,017
    
    
    
    4,981
    
    
    
    99.3
    %Deposit Insurance Premiums and Regulatory Assessments
    
    
    8,552
    
    
    
    7,420
    
    
    
    1,132
    
    
    
    15.3
    %Occupancy and Equipment
    
    
    8,101
    
    
    
    8,506
    
    
    
    (405
    )
    
    
    (4.8
    %)Data Processing
    
    
    4,432
    
    
    
    4,691
    
    
    
    (259
    )
    
    
    (5.5
    %)Professional Fees
    
    
    2,841
    
    
    
    2,745
    
    
    
    96
    
    
    
    3.5
    %Directors and Officers Liability Insurance
    
    
    2,149
    
    
    
    882
    
    
    
    1,267
    
    
    
    
    %Supplies and Communications
    
    
    1,774
    
    
    
    1,772
    
    
    
    2
    
    
    
    0.1
    %Advertising and Promotion
    
    
    1,605
    
    
    
    1,640
    
    
    
    (35
    )
    
    
    (2.1
    %)Loan-Related Expense
    
    
    939
    
    
    
    1,590
    
    
    
    (651
    )
    
    
    (40.9
    %)Amortization of Other Intangible Assets
    
    
    902
    
    
    
    1,214
    
    
    
    (312
    )
    
    
    (25.7
    %)Other Operating Expenses
    
    
    6,428
    
    
    
    7,508
    
    
    
    (1,180
    )
    
    
    (14.4
    %)Total Non-Interest Expense
    
    $
    75,070
    
    
    $
    67,644
    
    
    $
    7,426
    
    
    
    11.0
    %
     36




---



##### Table of Contents



Provision for Income Taxes
  FINANCIAL CONDITION
 Investment Portfolio
    37




---



##### Table of Contents



September 30, 2010
    
    
    December 31, 2009Estimated
    
    
    Unrealized
    
    
    
    
    
    
    Estimated
    
    
    UnrealizedAmortized
    
    
    Fair
    
    
    Gain
    
    
    Amortized
    
    
    Fair
    
    
    GainCost
    
    
    Value
    
    
    (Loss)
    
    
    Cost
    
    
    Value
    
    
    (Loss)(In Thousands)Investment Securities Held to Maturity:Municipal Bonds
    
    $
    696
    
    
    $
    696
    
    
    $
    
    
    
    $
    696
    
    
    $
    696
    
    
    $
    Mortgage-Backed Securities (1)
    
    
    154
    
    
    
    157
    
    
    
    3
    
    
    
    173
    
    
    
    175
    
    
    
    2Total Investment Securities Held to Maturity
    
    $
    850
    
    
    $
    853
    
    
    $
    3
    
    
    $
    869
    
    
    $
    871
    
    
    $
    2Investment Securities Available for Sale:Mortgage-Backed Securities (1)
    
    $
    104,013
    
    
    $
    106,045
    
    
    $
    2,032
    
    
    $
    65,218
    
    
    $
    66,332
    
    
    $
    1,114Collateralized Mortgage Obligations (1)
    
    
    97,409
    
    
    
    97,745
    
    
    
    336
    
    
    
    12,520
    
    
    
    12,789
    
    
    
    269U.S. Government Agency Securities
    
    
    91,409
    
    
    
    91,734
    
    
    
    325
    
    
    
    33,325
    
    
    
    32,763
    
    
    
    (562
    )Municipal Bonds
    
    
    12,704
    
    
    
    12,654
    
    
    
    (50
    )
    
    
    7,369
    
    
    
    7,359
    
    
    
    (10
    )Asset-Backed Securities
    
    
    7,259
    
    
    
    7,678
    
    
    
    419
    
    
    
    8,127
    
    
    
    8,188
    
    
    
    61Corporate Bonds
    
    
    4,500
    
    
    
    4,496
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    Other Securities
    
    
    3,305
    
    
    
    3,316
    
    
    
    11
    
    
    
    3,925
    
    
    
    4,195
    
    
    
    270Equity Securities
    
    
    647
    
    
    
    910
    
    
    
    263
    
    
    
    511
    
    
    
    794
    
    
    
    283Total Investment Securities Available for Sale
    
    $
    321,246
    
    
    $
    324,578
    
    
    $
    3,332
    
    
    $
    130,995
    
    
    $
    132,420
    
    
    $
    1,425
 
 (1)
    
    Collateralized by residential mortgages and guaranteed by U.S. government sponsored entities.  Available for Sale
    
    
    Held to MaturityEstimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(In Thousands)Within One Year
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Over One Year Through Five Years
    
    
    61,855
    
    
    
    61,922
    
    
    
    696
    
    
    
    696Over Five Years Through Ten Years
    
    
    41,220
    
    
    
    41,737
    
    
    
    
    
    
    
    Over Ten Years
    
    
    16,102
    
    
    
    16,219
    
    
    
    
    
    
    
    Mortgage-Backed Securities
    
    
    104,013
    
    
    
    106,045
    
    
    
    154
    
    
    
    157Collateralized Mortgage Obligations
    
    
    97,409
    
    
    
    97,745
    
    
    
    
    
    
    
    Equity Securities
    
    
    647
    
    
    
    910
    
    
    
    
    
    
    
    $
    321,246
    
    
    $
    324,578
    
    
    $
    850
    
    
    $
    853
 Investments  Debt and Equity Securities,
  38




---



##### Table of Contents



Holding PeriodLess than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Number
    
    
    Gross
    
    
    
    
    
    
    Number
    
    
    Gross
    
    
    
    
    
    
    NumberInvestment Securities
    
    Unrealized
    
    
    Estimated
    
    
    of
    
    
    Unrealized
    
    
    Estimated
    
    
    of
    
    
    Unrealized
    
    
    Estimated
    
    
    ofAvailable for Sale
    
    Losses
    
    
    Fair Value
    
    
    Securities
    
    
    Losses
    
    
    Fair Value
    
    
    Securities
    
    
    Losses
    
    
    Fair Value
    
    
    Securities(Dollars in Thousands)September 30, 2010:Mortgage-Backed Securities
    
    $
    134
    
    
    $
    37,140
    
    
    
    8
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    134
    
    
    $
    37,140
    
    
    
    8Collateralized Mortgage Obligation
    
    
    279
    
    
    
    35,303
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    279
    
    
    
    35,303
    
    
    
    6Municipal Bonds
    
    
    175
    
    
    
    7,266
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175
    
    
    
    7,266
    
    
    
    3U.S. Government Agency Securities
    
    
    11
    
    
    
    19,076
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    19,076
    
    
    
    4Corporate Bonds
    
    
    4
    
    
    
    2,992
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    2,992
    
    
    
    1Other Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    968
    
    
    
    1
    
    
    
    32
    
    
    
    968
    
    
    
    1$
    603
    
    
    $
    101,777
    
    
    
    22
    
    
    $
    32
    
    
    $
    968
    
    
    
    1
    
    
    $
    635
    
    
    $
    102,745
    
    
    
    23December 31, 2009:Mortgage-Backed Securities
    
    $
    144
    
    
    $
    14,584
    
    
    
    3
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    144
    
    
    $
    14,584
    
    
    
    3Municipal Bonds
    
    
    12
    
    
    
    303
    
    
    
    1
    
    
    
    80
    
    
    
    793
    
    
    
    1
    
    
    
    92
    
    
    
    1,096
    
    
    
    2U.S. Government Agency Securities
    
    
    562
    
    
    
    32,764
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    32,764
    
    
    
    6Other Securities
    
    
    24
    
    
    
    1,976
    
    
    
    2
    
    
    
    38
    
    
    
    961
    
    
    
    1
    
    
    
    62
    
    
    
    2,937
    
    
    
    3$
    742
    
    
    $
    49,627
    
    
    
    12
    
    
    $
    118
    
    
    $
    1,754
    
    
    
    2
    
    
    $
    860
    
    
    $
    51,381
    
    
    
    14
   39




---



##### Table of Contents



Loan Portfolio
  September 30,
    
    
    December 31,
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Real Estate Loans:Commercial Property (1)
    
    $
    753,921
    
    
    $
    839,598
    
    
    $
    (85,677
    )
    
    
    (10.2
    %)Construction
    
    
    66,082
    
    
    
    126,350
    
    
    
    (60,268
    )
    
    
    (47.7
    %)Residential Property
    
    
    65,731
    
    
    
    77,149
    
    
    
    (11,418
    )
    
    
    (14.8
    %)Total Real Estate Loans
    
    
    885,734
    
    
    
    1,043,097
    
    
    
    (157,363
    )
    
    
    (15.1
    %)Commercial and Industrial Loans: (2)Commercial Term Loans (3)
    
    
    1,219,726
    
    
    
    1,420,034
    
    
    
    (200,308
    )
    
    
    (14.1
    %)SBA Loans (4)
    
    
    117,644
    
    
    
    139,531
    
    
    
    (21,887
    )
    
    
    (15.7
    %)Commercial Lines of Credit
    
    
    72,722
    
    
    
    101,159
    
    
    
    (28,437
    )
    
    
    (28.1
    %)International Loans
    
    
    46,071
    
    
    
    53,488
    
    
    
    (7,417
    )
    
    
    (13.9
    %)Total Commercial and Industrial Loans
    
    
    1,456,163
    
    
    
    1,714,212
    
    
    
    (258,049
    )
    
    
    (15.1
    %)Consumer Loans
    
    
    53,237
    
    
    
    63,303
    
    
    
    (10,066
    )
    
    
    (15.9
    %)Total Loans  Gross
    
    
    2,395,134
    
    
    
    2,820,612
    
    
    
    (425,478
    )
    
    
    (15.1
    %)Deferred Loan Fees
    
    
    (843
    )
    
    
    (1,552
    )
    
    
    709
    
    
    
    (45.7
    %)Allowance for Loan Losses
    
    
    (176,063
    )
    
    
    (144,996
    )
    
    
    (31,067
    )
    
    
    21.4
    %Net Loans Receivable
    
    $
    2,218,228
    
    
    $
    2,674,064
    
    
    $
    (455,836
    )
    
    
    (17.0
    %)
 
 (1)
    
    Includes loans held for sale, at the lower of cost or fair value, of $2.2
million and $0 as of September 30, 2010 and December 31, 2009, respectively.(2)
    
    Commercial and industrial loans include owner-occupied property loans of $967.9 million and $1.15 billion as of September 30, 2010 and December 31, 2009, respectively.(3)
    
    Includes loans held for sale, at the lower of cost or fair value, of $1.8 million and $0 as of September 30, 2010 and December 31, 2009, respectively.(4)
    
    Includes loans held for sale, at the lower of cost or fair value, $6.7 million as of September 30, 2010 and December 31, 2009, respectively.    40




---



##### Table of Contents



Balance as of
    
    Percentage of TotalIndustry
    
    September 30, 2010
    
    Gross Loans Outstanding(In Thousands)Lessors of Non-Residential Buildings
    
    $
    386,360
    
    
    
    16.1
    %Accommodation/Hospitality
    
    $
    341,818
    
    
    
    14.3
    %Gasoline Stations
    
    $
    301,107
    
    
    
    12.6
    %
  Non-Performing Assets
    41




---



##### Table of Contents



September 30,
    
    
    December 31,
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Non-Performing Loans:Non-Accrual Loans:Real Estate Loans:Commercial Property
    
    $
    60,804
    
    
    $
    58,927
    
    
    $
    1,877
    
    
    
    3.2
    %Construction
    
    
    9,338
    
    
    
    15,185
    
    
    
    (5,847
    )
    
    
    (38.5
    %)Residential Property
    
    
    1,957
    
    
    
    3,335
    
    
    
    (1,379
    )
    
    
    (41.3
    %)Commercial and Industrial Loans:Commercial Term Loans
    
    
    89,129
    
    
    
    102,677
    
    
    
    (13,548
    )
    
    
    (13.2
    %)Commercial Lines of Credit
    
    
    3,692
    
    
    
    1,906
    
    
    
    1,787
    
    
    
    93.7
    %SBA Loans
    
    
    28,632
    
    
    
    35,609
    
    
    
    (6,976
    )
    
    
    (19.6
    %)International Loans
    
    
    540
    
    
    
    739
    
    
    
    (199
    )
    
    
    (26.9
    %)Consumer Loans
    
    
    638
    
    
    
    622
    
    
    
    15
    
    
    
    2.5
    %Total Non-Accrual Loans
    
    
    194,729
    
    
    
    219,000
    
    
    
    (24,271
    )
    
    
    (11.1
    %)Loans 90 Days or More Past Due and Still Accruing
(as to Principal or Interest):Consumer Loans
    
    
    
    
    
    
    67
    
    
    
    (67
    )
    
    
    (100.0
    %)Total Loans 90 Days or More Past Due and
Still
Accruing (as to Principal or Interest)
    
    
    
    
    
    
    67
    
    
    
    (67
    )
    
    
    (100.0
    %)Total Non-Performing Loans
    
    
    194,729
    
    
    
    219,067
    
    
    
    (24,338
    )
    
    
    (11.1
    %)Other Real Estate Owned
    
    
    20,577
    
    
    
    26,306
    
    
    
    (5,729
    )
    
    
    (21.8
    %)Total Non-Performing Assets
    
    $
    215,306
    
    
    $
    245,373
    
    
    $
    (30,067
    )
    
    
    (12.3
    %)Non-Performing Loans as a Percentage of Total Gross
Loans
    
    
    8.13
    %
    
    
    7.77
    %Non-Performing Assets as a Percentage of Total Assets
    
    
    7.25
    %
    
    
    7.76
    %Troubled Debt Restructurings on Accrual Status
    
    $
    35,492
    
    
    $
    
    
    
    $
    35,492
    
    
    
    
    42




---



##### Table of Contents



September 30,
    
    
    December 31,2010
    
    
    2009(In Thousands)Recorded Investment With Related Allowance
    
    $
    70,217
    
    
    $
    72,005Recorded Investment With No Related Allowance
    
    
    165,864
    
    
    
    128,729Allowance on Impaired Loans
    
    
    (26,813
    )
    
    
    (23,148
    )Net Recorded Investment in Impaired Loans
    
    $
    209,268
    
    
    $
    177,586
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)Interest Income That Would Have Been Recognized Had
Impaired
Loans Performed in Accordance With Their Original Terms
    
    $
    4,865
    
    
    $
    5,473
    
    
    $
    16,229
    
    
    $
    12,126Less: Interest Income Recognized on Impaired Loans
    
    
    (2,622
    )
    
    
    (3,987
    )
    
    
    (7,670
    )
    
    
    (7,591
    )Interest Foregone on Impaired Loans
    
    $
    2,243
    
    
    $
    1,486
    
    
    $
    8,559
    
    
    $
    4,535
  43




---



##### Table of Contents



Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
          
    
    changes in lending policies and procedures, including underwriting standards and
collection, charge-offs,
and recovery practice;
    
    changes in national and local economic and business conditions and developments,
including the condition
of various market segments;
    
    changes in the nature and volume of the portfolio;
 44




---



##### Table of Contents




    
    changes in the trend of the volume and severity of past due and classified loans,
and trends in the volume
of non-accrual loans, troubled debt restructurings, charge-offs and other loan
modifications;
    
    changes in the quality of the Banks loan review system and the degree of oversight
by the Board of Directors;
    
    the existence and effect of any concentrations of credit, and changes in the level
of such concentrations;
    
    transfer risk on cross-border lending activities;
    
    the effect of external factors such as competition and legal and regulatory
requirements as well as declining collateral values on the level of estimated credit losses in the Banks current
portfolio.
   September 30, 2010
    
    
    December 31, 2009Allowance
    
    
    Loans
    
    
    Allowance
    
    
    LoansAllowance for Loan Losses Applicable To
    
    Amount
    
    
    Receivable
    
    
    Amount
    
    
    Receivable(Dollars in Thousands)Real Estate Loans:Commercial Property (1)
    
    $
    34,836
    
    
    $
    751,755
    
    
    $
    19,149
    
    
    $
    839,598Construction
    
    
    3,873
    
    
    
    66,082
    
    
    
    9,043
    
    
    
    126,350Residential Property
    
    
    1,034
    
    
    
    65,731
    
    
    
    997
    
    
    
    77,149Total Real Estate Loans
    
    
    39,743
    
    
    
    883,568
    
    
    
    29,189
    
    
    
    1,043,097Commercial and Industrial Loans: (1)
    
    
    132,183
    
    
    
    1,447,669
    
    
    
    110,678
    
    
    
    1,709,202Consumer Loans
    
    
    2,658
    
    
    
    53,237
    
    
    
    2,690
    
    
    
    63,303Unallocated
    
    
    1,479
    
    
    
    
    
    
    
    2,439
    
    
    
    Total
    
    $
    176,063
    
    
    $
    2,384,474
    
    
    $
    144,996
    
    
    $
    2,815,602
 
 (1)
    
    Loans held for sale excluded. 45




---



##### Table of Contents



As of and for the
    
    
    As of and for theThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    June 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2010
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in Thousands)Allowance for Loan Losses:Balance at Beginning of Period
    
    $
    176,667
    
    
    $
    177,820
    
    
    $
    105,268
    
    
    $
    144,996
    
    
    $
    70,986Actual Charge-Offs
    
    
    (23,204
    )
    
    
    (40,718
    )
    
    
    (30,362
    )
    
    
    (94,036
    )
    
    
    (67,210
    )Recoveries on Loans Previously Charged Off
    
    
    1,900
    
    
    
    1,772
    
    
    
    487
    
    
    
    7,393
    
    
    
    1,925Net Loan Charge-Offs
    
    
    (21,304
    )
    
    
    (38,946
    )
    
    
    (29,875
    )
    
    
    (86,643
    )
    
    
    (65,285
    )Provision Charged to Operating Expenses
    
    
    20,700
    
    
    
    37,793
    
    
    
    49,375
    
    
    
    117,710
    
    
    
    119,067Balance at End of Period
    
    $
    176,063
    
    
    $
    176,667
    
    
    $
    124,768
    
    
    $
    176,063
    
    
    $
    124,768Allowance for Off-Balance Sheet Items:Balance at Beginning of Period
    
    $
    2,362
    
    
    $
    2,655
    
    
    $
    4,291
    
    
    $
    3,876
    
    
    $
    4,096Provision Charged to Operating Expenses
    
    
    1,300
    
    
    
    (293
    )
    
    
    125
    
    
    
    (214
    )
    
    
    320Balance at End of Period
    
    $
    3,662
    
    
    $
    2,362
    
    
    $
    4,416
    
    
    $
    3,662
    
    
    $
    4,416Ratios:Net Loan Charge-Offs to Average Total Gross Loans (1)
    
    
    3.44
    %
    
    
    5.98
    %
    
    
    3.85
    %
    
    
    4.44
    %
    
    
    2.70
    %Net Loan Charge-Offs to Total Gross Loans (1)
    
    
    3.53
    %
    
    
    6.24
    %
    
    
    3.98
    %
    
    
    4.84
    %
    
    
    2.93
    %Allowance for Loan Losses to Average Total Gross Loans
    
    
    7.16
    %
    
    
    6.76
    %
    
    
    4.05
    %
    
    
    6.74
    %
    
    
    3.85
    %Allowance for Loan Losses to Total Gross Loans
    
    
    7.35
    %
    
    
    7.05
    %
    
    
    4.19
    %
    
    
    7.35
    %
    
    
    4.19
    %Net Loan Charge-Offs to Allowance for Loan Losses (1)
    
    
    48.01
    %
    
    
    88.42
    %
    
    
    95.00
    %
    
    
    65.80
    %
    
    
    69.96
    %Net Loan Charge-Offs to Provision Charged to Operating Expenses
    
    
    102.92
    %
    
    
    103.05
    %
    
    
    60.51
    %
    
    
    73.61
    %
    
    
    54.83
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    90.41
    %
    
    
    72.96
    %
    
    
    71.53
    %
    
    
    90.41
    %
    
    
    71.53
    %Balances:Average Total Gross Loans Outstanding During Period
    
    $
    2,457,705
    
    
    $
    2,612,077
    
    
    $
    3,079,746
    
    
    $
    2,611,117
    
    
    $
    3,236,897Total Gross Loans Outstanding at End of Period
    
    $
    2,395,134
    
    
    $
    2,504,248
    
    
    $
    2,979,314
    
    
    $
    2,395,134
    
    
    $
    2,979,314Non-Performing Loans at End of Period
    
    $
    194,729
    
    
    $
    242,133
    
    
    $
    174,427
    
    
    $
    194,729
    
    
    $
    174,427
 
 (1)
    
    Net loan charge-offs are annualized to calculate the ratios.    46




---



##### Table of Contents



As of and for theThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in Thousands)Charge-offs:Real Estate Loans
    
    $
    2,867
    
    
    $
    1,949
    
    
    $
    20,684
    
    
    $
    8,163Commercial Term Loans
    
    
    16,605
    
    
    
    13,198
    
    
    
    57,031
    
    
    
    34,061SBA Loans
    
    
    2,734
    
    
    
    3,276
    
    
    
    9,068
    
    
    
    4,273Commercial Lines of Credit
    
    
    759
    
    
    
    2,612
    
    
    
    5,842
    
    
    
    4,009International Loans
    
    
    
    
    
    
    9,052
    
    
    
    194
    
    
    
    15,199Consumer Loans
    
    
    239
    
    
    
    274
    
    
    
    1,218
    
    
    
    1,505Total Charge-offs
    
    
    23,204
    
    
    
    30,362
    
    
    
    94,036
    
    
    
    67,210Recoveries:Real Estate Loans
    
    
    1,168
    
    
    
    
    
    
    
    3,033
    
    
    
    Commercial Term Loans
    
    
    495
    
    
    
    164
    
    
    
    3,091
    
    
    
    1,277SBA Loans
    
    
    72
    
    
    
    168
    
    
    
    559
    
    
    
    288Commercial Lines of Credit
    
    
    32
    
    
    
    116
    
    
    
    118
    
    
    
    242International Loans
    
    
    87
    
    
    
    2
    
    
    
    425
    
    
    
    6Consumer Loans
    
    
    46
    
    
    
    36
    
    
    
    167
    
    
    
    112Total Recoveries
    
    
    1,900
    
    
    
    487
    
    
    
    7,393
    
    
    
    1,925Net Charge-offs
    
    $
    21,304
    
    
    $
    29,875
    
    
    $
    86,643
    
    
    $
    65,285
   Deposits
  September 30,
    
    
    December 31,
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Demand  Noninterest-Bearing
    
    $
    559,764
    
    
    $
    556,306
    
    
    $
    3,458
    
    
    
    0.6
    %Interest-Bearing:Savings
    
    
    119,824
    
    
    
    111,172
    
    
    
    8,652
    
    
    
    7.8
    %Money Market Checking and NOW Accounts
    
    
    422,564
    
    
    
    685,858
    
    
    
    (263,294
    )
    
    
    (38.4
    %)Time Deposits of $100,000 or More
    
    
    1,126,760
    
    
    
    815,190
    
    
    
    311,570
    
    
    
    38.2
    %Other Time Deposits
    
    
    298,474
    
    
    
    580,801
    
    
    
    (282,327
    )
    
    
    (48.6
    %)Total Deposits
    
    $
    2,527,386
    
    
    $
    2,749,327
    
    
    $
    (221,941
    )
    
    
    (8.1
    %)
  47




---



##### Table of Contents



Federal Home Loan Bank Advances
  Junior Subordinated Debentures
  48




---



##### Table of Contents



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
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    63,455
    
    
    $
    63,455Interest-Bearing Deposits in Other Banks
    
    
    214,472
    
    
    
    4,371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218,843Investment Securities:Fixed Rate
    
    
    11,053
    
    
    
    36,064
    
    
    
    119,410
    
    
    
    75,756
    
    
    
    8,878
    
    
    
    251,161Floating Rate
    
    
    8,034
    
    
    
    24,747
    
    
    
    40,360
    
    
    
    910
    
    
    
    216
    
    
    
    74,267Loans:Fixed Rate
    
    
    120,745
    
    
    
    198,936
    
    
    
    422,742
    
    
    
    33,086
    
    
    
    
    
    
    
    775,509Floating Rate
    
    
    1,339,182
    
    
    
    42,974
    
    
    
    44,462
    
    
    
    1,494
    
    
    
    
    
    
    
    1,428,112Non-Accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,729
    
    
    
    194,729Deferred Loan Fees, Discounts, and
Allowance for
Loan Losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180,122
    )
    
    
    (180,122
    )Investment in Federal Home Loan Bank Stock
and Federal
Reserve Bank Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,201
    
    
    
    
    
    
    
    35,201Other Assets
    
    
    27,111
    
    
    
    
    
    
    
    
    
    
    
    7,012
    
    
    
    73,227
    
    
    
    107,350Total Assets
    
    $
    1,720,597
    
    
    $
    307,092
    
    
    $
    626,974
    
    
    $
    153,459
    
    
    $
    160,383
    
    
    $
    2,968,505LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits:Demand  Noninterest-Bearing
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    559,764
    
    
    $
    559,764Savings
    
    
    11,875
    
    
    
    28,472
    
    
    
    58,014
    
    
    
    21,463
    
    
    
    
    
    
    
    119,824Money Market Checking and NOW Accounts
    
    
    57,989
    
    
    
    120,968
    
    
    
    171,210
    
    
    
    72,397
    
    
    
    
    
    
    
    422,564Time Deposits:Fixed Rate
    
    
    227,125
    
    
    
    664,307
    
    
    
    533,684
    
    
    
    4
    
    
    
    
    
    
    
    1,425,120Floating Rate
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114Federal Home Loan Bank Advances
    
    
    150,086
    
    
    
    264
    
    
    
    3,384
    
    
    
    
    
    
    
    
    
    
    
    153,734Other Borrowings
    
    
    2,558
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,558Junior Subordinated Debentures
    
    
    82,406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,406Other Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,789
    
    
    
    29,789Stockholders Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172,632
    
    
    
    172,632Total Liabilities and Stockholders Equity
    
    $
    532,153
    
    
    $
    814,011
    
    
    $
    766,292
    
    
    $
    93,864
    
    
    $
    762,185
    
    
    $
    2,968,505Repricing Gap
    
    $
    1,188,444
    
    
    $
    (506,919
    )
    
    $
    (139,318
    )
    
    $
    59,595
    
    
    $
    (601,802
    )
    
    $
    Cumulative Repricing Gap
    
    $
    1,188,444
    
    
    $
    681,525
    
    
    $
    542,207
    
    
    $
    601,802
    
    
    $
    
    
    
    $
    Cumulative Repricing Gap as a Percentage of
Total Assets
    
    
    40.04
    %
    
    
    22.96
    %
    
    
    18.27
    %
    
    
    20.27
    %
    
    
    Cumulative Repricing Gap as a Percentage of
Interest-Earning Assets
    
    
    42.72
    %
    
    
    24.50
    %
    
    
    19.49
    %
    
    
    21.63
    %
    
    
    
   49




---



##### Table of Contents



The following table summarizes the status of the cumulative gap position as of the dates
indicated.
 Less Than Three Months
    
    Less Than Twelve MonthsSeptember 30,
    
    December 31,
    
    September 30,
    
    December 31,2010
    
    2009
    
    2010
    
    2009(Dollars in Thousands)Cumulative Repricing Gap
    
    $
    1,188,444
    
    
    $
    889,466
    
    
    $
    681,525
    
    
    $
    276,131Cumulative Repricing Gap as a Percentage of Total Assets
    
    
    40.04
    %
    
    
    28.12
    %
    
    
    22.96
    %
    
    
    8.73
    %Cumulative Repricing Gap as a Percentage of Interest-Earning Assets
    
    
    42.72
    %
    
    
    30.97
    %
    
    
    24.50
    %
    
    
    9.61
    %
   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%
    
    
    13.90
    %
    
    
    (6.13
    %)
    
    $
    15,214
    
    
    $
    (15,866
    )100%
    
    
    6.28
    %
    
    
    (3.38
    %)
    
    $
    6,876
    
    
    $
    (8,743
    )(100%)
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )(200%)
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
 
 (1)
    
    The table above only reflects the impact of upward shocks due to the fact that a
downward parallel shock of 100 basis points or more is not possible given that some
short-term rates are currently less than one percent.  50




---



##### Table of Contents



CAPITAL RESOURCES AND LIQUIDITY
 Capital Resources
   Ratio of Tangible StockholdersDate
    
    Equity to Total Tangible AssetsBy July 31, 2010
    
    Not Less Than 9.0 PercentFrom December 31, 2010 and Until the Final Order is Terminated
    
    Not Less Than 9.5 Percent
    Liquidity
   51




---



##### Table of Contents



Note 11  Liquidity
 OFF-BALANCE SHEET ARRANGEMENTS
 Note 9  Off-Balance Sheet
Commitments Item 1.
Business  Off-Balance Sheet Commitments
 CONTRACTUAL OBLIGATIONS
  RECENTLY ISSUED ACCOUNTING STANDARDS
 FASB ASU 2010-20, Receivable (Topic 310), Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses
 FASB ASU 2010-18, Receivable (Topic 310), Effect of a Loan Modification When the Loan Is Part
of a Pool That Is Accounted for as a Single Asset
 FASB ASC 810, Consolidations
 FASB ASC 860, Transfers and Servicing
 52




---



##### Table of Contents



FASB ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820)
 
 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 Part II, Item 1A Risk
Factors,
 
 ITEM 4. CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Risks Relating to our Business and Ownership of Our Common Stock
 Our independent registered public accounting firm has expressed substantial doubt about our
ability to continue as a going concern.
 53




---



##### Table of Contents



Our operations may require us to raise additional capital in the future, but that capital may
not be available or may not be on terms acceptable to us when it is needed.
 Ratio of Tangible ShareholdersDate
    
    Equity to Total Tangible AssetsBy July 31, 2010
    
    Not Less Than 9.0 PercentFrom December 31, 2010 and Until the Final Order is Terminated
    
    Not Less Than 9.5 Percent
   Based on its capital ratios as of June 30, 2010, Hanmi Bank was subject to various operating
restrictions and other limitations under the prompt corrective action regulations and guidelines.
 Hanmi Bank is prohibited from accepting, renewing or rolling over brokered deposits, which
could significantly affect its liquidity.
 The Bank is subject to additional regulatory oversight as a result of a formal regulatory
enforcement action issued by the Federal Reserve Bank and the California Department of Financial
Institutions.
 54




---



##### Table of Contents



We may become subject to additional regulatory restrictions in the event that our regulatory
capital levels were to decline.
   The Bank is currently restricted from paying dividends to us and we are restricted from paying
dividends to stockholders and from making any payments on our trust preferred securities.
 Liquidity risk could impair our ability to fund operations and jeopardize our financial
condition.
 55




---



##### Table of Contents



We may be required to make additional provisions for credit losses and charge off additional
loans in the future, which could adversely affect our results of operations and capital levels.
 Our allowance for loan losses may not be adequate to cover actual losses.
 Our Southern California business focus and economic conditions in Southern California could
adversely affect our operations.
 Our concentration in commercial real estate loans located primarily in Southern California
could have adverse effects on credit quality.
 Our concentration in commercial and industrial loans could have adverse effects on credit
quality.
 Our concentrations of loans in certain industries could have adverse effects on credit
quality.
 56




---



##### Table of Contents



The Woori investment is subject to conditions to closing and may not close at all.
  Existing stockholders will experience substantial dilution from the best efforts public
offering and the Woori investment.
 In the future we may decide or be required to raise additional funds, which would cause then
existing stockholders to experience dilution.
 Even after the Woori investment, the rights offering and best efforts public offering we may
still be subject to continued regulatory scrutiny.
 If the Woori investment is completed, we will have a controlling stockholder who will be able
to control certain corporate matters.
 57




---



##### Table of Contents



If the Woori investment is completed, we would qualify as a controlled company for NASDAQ
corporate governance purposes.
 Difficult economic and market conditions have adversely affected our industry.
 
    
    We potentially face increased regulation of our industry. Compliance with such regulation
may increase our costs and limit our ability to pursue business opportunities.
 58




---



##### Table of Contents




    
    The process we use to estimate losses inherent in our credit exposure requires
difficult, subjective and complex
judgments, including forecasts of economic conditions and how these economic conditions might
impair the
ability of our borrowers to repay their loans. The level of uncertainty concerning economic
conditions may
adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of
the process.
    
    We may be required to pay significantly higher Federal Deposit Insurance
Corporation premiums because
market developments have significantly depleted the deposit insurance fund of the Federal
Deposit Insurance
Corporation and reduced the ratio of reserves to insured deposits.
    
    Our liquidity could be negatively impacted by an inability to access the capital
markets, unforeseen or
extraordinary demands on cash, or regulatory restrictions, which could, among other things,
materially and
adversely affect our business, results of operations and financial condition and our ability
to continue as a going
concern.
 If current levels of market disruption and volatility continue or worsen, there can be no
assurance that we will not experience an adverse effect, which may be material, on our ability to
access capital and on our business, financial condition and results of operations and prospects as
a going concern.
 U.S. and international financial markets and economic conditions could adversely affect our
liquidity, results of operations and financial condition.
 Our success depends on our key management.
 Changes in economic conditions could materially hurt our business.
   
    
    problem assets and foreclosures may increase;
    
    demand for our products and services may decline;
    
    low cost or non-interest bearing deposits may decrease; and
    
    collateral for loans made by us, especially real estate, may decline in value.
 If a significant number of borrowers, guarantors or related parties fail to perform as
required by the terms of their loans, we could sustain losses.
 59




---



##### Table of Contents



Our loan portfolio is predominantly secured by real estate and thus we have a higher degree of
risk from a downturn in our real estate markets.
 We are exposed to risk of environmental liabilities with respect to properties to which we
take title.
 Our earnings are affected by changing interest rates.
 The impact of the Basel III capital standards on Hanmi Bank and Woori and potential changes or
additions to those standards will likely increase our capital requirements.
 We are subject to government regulations that could limit or restrict our activities, which in
turn could adversely affect our operations.
 Competition may adversely affect our performance.
 60




---



##### Table of Contents



We continually encounter technological change, and we may have fewer resources than many of
our competitors to continue to invest in technological improvements.
 We rely on communications, information, operating and financial control systems technology
from thirdparty service providers, and we may suffer an interruption in those systems.
 Negative publicity could damage our reputation.
 The price of our common stock may be volatile or may decline.
 
    
    developments relating to the Woori investment;
    
    actual or anticipated quarterly fluctuations in our operating results and
financial condition;
    
    changes in revenue or earnings estimates or publication of research reports and
recommendations by financial
analysts;
    
    failure to meet analysts revenue or earnings estimates;
    
    speculation in the press or investment community;
    
    strategic actions by us or our competitors, such as acquisitions or
restructurings;
    
    actions by institutional stockholders;
    
    fluctuations in the stock price and operating results of our competitors;
    
    general market conditions and, in particular, developments related to market
conditions for the financial services
industry;
    
    proposed or adopted legislative or regulatory changes or developments;
    
    anticipated or pending investigations, proceedings or litigation that involve or
affect us; or
    
    domestic and international economic factors unrelated to our performance.
  61




---



##### Table of Contents



Your share ownership may be diluted by the issuance of additional shares of our common stock
in the future.
  Future sales of common stock by existing stockholders may have an adverse impact on the market
price of our common stock.
 Holders of our junior subordinated debentures have rights that are senior to those of our
stockholders.
 Anti-takeover provisions and state and federal law may limit the ability of another party to
acquire us, which could cause our stock price to decline.
  62




---



##### Table of Contents



Our ability to use some or all of our net operating loss carryforwards may be impaired.
 Implementation of the various provisions of the Dodd-Frank Act may increase our operating
costs or otherwise have a material affect on our business, financial condition or results of
operations.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
  63




---



##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Document3.1
    
    Amended and Restated Certificate of
Incorporation of Hanmi Financial Corporation, as amended to date10.1
    
    Amendment No. 1 to Securities Purchase Agreement, dated September 30, 2010, between Hanmi Financial Corporation and Woori Finance Holdings Co. Ltd.
(1)31.1
    
    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 Current
Report on Form 8-K on October 1, 2010. 64




---



##### Table of Contents



SIGNATURES
  HANMI FINANCIAL CORPORATIONDate: November 9, 2010
    By:
    /s/ Jay S. YooJay S. YooPresident and Chief Executive OfficerBy:
    /s/ Brian E. ChoBrian E. ChoExecutive Vice President and Chief Financial Officer 65