NOTE 2 — REGULATORY MATTERS

On November 2, 2009, the members of the Board of Directors of the Bank consented to the issuance of a Final Order (“Final Order”) with the California Department of Financial Institutions (the “DFI”). On the same date, Hanmi Financial and the Bank entered into a Written Agreement (the “Agreement”) with the Federal Reserve Bank of San Francisco (the “FRB”). The Final Order and the Agreement contain a list of strict requirements ranging from a capital directive to developing a contingency funding plan.

While Hanmi Financial intends to take such actions as may be necessary to enable Hanmi Financial and the Bank to comply with the requirements of the Final Order and the Agreement, there can be no assurance that Hanmi Financial or the Bank will be able to comply fully with the provisions of the Final Order and the Agreement, or that compliance with the Final Order and the Agreement will not have material or adverse effects on the operations and financial condition of Hanmi Financial and the Bank. Any material failure to comply with the provisions of the Final Order and the Agreement could result in further enforcement actions by the DFI or the FRB or both, or the possible placement of the Bank into conservatorship or receivership.

Final Order and Written Agreement

The Final Order and the Agreement contain substantially similar provisions, and require the Board of Directors of the Bank to prepare and submit written plans to the DFI and the FRB that address the following items: (i) strengthening Board oversight of the management and operation of the Bank; (ii) strengthening credit risk management practices; (iii) improving credit administration policies and procedures; (iv) improving the Bank’s position with respect to problem assets; (v) maintaining adequate reserves for loan and lease losses; (vi)improving the capital position of the Bank and, with respect to the Agreement, of Hanmi Financial; (vii) improving the Bank’s earnings through a strategic plan and a budget for 2010; and (viii) improving the Bank’s liquidity position, funds management practices, and contingency funding plan. In addition, the Final Order and the Agreement place restrictions on the Bank’s lending to borrowers who have adversely classified loans with the Bank, and require the Bank to charge off or collect certain problem loans and to review and revise its methodology for calculating allowance for loan and lease losses consistent with relevant supervisory guidance. The Bank is also prohibited from paying dividends, incurring, increasing or guaranteeing any debt, or making certain changes to its business without prior approval from the DFI, and Hanmi Financial and the Bank must obtain prior approval from the FRB prior to declaring and paying dividends.

Under the Final Order, the Bank is required to increase its capital and maintain certain regulatory capital ratios prior to certain dates as follows: (1)by July 31, 2010, the Bank was required to increase its contributed equity capital by not less than an additional $100 million, and maintain a ratio of tangible stockholders’ equity to total tangible assets of at least 9.0 percent; and (2) by December 31, 2010, and thereafter during the life of the Final Order, the Bank will be required to maintain a ratio of tangible stockholders’ equity to total tangible assets of not less than 9.5 percent.

If the Bank is not able to maintain the capital ratios identified in the Final Order, it must notify the DFI, and Hanmi Financial and the Bank are required to notify the FRB if their respective capital ratios fall below those set forth in the capital plan approved by the FRB. On July 27, 2010, we completed a registered rights and best efforts offering in which we raised approximately $116.8 million in net proceeds. As a result, we satisfied the $100 million capital contribution requirement set forth in the Final Order. While the Bank’s tangible stockholders’ equity to total tangible assets ratio was 8.59% at December 31, 2010, the ratio increased to 10.63 percent at September 30, 2011. Therefore, the Bank is currently in compliance with the tangible capital ratio requirement.

Risk-Based Capital

Federal bank regulatory agencies require a minimum ratio of qualifying total capital to risk-weighted assets of 8.0 percent and a minimum ratio of Tier 1 capital to risk-weighted assets of 4.0 percent. In addition to the risk-based guidelines, federal bank regulatory agencies require banking organizations to maintain a minimum ratio of Tier 1 capital to average total assets, referred to as the leverage ratio, of 4.0 percent. For a bank rated in the highest of the five categories used by federal bank regulatory agencies to rate banks, the minimum leverage ratio is 3.0 percent. In addition to these uniform risk-based capital guidelines that apply across the industry, federal bank regulatory agencies have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

As of September 30, 2011, Hanmi Financial’s Tier 1 capital (stockholders’ equity plus qualified junior subordinated debentures less intangible assets) was $264.0 million. This represented an increase of $31.3 million, or 13.5 percent, over Tier 1 capital of $232.7 million as of December 31, 2010. The capital ratios of Hanmi Financial and the Bank were as follows as of September 30, 2011: