NOTE 1 — REGULATORY MATTERS

On November 2, 2009, the Board of Directors of the Bank consented to the issuance of the Final Order (the “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 “Written Agreement”) with the Federal Reserve Bank of San Francisco (the “FRB”). The Order and the Written Agreement contain a list of strict requirements ranging from a capital directive to developing a contingency funding plan.

Following a target joint examination of the Bank by the DFI and the FRB, which commenced in February 2012, and based on the improved condition of the Bank noted at the examination, the Bank entered into a Memorandum of Understanding (the “MOU”) with the DFI on May 1, 2012. Concurrently with the entry into the MOU, the DFI issued an order terminating the Order.

After our annual joint examination of the Bank by the DFI and the FRB, which commenced in August 2012, the DFI informed the Bank that the Bank’s overall condition had improved and that the MOU had been terminated effective October 29, 2012. Furthermore, on December 4, 2012, the FRB informed Hanmi Financial and the Bank that the Written Agreement has been terminated. Accordingly, Hanmi Financial and the Bank are no longer subject to any of the requirements imposed by the MOU and the Written Agreement or any other enforcement action.

Risk-Based Capital

The federal banking agencies require bank holding companies and banks to maintain 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, the agencies require bank holding companies and banks to maintain a minimum ratio of Tier 1 capital to average total assets, referred to as the leverage ratio, of 4.0 percent.

In order for banks to be considered “well capitalized,” the federal banking agencies require them to maintain a minimum ratio of qualifying total capital to risk-weighted assets of 10.0 percent and a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0 percent. In addition to the risk-based guidelines, the agencies require depository institutions to maintain a minimum ratio of Tier 1 capital to average total assets, referred to as the leverage ratio, of 5.0 percent.

The capital ratios of Hanmi Financial and the Bank were as follows as of December 31, 2012 and 2011:

Reserve Requirement

The Bank was required to maintain a certain percentage of its deposits as reserves at the FRB. Average daily reserve balances required to be maintained with the FRB were $0 and $1.5 million, and the Bank was in compliance with such requirements, as of December 31, 2012 and 2011, respectively.

Federal Reserve Notices of Proposed Rulemaking

On June 7, 2012, the Board of Governors of the Federal Reserve System approved for publication in the Federal Register three related notices of proposed rulemaking (collectively, the “Notices”) relating to the implementation of revised capital rules to reflect the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 as well as the Basel III international capital standards. Among other things, if adopted as proposed, the Notices would establish a new capital standard consisting of common equity Tier 1 capital; increase the capital ratios required for certain existing capital categories and add a requirement for a capital conservation buffer (failure to meet these standards would result in limitations on capital distributions as well as executive bonuses); and add more conservative standards for including securities in regulatory capital, which would phase-out trust preferred securities as a component of Tier 1 capital effective January 1, 2013. In addition, the Notices contemplate the deduction of certain assets from regulatory capital and revisions to the methodologies for determining risk weighted assets, including applying a more risk-sensitive treatment to residential mortgage exposures and to past due or nonaccrual loans. The Notices provide for various phase-in periods over the next several years. Hanmi Financial and the Bank will be subject to many provisions in the Notices, but until final regulations are issued pursuant to the Notices, Hanmi Financial cannot predict the actual effect of the Notices.