##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Transition Period From  To
 Commission File Number: 000-30421
 HANMI FINANCIAL CORPORATION
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    95-4788120(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)3660 Wilshire Boulevard, Penthouse Suite 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
  þ o o
 o þ




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##### 



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  QUARTERLY REPORT ON FORM 10-Q  THREE MONTHS ENDED MARCH 31, 2007
 TABLE OF CONTENTS
  
 PagePART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSConsolidated Statements of Financial Condition (Unaudited)
    
    
    1Consolidated Statements of Income (Unaudited)
    
    
    2Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
(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
    
    
    11ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    29ITEM 4. CONTROLS AND PROCEDURES
    
    
    29PART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    30ITEM 1A. RISK FACTORS
    
    
    30ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    30ITEM
3.  DEFAULTS UPON SENIOR SECURITIES
    
    
    30ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    30ITEM 5. OTHER INFORMATION
    
    
    30ITEM 6. EXHIBITS
    
    
    31SIGNATURES
    
    
    32Ex-10.1Ex-10.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)  (Dollars in Thousands)
 March 31,
    
    
    December 31,2007
    
    
    2006ASSETSCash and Due From Banks
    
    $
    93,174
    
    
    $
    97,501Federal Funds Sold and Securities Purchased Under Agreements to Resell
    
    
    55,000
    
    
    
    41,000Cash and Cash Equivalents
    
    
    148,174
    
    
    
    138,501Term Federal Funds Sold
    
    
    
    
    
    
    5,000Securities Held to Maturity, at Amortized Cost (Fair Value: 2007  $961; 2006  $969)
    
    
    958
    
    
    
    967Securities Available for Sale, at Fair Value
    
    
    380,279
    
    
    
    390,612Loans Receivable, Net of Allowance for Loan Losses of $31,527 and $27,557 at March 31,
2007 and December 31, 2006, Respectively
    
    
    2,871,463
    
    
    
    2,813,520Loans Held for Sale, at the Lower of Cost or Fair Value
    
    
    14,197
    
    
    
    23,870Customers Liability on Acceptances
    
    
    10,974
    
    
    
    8,403Premises and Equipment, Net
    
    
    20,324
    
    
    
    20,075Accrued Interest Receivable
    
    
    16,739
    
    
    
    16,919Deferred Income Taxes
    
    
    10,683
    
    
    
    13,064Servicing Asset
    
    
    4,528
    
    
    
    4,579Goodwill
    
    
    209,941
    
    
    
    207,646Other Intangible Assets
    
    
    8,619
    
    
    
    6,312Federal Reserve Bank Stock
    
    
    11,733
    
    
    
    11,733Federal Home Loan Bank Stock
    
    
    13,382
    
    
    
    13,189Bank-Owned Life Insurance
    
    
    23,822
    
    
    
    23,592Other Assets
    
    
    31,768
    
    
    
    27,261TOTAL ASSETS
    
    $
    3,777,584
    
    
    $
    3,725,243LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIES:Deposits:Noninterest-Bearing
    
    $
    738,396
    
    
    $
    728,347Interest-Bearing:Savings
    
    
    101,526
    
    
    
    99,255Money Market Checking and NOW Accounts
    
    
    424,774
    
    
    
    438,267Time Deposits of $100,000 or More
    
    
    1,418,335
    
    
    
    1,383,358Other Time Deposits
    
    
    300,976
    
    
    
    295,488Total Deposits
    
    
    2,984,007
    
    
    
    2,944,715Accrued Interest Payable
    
    
    22,379
    
    
    
    22,582Acceptances Outstanding
    
    
    10,974
    
    
    
    8,403FHLB Advances and Other Borrowings
    
    
    168,114
    
    
    
    169,037Junior Subordinated Debentures
    
    
    82,406
    
    
    
    82,406Other Liabilities
    
    
    16,650
    
    
    
    10,983Total Liabilities
    
    
    3,284,530
    
    
    
    3,238,126SHAREHOLDERS EQUITY:Common Stock, $.001 Par Value; Authorized 200,000,000 Shares; Issued 50,385,737
Shares (48,825,537 Shares Outstanding) and 50,239,613 Shares (49,076,613 Shares
Outstanding) at March 31, 2007 and December 31, 2006, Respectively
    
    
    50
    
    
    
    50Additional Paid-In Capital
    
    
    347,877
    
    
    
    344,810Accumulated Other Comprehensive Loss  Unrealized Loss on Securities Available for
Sale, Interest-Only Strips and Interest Rate Swaps, Net of Income Taxes of ($1,016)
and ($1,450) at March 31, 2007 and December 31, 2006, Respectively
    
    
    (2,378
    )
    
    
    (3,200
    )Retained Earnings
    
    
    175,603
    
    
    
    165,498521,152
    
    
    
    507,158Less Treasury Stock, at Cost; 1,560,200 and 1,163,000 Shares at March 31, 2007 and
December 31, 2006, Respectively
    
    
    (28,098
    )
    
    
    (20,041
    )Total Shareholders Equity
    
    
    493,054
    
    
    
    487,117TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    3,777,584
    
    
    $
    3,725,243
  1




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)  (Dollars in Thousands, Except Per Share Data)
 Three Months EndedMarch 31,2007
    
    
    2006INTEREST INCOME:Interest and Fees on Loans
    
    $
    62,561
    
    
    $
    53,147Interest on Investments
    
    
    4,664
    
    
    
    5,099Interest on Federal Funds Sold
    
    
    726
    
    
    
    289Interest on Term Federal Funds Sold
    
    
    5
    
    
    
    Total Interest Income
    
    
    67,956
    
    
    
    58,535INTEREST EXPENSE:Interest on Deposits
    
    
    26,081
    
    
    
    19,591Interest on FHLB Advances and Other Borrowings
    
    
    2,171
    
    
    
    614Interest on Junior Subordinated Debentures
    
    
    1,639
    
    
    
    1,475Total Interest Expense
    
    
    29,891
    
    
    
    21,680NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES
    
    
    38,065
    
    
    
    36,855Provision for Credit Losses
    
    
    6,132
    
    
    
    2,960NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
    
    
    31,933
    
    
    
    33,895NON-INTEREST INCOME:Service Charges on Deposit Accounts
    
    
    4,488
    
    
    
    4,231Trade Finance Fees
    
    
    1,290
    
    
    
    1,071Insurance Commissions
    
    
    1,125
    
    
    
    153Remittance Fees
    
    
    471
    
    
    
    488Other Service Charges and Fees
    
    
    616
    
    
    
    534Bank-Owned Life Insurance Income
    
    
    230
    
    
    
    218Increase in Fair Value of Derivatives
    
    
    92
    
    
    
    225Other Income
    
    
    275
    
    
    
    281Gain on Sales of Loans
    
    
    1,400
    
    
    
    839Gain on Sales of Securities Available for Sale
    
    
    
    
    
    
    5Total Non-Interest Income
    
    
    9,987
    
    
    
    8,045NON-INTEREST EXPENSES:Salaries and Employee Benefits
    
    
    11,761
    
    
    
    9,161Occupancy and Equipment
    
    
    2,512
    
    
    
    2,206Data Processing
    
    
    1,563
    
    
    
    1,429Advertising and Promotion
    
    
    661
    
    
    
    646Supplies and Communication
    
    
    588
    
    
    
    636Professional Fees
    
    
    474
    
    
    
    668Amortization of Other Intangible Assets
    
    
    614
    
    
    
    625Decrease in Fair Value of Embedded Options
    
    
    
    
    
    
    102Other Operating Expenses
    
    
    2,796
    
    
    
    2,267Total Non-Interest Expenses
    
    
    20,969
    
    
    
    17,740INCOME BEFORE PROVISION FOR INCOME TAXES
    
    
    20,951
    
    
    
    24,200Provision for Income Taxes
    
    
    7,896
    
    
    
    9,398NET INCOME
    
    $
    13,055
    
    
    $
    14,802EARNINGS PER SHARE:Basic
    
    $
    0.27
    
    
    $
    0.30Diluted
    
    $
    0.26
    
    
    $
    0.30WEIGHTED-AVERAGE SHARES OUTSTANDING:Basic
    
    
    48,962,089
    
    
    
    48,714,435Diluted
    
    
    49,500,312
    
    
    
    49,318,397DIVIDENDS DECLARED PER SHARE
    
    $
    0.06
    
    
    $
    0.06
  2




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (UNAUDITED)  (Dollars in Thousands)
 Common Stock  Number of Shares
    
    
    Shareholders EquityAccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Treasury
    
    
    TotalTreasury
    
    
    
    
    
    
    Common
    
    
    Paid-in
    
    
    Unearned
    
    
    Comprehensive
    
    
    Retained
    
    
    Stock,
    
    
    ShareholdersIssued
    
    
    Stock
    
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Compensation
    
    
    Income (Loss)
    
    
    Earnings
    
    
    at Cost
    
    
    EquityBALANCE  DECEMBER 31, 2005
    
    
    49,821,798
    
    
    
    (1,163,000
    )
    
    
    48,658,798
    
    
    $
    50
    
    
    $
    339,991
    
    
    $
    (1,150
    )
    
    $
    (4,383
    )
    
    $
    112,310
    
    
    $
    (20,041
    )
    
    $
    426,777Cumulative Adjustment  Tax Credit Funds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (656
    )
    
    
    
    
    
    
    (656
    )Cumulative Adjustment  Share-Based
Compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (916
    )
    
    
    1,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234Exercises of Stock Options and Stock Warrants
    
    
    197,418
    
    
    
    
    
    
    
    197,418
    
    
    
    
    
    
    
    1,522
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,522Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101Tax Benefit from Exercises of Stock Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,058
    )
    
    
    
    
    
    
    (3,058
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,802
    
    
    
    
    
    
    
    14,802Change in Unrealized Loss on Securities
Available for Sale, Interest-Only Strips
and Interest Rate Swaps, Net of Tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,503
    )
    
    
    
    
    
    
    
    
    
    
    (1,503
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,299BALANCE  MARCH 31, 2006
    
    
    50,019,216
    
    
    
    (1,163,000
    )
    
    
    48,856,216
    
    
    $
    50
    
    
    $
    341,027
    
    
    $
    
    
    
    $
    (5,886
    )
    
    $
    123,398
    
    
    $
    (20,041
    )
    
    $
    438,548BALANCE  DECEMBER 31, 2006
    
    
    50,239,613
    
    
    
    (1,163,000
    )
    
    
    49,076,613
    
    
    $
    50
    
    
    $
    344,810
    
    
    $
    
    
    
    $
    (3,200
    )
    
    $
    165,498
    
    
    $
    (20,041
    )
    
    $
    487,117Shares Issued for Business Acquisitions
    
    
    102,181
    
    
    
    
    
    
    
    102,181
    
    
    
    
    
    
    
    2,198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,198Exercises of Stock Options
    
    
    43,943
    
    
    
    
    
    
    
    43,943
    
    
    
    
    
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    480Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,950
    )
    
    
    
    
    
    
    (2,950
    )Shares Repurchased
    
    
    
    
    
    
    (397,200
    )
    
    
    (397,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,057
    )
    
    
    (8,057
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,055
    
    
    
    
    
    
    
    13,055Change in Unrealized Loss on Securities
Available for Sale, Interest-Only Strips
and Interest Rate Swaps, Net of Tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    822
    
    
    
    
    
    
    
    
    
    
    
    822Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,877BALANCE  MARCH 31, 2007
    
    
    50,385,737
    
    
    
    (1,560,200
    )
    
    
    48,825,537
    
    
    $
    50
    
    
    $
    347,877
    
    
    $
    
    
    
    $
    (2,378
    )
    
    $
    175,603
    
    
    $
    (28,098
    )
    
    $
    493,054
  3




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 (In Thousands)
 Three Months EndedMarch 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    13,055
    
    
    $
    14,802Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:Depreciation and Amortization of Premises and Equipment
    
    
    703
    
    
    
    709Amortization of Premiums and Accretion of Discounts on Investments, Net
    
    
    48
    
    
    
    83Amortization of Other Intangible Assets
    
    
    614
    
    
    
    625Share-Based Compensation Expense
    
    
    480
    
    
    
    101Provision for Credit Losses
    
    
    6,132
    
    
    
    2,960Federal Home Loan Bank Stock Dividend
    
    
    (193
    )
    
    
    (143
    )Gain on Sales of Securities Available for Sale
    
    
    
    
    
    
    (5
    )Increase in Fair Value of Derivatives
    
    
    (92
    )
    
    
    (225
    )Decrease in Fair Value of Embedded Options
    
    
    
    
    
    
    102Gain on Sales of Loans
    
    
    (1,400
    )
    
    
    (839
    )Loss on Sales of Premises and Equipment
    
    
    10
    
    
    
    16Deferred Tax Benefit
    
    
    732
    
    
    
    1,574Origination of Loans Held for Sale
    
    
    (24,698
    )
    
    
    (22,374
    )Proceeds from Sales of Loans Held for Sale
    
    
    35,771
    
    
    
    22,921(Increase) Decrease in Accrued Interest Receivable
    
    
    180
    
    
    
    (278
    )(Increase) Decrease in Servicing Asset
    
    
    51
    
    
    
    (125
    )Increase in Cash Surrender Value of Bank-Owned Life Insurance
    
    
    (230
    )
    
    
    (219
    )Increase in Other Assets
    
    
    (4,203
    )
    
    
    (6,841
    )Increase (Decrease) in Accrued Interest Payable
    
    
    (203
    )
    
    
    823Increase in Other Liabilities
    
    
    5,232
    
    
    
    10,156Other, Net
    
    
    783
    
    
    
    Net Cash Provided By Operating Activities
    
    
    32,772
    
    
    
    23,823CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from Matured Term Federal Funds Sold
    
    
    5,000
    
    
    
    Proceeds from Matured or Called Securities Available for Sale
    
    
    11,334
    
    
    
    11,082Proceeds from Matured or Called Securities Held to Maturity
    
    
    
    
    
    
    10Proceeds from Sales of Securities Available for Sale
    
    
    
    
    
    
    5,000Net Increase in Loans Receivable
    
    
    (64,317
    )
    
    
    (175,670
    )Purchases of Securities Available for Sale
    
    
    
    
    
    
    (6,183
    )Purchases of Premises and Equipment
    
    
    (944
    )
    
    
    (506
    )Business Acquisitions, Net of Cash Acquired
    
    
    (4,121
    )
    
    
    Net Cash Used In Investing Activities
    
    
    (53,048
    )
    
    
    (166,267
    )CASH FLOWS FROM FINANCING ACTIVITIES:Increase (Decrease) in Deposits
    
    
    39,292
    
    
    
    (7,248
    )Proceeds from Exercises of Stock Options and Stock Warrants
    
    
    389
    
    
    
    1,522Tax Benefit from Exercises of Stock Options
    
    
    
    
    
    
    329Stock Issued for Business Acquisitions
    
    
    2,198
    
    
    
    Cash Paid to Acquire Treasury Stock
    
    
    (8,057
    )
    
    
    Cash Dividends Paid
    
    
    (2,950
    )
    
    
    (3,058
    )Repayment of Long-Term FHLB Advances and Other Borrowings
    
    
    (109
    )
    
    
    (103
    )Net Change in Short-Term FHLB Advances and Other Borrowings
    
    
    (814
    )
    
    
    85,305Net Cash Provided By Financing Activities
    
    
    29,949
    
    
    
    76,747NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    9,673
    
    
    
    (65,697
    )Cash and Cash Equivalents  Beginning of Period
    
    
    138,501
    
    
    
    163,477CASH AND CASH EQUIVALENTS END OF PERIOD
    
    $
    148,174
    
    
    $
    97,780Supplemental Disclosures of Cash Flow Information:Interest Paid
    
    $
    29,688
    
    
    $
    10,221Income Taxes Paid
    
    $
    711
    
    
    $
    1,900
  4




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
 THREE MONTHS ENDED MARCH 31, 2007 AND 2006
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
     Note 1  Summary of
Significant Accounting Policies
  NOTE 2  SHARE-BASED COMPENSATION
  5




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (Continued)
 NOTE 2  SHARE-BASED COMPENSATION (Continued)
 Unrecognized Compensation Expense
  AverageExpectedUnrecognized
    
    
    RecognitionExpense
    
    
    Period(Dollars in Thousands)Stock Option Awards:Year 2000 Stock Option Plan
    
    $
    5,395
    
    
    3.4 years2004 CEO Stock Option Plan
    
    
    980
    
    
    3.6 yearsRestricted Stock Award
    
    
    696
    
    
    1.9 yearsTotal Unrecognized Share-Based Compensation Expense
    
    $
    7,071
    
    
    3.3 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  Beginning of Period
    
    
    1,755,813
    
    
    $
    15.31
    
    
    8.0 years
    
    $
    12,678
    (1)Options Granted
    
    
    15,000
    
    
    $
    20.74
    
    
    9.8 yearsOptions Exercised
    
    
    (43,943
    )
    
    $
    8.85
    
    
    5.1 yearsOptions Forfeited
    
    
    (56,400
    )
    
    $
    16.46
    
    
    8.3 yearsOptions Outstanding  End of Period
    
    
    1,670,470
    
    
    $
    15.49
    
    
    7.8 years
    
    $
    6,732
    (2)Options Exercisable  End of Period
    
    
    528,071
    
    
    $
    9.57
    
    
    5.4 years
    
    $
    5,012
    (2)
 
 (1)
    
    Intrinsic value represents the excess of the closing stock price on the last
trading day of the period, which was $22.53 as of December 29, 2006, over the exercise
price, multiplied by the number of options.(2)
    
    Intrinsic value represents the excess of the closing stock price on the last
trading day of the period, which was $19.06 as of March 30, 2007, over the exercise
price, multiplied by the number of options.  6




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
 THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (Continued)
 NOTE 2  SHARE-BASED COMPENSATION (Continued)
  AggregateIntrinsicNumber
    
    
    Exercise
    
    
    Remaining
    
    
    Value ofof
    
    
    Price Per
    
    
    Contractual
    
    
    In-the-MoneyShares
    
    
    Share
    
    
    Life
    
    
    Options(Dollars in Thousands, Except Per Share Data)Options Outstanding  Beginning of Period
    
    
    350,000
    
    
    $
    17.17
    
    
    7.9 years
    
    $
    1,878
    (1)Options Outstanding  End of Period
    
    
    350,000
    
    
    $
    17.17
    
    
    7.8 years
    
    $
    663
    (2)Options Exercisable  End of Period
    
    
    116,666
    
    
    $
    17.17
    
    
    7.8 years
    
    $
    221
    (2)
 
 (1)
    
    Intrinsic value represents the excess of the closing stock price on the last
trading day of the period, which was $22.53 as of December 29, 2006, over the exercise
price, multiplied by the number of options.(2)
    
    Intrinsic value represents the excess of the closing stock price on the last
trading day of the period, which was $19.06 as of March 30, 2007, over the exercise
price, multiplied by the number of options.  Weighted-AverageNumber
    
    
    Grant Dateof
    
    
    Fair ValueShares
    
    
    Per ShareNon-Vested  Beginning of Period
    
    
    60,000
    
    
    $
    18.15Options Vested
    
    
    (20,000
    )
    
    $
    18.15Non-Vested  End of Period
    
    
    40,000
    
    
    $
    18.15
 NOTE 3  EARNINGS PER SHARE
   7




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
 THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (Continued)
 NOTE 3  EARNINGS PER SHARE (Continued)
  Weighted-Average
    
    
    PerIncome
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    Amount(Dollars in Thousands, Except Per Share Data)Three Months Ended March 31, 2007:Basic EPS  Income Available to Common Shareholders
    
    $
    13,055
    
    
    
    48,962,089
    
    
    $
    0.27Effect of Dilutive Securities  Options and Warrants
    
    
    
    
    
    
    538,223
    
    
    
    (0.01
    )Diluted EPS  Income Available to Common Shareholders
    
    $
    13,055
    
    
    
    49,500,312
    
    
    $
    0.26Three Months Ended March 31, 2006:Basic EPS  Income Available to Common Shareholders
    
    $
    14,802
    
    
    
    48,714,435
    
    
    $
    0.30Effect of Dilutive Securities  Options and Warrants
    
    
    
    
    
    
    603,962
    
    
    
    Diluted EPS  Income Available to Common Shareholders
    
    $
    14,802
    
    
    
    49,318,397
    
    
    $
    0.30
  NOTE 4  DERIVATIVE FINANCIAL INSTRUMENTS
 Interest Rate Swap
   Equity Swap
  8




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (Continued)
 NOTE 4  DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
  Currency Swap
   NOTE 5  INCOME TAXES
 Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109
       9




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (Continued)
 NOTE 6  SHAREHOLDERS EQUITY
 Stock Warrants
  Repurchase of Common Stock
  NOTE 7  OFF-BALANCE SHEET COMMITMENTS
   March 31,
    
    
    December 31,2007
    
    
    2006(In Thousands)Commitments to Extend Credit
    
    $
    547,346
    
    
    $
    578,347Commercial Letters of Credit
    
    
    56,081
    
    
    
    65,158Standby Letters of Credit
    
    
    58,619
    
    
    
    48,289Unused Credit Card Lines
    
    
    19,127
    
    
    
    17,031Total Undisbursed Loan Commitments
    
    $
    681,173
    
    
    $
    708,825
 NOTE 8  SEGMENT REPORTING
  NOTE 9  SUBSEQUENT EVENT
  10




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 FORWARD-LOOKING STATEMENTS
 Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations Item 1A. Risk Factors, Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations  Interest Rate Risk Management  Liquidity and Capital
Resources.
  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
 11




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##### Table of Contents



SELECTED FINANCIAL DATA
  As of and for theThree Months EndedMarch 31,2007
    
    2006(Dollars in Thousands, Except Per Share Data)AVERAGE BALANCES:Average Gross Loans, Net (1)
    
    $
    2,882,632
    
    
    $
    2,547,421Average Investment Securities
    
    $
    386,688
    
    
    $
    437,576Average Interest-Earning Assets
    
    $
    3,350,245
    
    
    $
    3,036,300Average Total Assets
    
    $
    3,740,936
    
    
    $
    3,423,419Average Deposits
    
    $
    2,945,386
    
    
    $
    2,810,313Average Borrowings
    
    $
    251,594
    
    
    $
    138,362Average Interest-Bearing Liabilities
    
    $
    2,487,429
    
    
    $
    2,215,781Average Shareholders Equity
    
    $
    495,832
    
    
    $
    434,220Average Tangible Equity (2)
    
    $
    276,918
    
    
    $
    216,723PER SHARE DATA:Earnings Per Share  Basic
    
    $
    0.27
    
    
    $
    0.30Earnings Per Share  Diluted
    
    $
    0.26
    
    
    $
    0.30Common Shares Outstanding
    
    
    48,825,537
    
    
    
    48,856,216Book Value Per Share (3)
    
    $
    10.10
    
    
    $
    8.98Tangible Book Value Per Share (4)
    
    $
    5.62
    
    
    $
    4.53Cash Dividends Per Share
    
    $
    0.06
    
    
    $
    0.06SELECTED PERFORMANCE RATIOS:Return on Average Assets (5) (6)
    
    
    1.42
    %
    
    
    1.75
    %Return on Average Shareholders Equity (5) (7)
    
    
    10.68
    %
    
    
    13.83
    %Return on Average Tangible Equity (5) (8)
    
    
    19.12
    %
    
    
    27.70
    %Net Interest Spread (9)
    
    
    3.36
    %
    
    
    3.85
    %Net Interest Margin (10)
    
    
    4.61
    %
    
    
    4.92
    %Efficiency Ratio (11)
    
    
    43.64
    %
    
    
    39.51
    %Dividend Payout Ratio (12)
    
    
    22.42
    %
    
    
    19.80
    %Average Shareholders Equity to Average Total Assets
    
    
    13.25
    %
    
    
    12.68
    %SELECTED CAPITAL RATIOS:(13)Total Risk-Based Capital Ratio:Hanmi Financial
    
    
    12.19
    %
    
    
    11.97
    %Hanmi Bank
    
    
    12.30
    %
    
    
    11.87
    %Tier 1 Risk-Based Capital Ratio:Hanmi Financial
    
    
    11.15
    %
    
    
    10.94
    %Hanmi Bank
    
    
    11.25
    %
    
    
    10.84
    %Tier 1 Leverage Ratio:Hanmi Financial
    
    
    10.09
    %
    
    
    9.57
    %Hanmi Bank
    
    
    10.18
    %
    
    
    9.49
    %SELECTED ASSET QUALITY RATIOS:Non-Performing Loans to Total Gross Loans (14)
    
    
    0.67
    %
    
    
    0.38
    %Non-Performing Assets to Total Assets (15)
    
    
    0.52
    %
    
    
    0.31
    %Net Loan Charge-Offs to Average Total Gross Loans (16)
    
    
    0.34
    %
    
    
    0.19
    %Allowance for Loan Losses to Total Gross Loans
    
    
    1.08
    %
    
    
    1.00
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    161.55
    %
    
    
    259.48
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs.(2)
    
    Average tangible equity is calculated by subtracting average goodwill and average
core deposit intangible assets from average shareholders equity. See Non-GAAP Financial
Measures.(3)
    
    Total shareholders equity divided by common shares outstanding.(4)
    
    Tangible equity divided by common shares outstanding. See Non-GAAP Financial
Measures.(5)
    
    Calculation based upon annualized net income.(6)
    
    Net income divided by average total assets.(7)
    
    Net income divided by average shareholders equity.(8)
    
    Net income divided by average tangible equity. See Non-GAAP Financial Measures.(9)
    
    Average yield earned on interest-earning assets less average rate paid on
interest-bearing liabilities.(10)
    
    Net interest income before provision for credit losses divided by average
interest-earning assets.(11)
    
    Total non-interest expenses divided by the sum of net interest income before
provision for credit losses and total non-interest income.(12)
    
    Cash dividends per share times common shares outstanding divided by net income.(13)
    
    The required ratios for a well-capitalized institution, as defined by regulations
of the Board of Governors of the Federal Reserve System, are 10 percent for Total Risk-Based
Capital Ratio (total capital divided by total risk-weighted assets); 6 percent for Tier 1
Risk-Based Capital Ratio (Tier 1 capital divided by total risk-weighted assets); and 5 percent
for Tier 1 Leverage Ratio (Tier 1 capital divided by average total assets).(14)
    
    Non-performing loans consist of non-accrual loans, loans past due 90 days or more
and restructured loans.(15)
    
    Non-performing assets consist of non-performing loans (see
footnote (14) above) and
other real estate owned.(16)
    
    Calculation based upon annualized net loan charge-offs. 12




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##### Table of Contents



Non-GAAP Financial Measures
 Return on Average Tangible Equity
   Three Months EndedMarch 31,2007
    
    
    2006(Dollars in Thousands)Average Shareholders Equity
    
    $
    495,832
    
    
    $
    434,220Less Average Goodwill and Average Other Intangible Assets
    
    
    (218,914
    )
    
    
    (217,497
    )Average Tangible Equity
    
    $
    276,918
    
    
    $
    216,723Return on Average Shareholders Equity
    
    
    10.68
    %
    
    
    13.83
    %Effect of Average Goodwill and Average Other Intangible Assets
    
    
    8.44
    %
    
    
    13.87
    %Return on Average Tangible Equity
    
    
    19.12
    %
    
    
    27.70
    %
 Tangible Book Value Per Share
   March 31,2007
    
    
    2006(Dollars in Thousands;Except Per Share Data)Total Shareholders Equity
    
    $
    493,054
    
    
    $
    438,548Less Goodwill and Other Intangible Assets
    
    
    (218,560
    )
    
    
    (217,124
    )Tangible Equity
    
    $
    274,494
    
    
    $
    221,424Book Value Per Share
    
    $
    10.10
    
    
    $
    8.98Effect of Goodwill and Other Intangible Assets
    
    
    (4.48
    )
    
    
    (4.45
    )Tangible Book Value Per Share
    
    $
    5.62
    
    
    $
    4.53
 13




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##### Table of Contents



RESULTS OF OPERATIONS
 Overview
        Net Interest Income Before Provision for Credit Losses
  14




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##### Table of Contents



Three Months EndedMarch 31, 2007
    
    March 31, 2006Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)ASSETSInterest-Earning Assets:Gross Loans, Net (1)
    
    $
    2,882,632
    
    
    $
    62,561
    
    
    
    8.80
    %
    
    $
    2,547,421
    
    
    $
    53,147
    
    
    
    8.46
    %Municipal Securities (2)
    
    
    72,396
    
    
    
    764
    
    
    
    4.22
    %
    
    
    73,770
    
    
    
    778
    
    
    
    4.22
    %Obligations of Other U.S. Government Agencies
    
    
    118,267
    
    
    
    1,256
    
    
    
    4.25
    %
    
    
    126,498
    
    
    
    1,303
    
    
    
    4.12
    %Other Debt Securities
    
    
    196,025
    
    
    
    2,275
    
    
    
    4.64
    %
    
    
    237,308
    
    
    
    2,692
    
    
    
    4.54
    %Equity Securities
    
    
    25,008
    
    
    
    369
    
    
    
    5.90
    %
    
    
    24,610
    
    
    
    325
    
    
    
    5.28
    %Term Federal Funds Sold
    
    
    389
    
    
    
    5
    
    
    
    5.14
    %
    
    
    
    
    
    
    
    
    
    
    Federal Funds Sold
    
    
    55,528
    
    
    
    726
    
    
    
    5.23
    %
    
    
    26,593
    
    
    
    289
    
    
    
    4.35
    %Interest-Earning Deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    1
    
    
    
    3.45
    %Total Interest-Earning Assets
    
    
    3,350,245
    
    
    
    67,956
    
    
    
    8.23
    %
    
    
    3,036,300
    
    
    
    58,535
    
    
    
    7.82
    %Noninterest-Earning Assets:Cash and Cash Equivalents
    
    
    90,766
    
    
    
    
    
    
    
    
    
    
    
    94,501Allowance for Loan Losses
    
    
    (27,085
    )
    
    
    
    
    
    
    
    
    
    
    (25,011
    )Other Assets
    
    
    327,010
    
    
    
    
    
    
    
    
    
    
    
    317,629Total Noninterest-Earning Assets
    
    
    390,691
    
    
    
    
    
    
    
    
    
    
    
    387,119Total Assets
    
    $
    3,740,936
    
    
    
    
    
    
    
    
    
    
    $
    3,423,419LIABILITIES AND SHAREHOLDERS EQUITYInterest-Bearing Liabilities:Deposits:Savings
    
    $
    100,777
    
    
    
    461
    
    
    
    1.86
    %
    
    $
    117,761
    
    
    
    482
    
    
    
    1.66
    %Money Market Checking and NOW Accounts
    
    
    427,871
    
    
    
    3,472
    
    
    
    3.29
    %
    
    
    519,628
    
    
    
    3,714
    
    
    
    2.90
    %Time Deposits of $100,000 or More
    
    
    1,406,311
    
    
    
    18,498
    
    
    
    5.33
    %
    
    
    1,167,270
    
    
    
    12,784
    
    
    
    4.44
    %Other Time Deposits
    
    
    300,876
    
    
    
    3,650
    
    
    
    4.92
    %
    
    
    272,760
    
    
    
    2,611
    
    
    
    3.88
    %FHLB Advances and Other Borrowings
    
    
    169,188
    
    
    
    2,171
    
    
    
    5.20
    %
    
    
    55,956
    
    
    
    614
    
    
    
    4.45
    %Junior Subordinated Debentures
    
    
    82,406
    
    
    
    1,639
    
    
    
    8.07
    %
    
    
    82,406
    
    
    
    1,475
    
    
    
    7.26
    %Total Interest-Bearing Liabilities
    
    
    2,487,429
    
    
    
    29,891
    
    
    
    4.87
    %
    
    
    2,215,781
    
    
    
    21,680
    
    
    
    3.97
    %Noninterest-Bearing Liabilities:Demand Deposits
    
    
    709,551
    
    
    
    
    
    
    
    
    
    
    
    732,894Other Liabilities
    
    
    48,124
    
    
    
    
    
    
    
    
    
    
    
    40,524Total Noninterest-Bearing Liabilities
    
    
    757,675
    
    
    
    
    
    
    
    
    
    
    
    773,418Total Liabilities
    
    
    3,245,104
    
    
    
    
    
    
    
    
    
    
    
    2,989,199Shareholders Equity
    
    
    495,832
    
    
    
    
    
    
    
    
    
    
    
    434,220Total Liabilities and Shareholders Equity
    
    $
    3,740,936
    
    
    
    
    
    
    
    
    
    
    $
    3,423,419Net Interest Income
    
    
    
    
    
    $
    38,065
    
    
    
    
    
    
    
    
    
    
    $
    36,855Net Interest Spread(3)
    
    
    
    
    
    
    
    
    
    
    3.36
    %
    
    
    
    
    
    
    
    
    
    
    3.85
    %Net Interest Margin(4)
    
    
    
    
    
    
    
    
    
    
    4.61
    %
    
    
    
    
    
    
    
    
    
    
    4.92
    %
 
 (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 $902,000 and $1.3 million
for the three months ended March 31, 2007 and 2006, respectively.(2)
    
    If computed on a tax-equivalent basis using an effective
marginal rate of 35 percent, tax-exempt income would be
$1.2 million and $1.2 million, and the yields would be
6.49 percent and 6.49 percent, for the three months ended
March 31, 2007 and 2006, respectively.(3)
    
    Represents the average rate earned on interest-earning assets less the average rate
paid on interest-bearing liabilities.(4)
    
    Represents annualized net interest income as a percentage of average
interest-earning assets. 15




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##### Table of Contents



Three Months EndedMarch 31, 2007 vs. 2006Increases (Decreases)Due to Change inVolume
    
    
    Rate
    
    
    Total(In Thousands)Interest Income:Gross Loans, Net
    
    $
    7,209
    
    
    $
    2,205
    
    
    $
    9,414Municipal Securities
    
    
    (14
    )
    
    
    
    
    
    
    (14
    )Obligations of Other U.S. Government Agencies
    
    
    (88
    )
    
    
    41
    
    
    
    (47
    )Other Debt Securities
    
    
    (478
    )
    
    
    61
    
    
    
    (417
    )Equity Securities
    
    
    5
    
    
    
    39
    
    
    
    44Federal Funds Sold
    
    
    368
    
    
    
    69
    
    
    
    437Term Federal Funds Sold
    
    
    5
    
    
    
    
    
    
    
    5Interest-Earning Deposits
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Total Interest Income
    
    
    7,006
    
    
    
    2,415
    
    
    
    9,421Interest Expense:Savings
    
    
    (74
    )
    
    
    53
    
    
    
    (21
    )Money Market Checking and NOW Accounts
    
    
    (706
    )
    
    
    464
    
    
    
    (242
    )Time Deposits of $100,000 or More
    
    
    2,883
    
    
    
    2,831
    
    
    
    5,714Other Time Deposits
    
    
    289
    
    
    
    750
    
    
    
    1,039FHLB Advances and Other Borrowings
    
    
    1,435
    
    
    
    122
    
    
    
    1,557Junior Subordinated Debentures
    
    
    
    
    
    
    164
    
    
    
    164Total Interest Expense
    
    
    3,827
    
    
    
    4,384
    
    
    
    8,211Change in Net Interest Income
    
    $
    3,179
    
    
    $
    (1,969
    )
    
    $
    1,210
    16




---



##### Table of Contents



Provision for Credit Losses
    Non-Interest Income
   Three Months EndedMarch 31,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Service Charges on Deposit Accounts
    
    $
    4,488
    
    
    $
    4,231
    
    
    $
    257
    
    
    
    6.1
    %Trade Finance Fees
    
    
    1,290
    
    
    
    1,071
    
    
    
    219
    
    
    
    20.4
    %Insurance
Commissions
    
    
    1,125
    
    
    
    153
    
    
    
    972
    
    
    
    635.3
    %Remittance Fees
    
    
    471
    
    
    
    488
    
    
    
    (17
    )
    
    
    (3.5
    %)Other Service Charges and Fees
    
    
    616
    
    
    
    534
    
    
    
    82
    
    
    
    15.4
    %Bank-Owned Life Insurance Income
    
    
    230
    
    
    
    218
    
    
    
    12
    
    
    
    5.5
    %Increase in Fair Value of Derivatives
    
    
    92
    
    
    
    225
    
    
    
    (133
    )
    
    
    (59.1
    %)Other Income
    
    
    275
    
    
    
    281
    
    
    
    (6
    )
    
    
    (2.1
    )%Gain on Sales of Loans
    
    
    1,400
    
    
    
    839
    
    
    
    561
    
    
    
    66.9
    %Gain on Sales of Securities Available for Sale
    
    
    
    
    
    
    5
    
    
    
    (5
    )
    
    
    (100.0
    %)Total Non-Interest Income
    
    $
    9,987
    
    
    $
    8,045
    
    
    $
    1,942
    
    
    
    24.1
    %
    17




---



##### Table of Contents



Non-Interest Expenses
  Three Months EndedMarch 31,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Salaries and Employee Benefits
    
    $
    11,761
    
    
    $
    9,161
    
    
    $
    2,600
    
    
    
    28.4
    %Occupancy and Equipment
    
    
    2,512
    
    
    
    2,206
    
    
    
    306
    
    
    
    13.9
    %Data Processing
    
    
    1,563
    
    
    
    1,429
    
    
    
    134
    
    
    
    9.4
    %Advertising and Promotion
    
    
    661
    
    
    
    646
    
    
    
    15
    
    
    
    2.3
    %Supplies and Communications
    
    
    588
    
    
    
    636
    
    
    
    (48
    )
    
    
    (7.5
    %)Professional Fees
    
    
    474
    
    
    
    668
    
    
    
    (194
    )
    
    
    (29.0
    %)Amortization of Other Intangible Assets
    
    
    614
    
    
    
    625
    
    
    
    (11
    )
    
    
    (1.8
    %)Decrease in Fair Value of Embedded Options
    
    
    
    
    
    
    102
    
    
    
    (102
    )
    
    
    (100.0
    %)Other Operating Expenses
    
    
    2,796
    
    
    
    2,267
    
    
    
    529
    
    
    
    23.3
    %Total Non-Interest Expenses
    
    $
    20,969
    
    
    $
    17,740
    
    
    $
    3,229
    
    
    
    18.2
    %
     18




---



##### Table of Contents



Provision for Income Taxes
  FINANCIAL CONDITION
 Summary of Changes in Balance Sheets  March 31, 2007 Compared to December 31, 2006
  Investment Portfolio
 Accounting for Certain Investments in Debt and
Equity Securities.
  March 31, 2007
    
    
    December 31, 2006Unrealized
    
    
    
    
    
    
    
    
    
    
    UnrealizedAmortized
    
    
    Fair
    
    
    Gain
    
    
    Amortized
    
    
    Fair
    
    
    GainCost
    
    
    Value
    
    
    (Loss)
    
    
    Cost
    
    
    Value
    
    
    (Loss)(In Thousands)Held to Maturity:Municipal Bonds
    
    $
    693
    
    
    $
    693
    
    
    $
    
    
    
    $
    693
    
    
    $
    693
    
    
    $
    Mortgage-Backed Securities
    
    
    265
    
    
    
    268
    
    
    
    3
    
    
    
    274
    
    
    
    276
    
    
    
    2Total Held to Maturity
    
    $
    958
    
    
    $
    961
    
    
    $
    3
    
    
    $
    967
    
    
    $
    969
    
    
    $
    2Available for Sale:U.S. Government Agency Securities
    
    $
    119,805
    
    
    $
    118,678
    
    
    $
    (1,127
    )
    
    $
    119,768
    
    
    $
    118,244
    
    
    $
    (1,524
    )Mortgage-Backed Securities
    
    
    116,482
    
    
    
    114,905
    
    
    
    (1,577
    )
    
    
    123,614
    
    
    
    121,608
    
    
    
    (2,006
    )Municipal Bonds
    
    
    69,954
    
    
    
    71,614
    
    
    
    1,660
    
    
    
    69,966
    
    
    
    71,710
    
    
    
    1,744Collateralized Mortgage Obligations
    
    
    63,373
    
    
    
    62,211
    
    
    
    (1,162
    )
    
    
    67,605
    
    
    
    66,113
    
    
    
    (1,492
    )Corporate Bonds
    
    
    8,055
    
    
    
    7,926
    
    
    
    (129
    )
    
    
    8,090
    
    
    
    7,887
    
    
    
    (203
    )Other Securities
    
    
    4,999
    
    
    
    4,945
    
    
    
    (54
    )
    
    
    4,999
    
    
    
    5,050
    
    
    
    51Total Available for Sale
    
    $
    382,668
    
    
    $
    380,279
    
    
    $
    (2,389
    )
    
    $
    394,042
    
    
    $
    390,612
    
    
    $
    (3,430
    )
 19




---



##### Table of Contents



Available for Sale
    
    
    Held to MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(In Thousands)Within One Year
    
    $
    59,955
    
    
    $
    59,541
    
    
    $
    
    
    
    $
    Over One Year Through Five Years
    
    
    75,315
    
    
    
    74,405
    
    
    
    
    
    
    
    Over Five Years Through Ten Years
    
    
    8,335
    
    
    
    8,476
    
    
    
    693
    
    
    
    693Over Ten Years
    
    
    59,208
    
    
    
    60,741
    
    
    
    
    
    
    
    202,813
    
    
    
    203,163
    
    
    
    693
    
    
    
    693Mortgage-Backed Securities
    
    
    116,482
    
    
    
    114,905
    
    
    
    265
    
    
    
    268Collateralized Mortgage Obligations
    
    
    63,373
    
    
    
    62,211
    
    
    
    
    
    
    
    179,855
    
    
    
    177,116
    
    
    
    265
    
    
    
    268$
    382,668
    
    
    $
    380,279
    
    
    $
    958
    
    
    $
    961
  Loan Portfolio
   March 31,
    
    
    December 31,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Real Estate Loans:Commercial Property
    
    $
    759,167
    
    
    $
    757,428
    
    
    $
    1,739
    
    
    
    0.2
    %Construction
    
    
    216,117
    
    
    
    202,207
    
    
    
    13,910
    
    
    
    6.9
    %Residential Property (1)
    
    
    86,606
    
    
    
    81,758
    
    
    
    4,848
    
    
    
    5.9
    %Total Real Estate Loans
    
    
    1,061,890
    
    
    
    1,041,393
    
    
    
    20,497
    
    
    
    2.0
    %Commercial and Industrial Loans:Commercial Term Loans
    
    
    1,249,863
    
    
    
    1,202,612
    
    
    
    47,251
    
    
    
    3.9
    %Commercial Lines of Credit
    
    
    233,596
    
    
    
    225,630
    
    
    
    7,966
    
    
    
    3.5
    %SBA Loans (2)
    
    
    150,407
    
    
    
    171,631
    
    
    
    (21,224
    )
    
    
    (12.4
    %)International Loans
    
    
    124,935
    
    
    
    126,561
    
    
    
    (1,626
    )
    
    
    (1.3
    %)Total Commercial and Industrial Loans
    
    
    1,758,801
    
    
    
    1,726,434
    
    
    
    32,367
    
    
    
    1.9
    %Consumer Loans
    
    
    98,909
    
    
    
    100,121
    
    
    
    (1,212
    )
    
    
    (1.2
    %)Total Loans  Gross
    
    
    2,919,600
    
    
    
    2,867,948
    
    
    
    51,652
    
    
    
    1.8
    %Deferred Loan Fees
    
    
    (2,413
    )
    
    
    (3,001
    )
    
    
    588
    
    
    
    (19.6
    %)Allowance for Loan Losses
    
    
    (31,527
    )
    
    
    (27,557
    )
    
    
    (3,970
    )
    
    
    14.4
    %Net Loans Receivable
    
    $
    2,885,660
    
    
    $
    2,837,390
    
    
    $
    48,270
    
    
    
    1.7
    %
 
 (1)
    
    Includes loans held for sale, at the lower of cost or
market, of $970,000 and $630,000 at March 31, 2007 and December 31, 2006, respectively.(2)
    
    Includes loans held for sale, at the lower of cost or market, of $13.2 million and
$23.2 million at March 31, 2007 and December 31, 2006, respectively. 20




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##### Table of Contents



Non-Performing Assets
    March 31,
    
    
    December 31,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Non-Accrual Loans
    
    $
    19,509
    
    
    $
    14,213
    
    
    $
    5,296
    
    
    
    37.3
    %Loans 90 Days or More Past Due and Still Accruing
    
    
    6
    
    
    
    2
    
    
    
    4
    
    
    
    200.0
    %Total Non-Performing Loans
    
    
    19,515
    
    
    
    14,215
    
    
    
    5,300
    
    
    
    37.3
    %Other Real Estate Owned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Non-Performing Assets
    
    $
    19,515
    
    
    $
    14,215
    
    
    $
    5,300
    
    
    
    37.3
    %Troubled Debt Restructurings
    
    $
    3,079
    
    
    $
    3,310
    
    
    $
    (231
    )
    
    
    (7.0
    %)
  Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
  21




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##### Table of Contents



As of and for the Three Months EndedMarch 31,
    
    
    December 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2006(Dollars in Thousands)Allowance for Loan Losses:Balance  Beginning of Period
    
    $
    27,557
    
    
    $
    28,276
    
    
    $
    24,963Actual Charge-Offs
    
    
    (2,619
    )
    
    
    (2,510
    )
    
    
    (1,328
    )Recoveries on Loans Previously Charged Off
    
    
    215
    
    
    
    160
    
    
    
    108Net Loan Charge-Offs
    
    
    (2,404
    )
    
    
    (2,350
    )
    
    
    (1,220
    )Provision Charged to Operating Expenses
    
    
    6,374
    
    
    
    1,631
    
    
    
    2,960Balance  End of Period
    
    $
    31,527
    
    
    $
    27,557
    
    
    $
    26,703Allowance for Off-Balance Sheet Items:Balance  Beginning of Period
    
    $
    2,130
    
    
    $
    2,130
    
    
    $
    2,130Provision Charged to Operating Expenses
    
    
    (242
    )
    
    
    
    
    
    
    Balance  End of Period
    
    $
    1,888
    
    
    $
    2,130
    
    
    $
    2,130Ratios:Net Loan Charge-Offs to Average Total Gross Loans (1)
    
    
    0.34
    %
    
    
    0.32
    %
    
    
    0.19
    %Net Loan Charge-Offs to Total Gross Loans at End of Period (1)
    
    
    0.33
    %
    
    
    0.33
    %
    
    
    0.19
    %Allowance for Loan Losses to Average Total Gross Loans
    
    
    1.09
    %
    
    
    0.96
    %
    
    
    1.05
    %Allowance for Loan Losses to Total Gross Loans at End of Period
    
    
    1.08
    %
    
    
    0.96
    %
    
    
    1.00
    %Net Loan Charge-Offs to Allowance for Loan Losses (1)
    
    
    30.92
    %
    
    
    33.83
    %
    
    
    18.53
    %Net Loan Charge-Offs to Provision Charged to Operating Expenses
    
    
    37.72
    %
    
    
    144.08
    %
    
    
    41.22
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    161.55
    %
    
    
    193.86
    %
    
    
    259.48
    %Balances:Average Total Gross Loans Outstanding During Period
    
    $
    2,885,229
    
    
    $
    2,884,739
    
    
    $
    2,551,228Total Gross Loans Outstanding at End of Period
    
    $
    2,919,600
    
    
    $
    2,867,948
    
    
    $
    2,673,389Non-Performing Loans at End of Period
    
    $
    19,515
    
    
    $
    14,215
    
    
    $
    10,291
 
 (1)
    
    Net loan charge-offs are annualized to calculate the ratios. 22




---



##### Table of Contents




    
    reviewing the adversely graded, delinquent or otherwise questionable loans;
    
    generating an estimate of the loss potential in each such loan;
    
    adjusting a qualitative factor for industry, economic or other external factors; and
    
    evaluating the present status of each loan.
  Deposits
  March 31,
    
    
    December 31,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Deposits:Demand  Noninterest-Bearing
    
    $
    738,396
    
    
    $
    728,348
    
    
    $
    10,048
    
    
    
    1.4
    %Interest-Bearing:Savings
    
    
    101,526
    
    
    
    99,254
    
    
    
    2,272
    
    
    
    2.3
    %Money Market Checking and NOW Accounts
    
    
    424,774
    
    
    
    438,267
    
    
    
    (13,493
    )
    
    
    (3.1
    %)Time Deposits of $100,000 or More
    
    
    1,418,335
    
    
    
    1,383,358
    
    
    
    34,977
    
    
    
    2.5
    %Other Time Deposits
    
    
    300,976
    
    
    
    295,488
    
    
    
    5,488
    
    
    
    1.9
    %Total Deposits
    
    $
    2,984,007
    
    
    $
    2,944,715
    
    
    $
    39,292
    
    
    
    1.3
    %
  FHLB Advances and Other Borrowings
  23




---



##### Table of Contents



INTEREST RATE RISK MANAGEMENT
   After Three
    
    
    After OneWithin
    
    
    Months
    
    
    Year But
    
    
    
    
    
    
    Non-Three
    
    
    But Within
    
    
    Within Five
    
    
    After Five
    
    
    Interest-Months
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Sensitive
    
    
    Total(Dollars in Thousands)ASSETSCash and Due From Banks
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    93,174
    
    
    $
    93,174Federal Funds Sold
    
    
    55,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,000Securities:Fixed Rate
    
    
    6,783
    
    
    
    69,903
    
    
    
    151,686
    
    
    
    111,924
    
    
    
    
    
    
    
    340,296Floating Rate
    
    
    9,590
    
    
    
    3,255
    
    
    
    23,151
    
    
    
    4,945
    
    
    
    
    
    
    
    40,941Loans:Fixed Rate
    
    
    43,910
    
    
    
    52,520
    
    
    
    415,361
    
    
    
    340,711
    
    
    
    
    
    
    
    852,502Floating Rate
    
    
    1,823,577
    
    
    
    36,102
    
    
    
    184,265
    
    
    
    3,645
    
    
    
    
    
    
    
    2,047,589Non-Accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,509
    
    
    
    19,509Deferred Loan Fees and Allowance
for Loan Losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,940
    )
    
    
    (33,940
    )FRB and FHLB Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,115
    
    
    
    
    
    
    
    25,115Other Assets
    
    
    
    
    
    
    23,822
    
    
    
    
    
    
    
    6,767
    
    
    
    306,809
    
    
    
    337,398Total Assets
    
    $
    1,938,860
    
    
    $
    185,602
    
    
    $
    774,463
    
    
    $
    493,107
    
    
    $
    385,552
    
    
    $
    3,777,584LIABILITIES AND
SHAREHOLDERS EQUITYLiabilities:Deposits:Demand Deposits
    
    $
    50,502
    
    
    $
    147,934
    
    
    $
    355,042
    
    
    $
    184,918
    
    
    $
    
    
    
    $
    738,396Savings
    
    
    15,700
    
    
    
    29,987
    
    
    
    44,992
    
    
    
    10,847
    
    
    
    
    
    
    
    101,526Money Market Checking and
NOW Accounts
    
    
    63,115
    
    
    
    121,129
    
    
    
    137,868
    
    
    
    102,662
    
    
    
    
    
    
    
    424,774Time Deposits:Fixed Rate
    
    
    837,784
    
    
    
    871,494
    
    
    
    9,719
    
    
    
    115
    
    
    
    
    
    
    
    1,719,112Floating Rate
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199FHLB Advances and Other Borrowings
    
    
    10,116
    
    
    
    35,000
    
    
    
    118,210
    
    
    
    4,788
    
    
    
    
    
    
    
    168,114Junior Subordinated Debentures
    
    
    82,406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,406Other Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,003
    
    
    
    50,003Shareholders Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    493,054
    
    
    
    493,054Total Liabilities and
Shareholders Equity
    
    $
    1,059,822
    
    
    $
    1,205,544
    
    
    $
    665,831
    
    
    $
    303,330
    
    
    $
    543,057
    
    
    $
    3,777,584Repricing Gap
    
    $
    879,038
    
    
    $
    (1,019,942
    )
    
    $
    108,632
    
    
    $
    189,777
    
    
    $
    (157,505
    )Cumulative Repricing Gap
    
    $
    879,038
    
    
    $
    (140,904
    )
    
    $
    (32,272
    )
    
    $
    157,505
    
    
    $
    Cumulative Repricing Gap as a
Percentage of Total Assets
    
    
    23.27
    %
    
    
    (3.73
    %)
    
    
    (0.85
    %)
    
    
    4.17
    %Cumulative Repricing Gap as a
Percentage of Interest-Earning Assets
    
    
    26.15
    %
    
    
    (4.19
    %)
    
    
    (0.96
    %)
    
    
    4.69
    %
 24




---



##### Table of Contents



Less than Three Months
    
    Less Than Twelve MonthsMarch 31,
    
    December 31,
    
    March 31,
    
    December 31,2007
    
    2006
    
    2007
    
    2006(Dollars in Thousands)Cumulative Repricing Gap
    
    $
    879,038
    
    
    $
    970,441
    
    
    $
    (140,904
    )
    
    $
    (85,051
    )Percentage of Total Assets
    
    
    23.27
    %
    
    
    26.05
    %
    
    
    (3.73
    %)
    
    
    (2.28
    %)Percentage of Interest-Earning Assets
    
    
    26.15
    %
    
    
    29.26
    %
    
    
    (4.19
    %)
    
    
    (2.56
    %)
   Rate
Shock Table
 Percentage Changes
    
    Change in AmountChange in
    
    Net
    
    Economic
    
    Net
    
    EconomicInterest
    
    Interest
    
    Value of
    
    Interest
    
    Value ofRate
    
    Income
    
    Equity
    
    Income
    
    Equity(Dollars in Thousands)200%
    
    
    11.92
    %
    
    
    (11.01
    %)
    
    $
    19,103
    
    
    $
    (56,150
    )100%
    
    
    5.94
    %
    
    
    (5.75
    %)
    
    $
    9,525
    
    
    $
    (29,334
    )(100%)
    
    
    (5.98
    %)
    
    
    6.16
    %
    
    $
    (9,579
    )
    
    $
    31,386(200%)
    
    
    (12.00
    %)
    
    
    12.64
    %
    
    $
    (19,236
    )
    
    $
    64,435
  25




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   March 31,
    
    December 31,Liquidity Ratios
    
    2007
    
    2006Core Deposits/Total Assets
    
    
    29.97
    %
    
    
    30.10
    %Short-Term Non-Core Funding/Total Assets
    
    
    46.45
    %
    
    
    46.01
    %Net Loans/Total Assets
    
    
    76.56
    %
    
    
    76.60
    %Investments/Deposits
    
    
    15.69
    %
    
    
    15.93
    %Loans and Investments/Deposits
    
    
    112.59
    %
    
    
    112.52
    %Off-Balance Sheet Items/Total Assets
    
    
    18.04
    %
    
    
    19.04
    %
   26




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##### Table of Contents



Minimum
    
    Minimum to BeRegulatory
    
    Categorized asActual
    
    Requirement
    
    Well CapitalizedAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in Thousands)Total Capital (to Risk-Weighted Assets):Hanmi Financial
    
    $
    388,863
    
    
    
    12.19
    %
    
    $
    255,107
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    391,963
    
    
    
    12.30
    %
    
    $
    254,938
    
    
    
    8.00
    %
    
    $
    318,673
    
    
    
    10.00
    %Tier 1 Capital (to Risk-Weighted Assets):Hanmi Financial
    
    $
    355,449
    
    
    
    11.15
    %
    
    $
    127,553
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    358,549
    
    
    
    11.25
    %
    
    $
    127,469
    
    
    
    4.00
    %
    
    $
    191,204
    
    
    
    6.00
    %Tier 1 Capital (to Average Total Assets):Hanmi Financial
    
    $
    355,449
    
    
    
    10.09
    %
    
    $
    140,950
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    358,549
    
    
    
    10.18
    %
    
    $
    140,857
    
    
    
    4.00
    %
    
    $
    176,071
    
    
    
    5.00
    %
 Dividends
  OFF-BALANCE SHEET ARRANGEMENTS
 Note 7  Off-Balance Sheet
Commitments Item 1. Business  Small
Business Administration Guaranteed Loans Item 1. Business  Off-Balance Sheet Commitments
 CONTRACTUAL OBLIGATIONS
  27




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##### Table of Contents



RECENTLY ISSUED ACCOUNTING STANDARDS
 SFAS No. 159
 The Fair Value Option for Financial Assets
and Financial Liabilities
 SFAS No. 157
 Fair Value Measurements
 SFAS No. 156
 Accounting for Servicing of Financial Assets
 SFAS No. 155
 Accounting for Certain Hybrid Financial
Instruments, an amendment of FASB Statements No. 133 and SFAS No. 140
 
    
    permits fair value remeasurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation;
    
    clarifies which interest-only strips and principal-only strips are not subject to SFAS
No. 133;
    
    establishes a requirement to evaluate interests in securitized financial assets to
identify interests that are freestanding derivatives or hybrid financial instruments that
contain an embedded derivative requiring bifurcation;
    
    clarifies that concentrations of credit risk in the form of subordinations are not
embedded derivatives; and
    
    amends SFAS No. 140 to eliminate the prohibition on a qualified special purpose entity
from holding a derivative financial instrument that pertains to a beneficial interest other
than another derivative financial instrument.
  28




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Interest Rate Risk Management  Liquidity and Capital Resources.
 
 ITEM 4. CONTROLS AND PROCEDURES
    29




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   ISSUER PURCHASES OF EQUITY SECURITIES(d) Maximum Number(a) Total
    
    
    
    
    
    
    (c) Total Number of
    
    
    (or Approximate DollarNumber of
    
    
    (b) Average
    
    
    Shares (or Units)
    
    
    Value) of Shares (orShares
    
    
    Price Paid
    
    
    Purchased as Part of
    
    
    Units) that May Yet Be(or Units)
    
    
    per Share
    
    
    Publicly Announced
    
    
    Purchased Under thePeriod
    
    Purchased
    
    
    (or Unit)
    
    
    Plans or Programs
    
    
    Plans or ProgramsRepurchases
from January 1, 2007 to January 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    50,000,000Repurchases
from February 1, 2007 to February 28, 2007
    
    
    397,200
    
    
    $
    20.24
    
    
    
    397,200
    
    
    $
    41,943,000Repurchases from
March 1, 2007 to
March 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    41,943,000Total
    
    
    397,200
    
    
    $
    20.24
    
    
    
    397,200
    
    
    $
    41,943,000
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  30




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##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Document10.1
    
    Put Option Agreement between Hanmi Financial Corporation and
William J. Ruh dated April 17, 200710.2
    
    Put Option Agreement between Hanmi Financial Corporation and John
M. Eggemeyer dated April 17, 200731.1
    
    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
 31




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##### Table of Contents



SIGNATURES
  HANMI FINANCIAL CORPORATIONDate: May 10, 2007
    By:
    /s/ Sung Won Sohn, Ph.D.Sung Won Sohn, Ph.D.President and Chief Executive Officer By:
    /s/ Michael J. WiniarskiMichael J. WiniarskiSenior Vice President and Chief Financial Officer 32