Note 8 — Subordinated Debentures and Rescinded Stock Obligation

Subordinated Debentures

During the third quarter of 2014 with the acquisition of CBI, the Company assumed CBI’s Junior Subordinated Deferrable Interest Debentures (“Subordinated Debentures”) with a notional balance of $26.8 million and an estimated fair value of $18.5 million. The $8.3 million discount will be amortized to interest expense over the remaining term. In December 2005, a trust was formed by CBI and issued $26.0 million Trust Preferred Securities (“TPS”) at 6.26 percent fixed rate for the first five years and a variable rate at the 3 month LIBOR plus 140 basis thereafter and invested the proceeds Subordinated Debentures. The Subordinated Debentures will mature on December 31, 2035, which date may be shortened to, at the Bank’s option if certain conditions are met. The TPS will be subject to mandatory redemption if the Subordinated Debentures are repaid by the Bank. Interest is payable quarterly, and the Bank has the option to defer interest payments on the Subordinated Debentures from time to time for a period not to exceed five consecutive years. Interest expense related to the amortization discount was 35,000 for the three months ended September 30, 2014.

Rescinded Stock Obligation

Hanmi Finanical assumed a rescinded stock obligation of $15.7 million and related accrued interest payable of $4.9 million at the closing date. The obligation resulted from the issuance of CBI common shares more than what was legally authorized in 2009 and 2010. Interest has been accrued on the obligation with interest rates varying state to state. Interest expense of $87,000 was recorded in September 2014, reflecting a weighted average rate of 6.79%. Accrued interest on the obligation as of September 30, 2014 was $5.1 million. Hanmi Financial has been in the process of paying off the obligation since the acquisition date.