Filed Pursuant to Rule 424(b)(3)
Registration No. 333-163206

 

PROSPECTUS SUPPLEMENT
(To Prospectus dated November 30, 2009)

 

 

100,000,000 Shares of Common Stock

Subscription Rights to Purchase up to 50,000,000 Shares of Common Stock

 

We are conducting a rights offering and concurrent offering of common stock to the public on a “best efforts” basis at a price of $1.20 per share. We intend to use a substantial portion of the proceeds from the offerings to increase the capital of our subsidiary, Hanmi Bank. On November 2, 2009, the Board of Directors of Hanmi Bank consented to the issuance of a Final Order from the California Department of Financial Institutions (the “Final Order”) and entered into a Written Agreement (the “Written Agreement”) with the Federal Reserve Bank of San Francisco (the “Federal Reserve Bank”). Under the Final Order, Hanmi Bank is required to increase its capital and maintain certain regulatory capital ratios prior to certain dates specified in the Final Order. Hanmi Bank is required to increase its contributed equity capital by July 31, 2010 by not less than an additional $100,000,000. Hanmi Bank is also required to maintain specified ratios of tangible stockholder’s equity to total tangible assets. Pursuant to the Written Agreement, we are also required to increase and maintain sufficient capital at Hanmi Financial Corporation (“Hanmi Financial”) and at Hanmi Bank satisfactory to the Federal Reserve Bank.

 

We are distributing at no charge to our common stockholders non-transferable subscription rights (“subscription rights”) to purchase up to 50,000,000 shares of our common stock (the “rights offering”). You will receive one subscription right for each share of common stock held of record at the close of business on June 7, 2010. Subscription rights may only be exercised for whole shares. Each subscription right will entitle you to purchase one share of our common stock at a subscription price equal to $1.20 per share. This is the same purchase price per share that Woori Finance Holdings Co. Ltd. (“Woori”) has agreed to pay to acquire, subject to certain conditions, a minimum of 175,000,000 shares of our common stock pursuant to a securities purchase agreement we entered into with Woori on May 25, 2010. See “Summary — Recent Developments” for further information about our agreement with Woori.

 

The subscription rights will expire if they are not exercised by 5:00 p.m., New York time, on July 6, 2010, unless we extend the rights offering subscription period in our sole discretion. You should carefully consider whether or not to exercise your subscription rights before the expiration of the rights offering subscription period. Exercises of subscription rights are irrevocable. Our Board of Directors is making no recommendation regarding your exercise of the subscription rights or the purchase of shares of our common stock in the best efforts public offering (discussed below). Subscription rights may not be sold or transferred.

 

If you exercise all of the subscription rights distributed to you, you will also be entitled to purchase additional shares not purchased by other stockholders pursuant to the over-subscription privilege described in this prospectus supplement, subject to our right to reject in whole or in part any over-subscription request.

 

We may in our sole discretion cancel the rights offering at any time and for any reason. If we cancel the rights offering, the subscription agent will return all subscription payments it has received for the cancelled offering without interest or penalty.

 

We will deposit subscriptions from the rights offering into an escrow account with our escrow agent until the earlier of (i) when we have received total subscriptions in the rights offering and the best efforts public offering for at least 87,500,000 of the offered shares, representing $105,000,000 in gross proceeds or (ii) the closing of the transaction with Woori (the “Escrow Release Date”). If the Escrow Release Date has not occurred on or prior to November 15, 2010, we will cancel the rights offering and best efforts public offering and the subscription agent will return the subscription payments received in the rights offering, without interest or penalty.

 

Concurrently with the rights offering, we are initially offering to sell an additional 50,000,000 shares of our common stock to the public, to be offered and sold by our placement agent on a “best efforts” basis, at a purchase price of $1.20 per share (the “best efforts public offering” and together with the rights offering collectively referred to hereinafter as, the “offerings”). Shares of common stock not subscribed for in the rights offering may be offered and sold in the best efforts public offering. We may in our sole discretion cancel the best efforts public offering at any time and for any reason.

 

We have engaged Cappello Capital Corp. (“Cappello”) to provide financial advisory services in connection with the rights offering and to act as our placement agent in the best efforts public offering. This is not an underwritten offering. Cappello is not obligated to purchase any of the shares of common stock that are being offered for sale by us. We have agreed to pay Cappello a cash fee equal to 2.75% of the aggregate gross proceeds raised in the offerings and to issue to Cappello five-year warrants to purchase up to 2% of the aggregate number of shares sold in the offerings. See “Plan of Distribution” for further information about our agreement with Cappello.

 

Shares of our common stock are traded on the NASDAQ Global Select Market under the symbol “HAFC.” On June 7, 2010, the closing sale price for our common stock was $1.64 per share. We urge you to obtain a current market price for our common stock before making any determination with respect to the exercise of subscription rights or the purchase of common stock in the best efforts public offering. We will apply to list the shares of common stock issued in the offerings on the NASDAQ Global Select Market under the same symbol.

 

Investment in our common stock is speculative and involves a high degree of risk. You could lose your entire investment. You should carefully consider all of the information set forth in this prospectus supplement and the accompanying prospectus, including the risk factors beginning on page S-19 of this prospectus supplement and on page 6 of the accompanying prospectus, as well as the risk factors and other information contained in any documents we incorporate by reference into this prospectus supplement and the accompanying prospectus before exercising subscription rights in the rights offering or purchasing shares of our common stock in the best efforts public offering. See “Information Incorporated by Reference” for further information about the documents we incorporate by reference into this prospectus supplement and the accompanying prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.

 

These securities are not deposits or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Deposit Insurance Fund or any other state, federal or foreign governmental agency or fund.

 

 

The date of this prospectus supplement is June 11, 2010

 

THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS IS NOT AN OFFER TO SELL THE SECURITIES DESCRIBED HEREIN AND IT IS NOT SOLICITING AN OFFER TO BUY SUCH SECURITIES IN ANY STATE OR JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

 

NOTICE TO RESIDENTS OF KOREA

 

THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS IS NOT, AND UNDER NO CIRCUMSTANCE, IS TO BE CONSTRUED AS, A PUBLIC OFFERING OF SECURITIES IN KOREA UNDER THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT OF KOREA. THE SECURITIES HAVE NOT BEEN REGISTERED WITH THE FINANCIAL SERVICES COMMISSION OF KOREA UNDER THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT OF KOREA AND NONE OF THE SECURITIES MAY BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, OR OFFERED OR SOLD TO ANY RESIDENT OF KOREA FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN KOREA OR TO ANY RESIDENT OF KOREA EXCEPT PURSUANT TO APPLICABLE LAWS AND REGULATIONS OF KOREA, INCLUDING BUT WITHOUT LIMITATION THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT OF KOREA AND THE FOREIGN EXCHANGE TRANSACTION LAW OF KOREA AND THE DECREES AND REGULATIONS THEREUNDER. FURTHERMORE, THE SALE AND PURCHASE OF THE SECURITIES SHOULD COMPLY WITH THE REQUIREMENTS UNDER THE FOREIGN EXCHANGE TRANSACTION LAW OF KOREA AND ITS SUBORDINATE REGULATIONS. NEITHER THE COMPANY, NOR ANY PLACEMENT AGENT MAKES ANY REPRESENTATION WITH RESPECT TO THE ELIGIBILITY OF ANY RECIPIENTS OF THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS TO ACQUIRE THE SECURITIES UNDER THE LAWS OF KOREA, INCLUDING BUT WITHOUT LIMITATION THE FOREIGN EXCHANGE TRANSACTION LAW AND REGULATIONS THEREUNDER.

TABLE OF CONTENTS

 

 

This prospectus supplement and the accompanying prospectus are part of a shelf registration statement on Form S-3 that we filed with the Securities and Exchange Commission. Under the shelf registration process, we may sell any combination of common stock, preferred stock, debt securities, rights, warrants or units in one or more offerings from time to time. In the accompanying prospectus, we provide you a general description of the securities we may offer from time to time under our shelf registration statement. This prospectus supplement describes the specific details regarding the rights offering and best efforts public offering, including the subscription price, the aggregate number of shares of common stock being offered and the risks of investing in our common stock. This prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein include important information about us and our common stock and other information you should know before exercising your non-transferable subscription rights or deciding to purchase our common stock in the best efforts public offering.

 

You should rely only on the information we have provided or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. No placement agent, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus supplement or the accompanying prospectus. You must not rely on any unauthorized information or representation. This prospectus supplement is an offer to sell only the securities offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus supplement or the accompanying prospectus is accurate only as of the date on the front of the document and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus supplement or the accompanying prospectus, or any sale of a security.

 

This prospectus supplement contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. You may obtain copies of the documents referred to herein as described below under “Where You Can Find More Information.”

 

In this prospectus supplement and accompanying prospectus, (i) all references to the “Company,” “we,” “us” and “our” refer to Hanmi Financial Corporation and its subsidiaries; and (ii) references to “the Bank” refers to Hanmi Bank.

 

This prospectus supplement and the documents incorporated by reference may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made pursuant to the safe harbors of the Act. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results could be quite different from those expressed or implied by the forward-looking statements. Do not unduly rely on forward-looking statements; they give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made and we undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this prospectus supplement or the accompanying prospectus or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise except as required by law.

 

Factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statement include:

 

 

 

In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this prospectus supplement, accompanying prospectus and the documents incorporated by reference might not occur, and you should not put undue reliance on any forward-looking statements.

 

Some of these and other factors are discussed in this prospectus supplement under the caption “Risk Factors” and elsewhere in this prospectus supplement and accompanying prospectus and the documents incorporated by reference, including but not limited to the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, as amended, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010. The development of any or all of these factors could have a material adverse impact on our financial position and our results of operations.

 

The following are examples of what we anticipate will be common questions about the rights offering and best efforts public offering. The answers are based on selected information included elsewhere in this prospectus supplement and accompanying prospectus. The following questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about the offerings. This prospectus supplement, accompanying prospectus and the documents we incorporate by reference contain more detailed descriptions of the terms and conditions of the offerings and provide additional information about us and our business, including potential risks related to the offerings, an investment in our common stock and our business.

 

What is the rights offering?

 

We are distributing at no charge to our common stockholders non-transferable subscription rights to purchase up to 50,000,000 shares of our common stock. You will receive one subscription right for each share of common stock held of record at the close of business on June 7, 2010 (the “record date”). Subscription rights may only be exercised for whole shares. Each subscription right will entitle you to purchase one share of our common stock at a subscription price equal to $1.20 per share. The subscription rights will be evidenced by subscription rights certificates.

 

Why are we conducting the rights offering?

 

We are conducting the rights offering to raise equity capital and to provide our existing stockholders with the opportunity to purchase our common stock at the same price per common share being offered to Woori pursuant to the terms of the securities purchase agreement we entered into with Woori on May 25, 2010. Woori has agreed to purchase a minimum of 175,000,000 shares of our common stock at a purchase price of $1.20 per share, if the transactions contemplated by the securities purchase agreement are completed.

 

How was the $1.20 per share subscription price and purchase price determined?

 

The subscription price in the rights offering and the purchase price in the best efforts public offering is the same purchase price that Woori has agreed to acquire common stock from us pursuant to the securities purchase agreement. In determining the purchase price to be paid by Woori, our Board of Directors considered a number of factors, including, historical and current trading prices for our common stock, the need for liquidity and capital, negotiations with Woori and the desire to provide an opportunity to our stockholders and other investors to participate in the offerings on the same financial terms as Woori. In conjunction with its review of these factors, our Board of Directors also reviewed our history and prospects, including our past and present earnings, our prospects for future earnings and our current financial condition.

 

Our Board of Directors received a fairness opinion from McGladrey Capital Markets LLC (“McGladrey”) that the price per share to be paid by Woori was fair, from a financial point of view, to our stockholders. The Special Committee of our Board of Directors also received a fairness opinion from Cappello that, as of May 19, 2010, and subject to the assumptions, qualifications and limitations set forth in its opinion, the price per share of our common stock to be received by Hanmi Financial in the sale of a majority interest in Hanmi Financial to Woori and the subsequent registered rights and best efforts offering, collectively referred to as the “Transaction,” was fair, from a financial point of view, to the holders of our common stock, other than Woori and any other purchasers of our common stock in the Transaction (the “Investors”). McGladrey and Cappello did not advise on, and their opinions did not address, the fairness to any of our stockholders or any other person purchasing shares in the rights offering or the best efforts public offering of the subscription price or purchase price or any other terms of the rights offering or the best efforts public offering. Neither the subscription price nor the purchase price is necessarily related to our book value, results of operations, cash flows, financial condition or the future market value of our common stock. We cannot assure you that the trading price of our common stock will not decline during or after the offerings. We also cannot assure you that you will be able to sell shares purchased in these offerings at a price equal to or greater than $1.20. We do not intend to change the subscription price or purchase price in response to changes in the trading

price of our common stock prior to the closing of the offerings. You should not assume or expect that, after the offerings, our shares of common stock will trade at or above $1.20.

 

What is the basic subscription privilege?

 

For each subscription right that you own, you will have a basic subscription privilege to buy from us one share of our common stock at a subscription price of $1.20 per share. You may exercise your basic subscription privilege for some or all of your subscription rights, or you may choose not to exercise any subscription rights.

 

For example, if you owned 1,000 shares of our common stock as of 5:00 p.m., New York time, on the record date, you would receive 1,000 subscription rights and would have the right to purchase 1,000 shares of common stock for $1.20 per share with your basic subscription privilege.

 

What is the over-subscription privilege?

 

If you exercise all of the subscription rights distributed to you pursuant to the basic subscription privilege, you will also have the opportunity to purchase additional shares not purchased by other stockholders pursuant to their basic subscription privilege at the same subscription price per share that applies to the basic subscription privilege.

 

We will be able to satisfy your exercise of the over-subscription privilege only if other stockholders do not elect to purchase all of the shares offered under their basic subscription privilege. We will satisfy over-subscription requests to the extent sufficient shares are available following the exercise of rights under the basic subscription privilege, provided that we reserve the right to reject in whole or in part any over-subscription requests, regardless of the availability of shares to satisfy these requests. If over-subscription requests exceed shares available, we will allocate the available shares pro rata based on the number of shares each oversubscribing stockholder purchased under the basic subscription privilege. Any excess subscription payments received by the subscription agent will be returned, without interest or penalty, as soon as practicable following the earlier of the Escrow Release Date, November 15, 2010 or the cancellation of the rights offering.

 

What are the limitations on the exercise of the basic subscription privilege and over-subscription privilege?

 

We will not accept any over-subscription requests for less than 10,000 shares of our common stock, except from our non-executive officers and employees from whom we will accept over-subscription requests for 1,000 or more shares of our common stock.

 

In addition, under applicable federal and state banking laws, any purchase of shares of our common stock may also require the prior clearance or approval of, or prior notice to, federal and state bank regulatory authorities if the purchase will result in any person or entity or group of persons or entities acting in concert owning or controlling shares in excess of 9.9%.

 

Am I required to exercise the subscription rights I receive in the rights offering?

 

No. You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights. However, if you choose not to fully exercise your basic subscription privilege and other stockholders fully exercise their basic subscription privilege, the percentage of our common stock owned by these other stockholders will increase relative to your ownership percentage, and your voting and other rights will likewise be diluted. In addition, if you do not exercise your basic subscription privilege in full, you will not be entitled to subscribe to purchase additional shares pursuant to the over-subscription privilege and your ownership percentage in our common stock and related voting and other rights may be further diluted.

 

May I transfer my subscription rights?

 

No, you may not sell, transfer or assign your rights to anyone else.

How do I exercise my subscription rights?

 

The subscription rights may be exercised beginning on the date of this prospectus supplement through the expiration of the rights offering subscription period, which is 5:00 p.m., New York time, on July 6, 2010. Although we have the option of extending the expiration date of the rights offering subscription period, we currently do not intend to do so.

 

You must properly complete the enclosed subscription rights certificate and deliver it, along with the full subscription price (including any amounts in respect of your over-subscription privilege), to our subscription agent, Computershare Inc., to the address set forth on page S-51 of this prospectus supplement, before 5:00 p.m., New York time, on July 6, 2010. If you use the mail, we recommend that you use insured, registered mail, return receipt requested. If you cannot deliver your subscription rights certificate to the subscription agent prior to the expiration of the rights offering subscription period, you may follow the guaranteed delivery procedures described under “The Rights Offering — Notice of Guaranteed Delivery.”

 

If you send a payment that is insufficient to purchase the number of shares you requested, or if the number of shares you requested is not specified in the forms, the payment received will be applied to exercise your basic subscription privilege and, if applicable, any over-subscription request that we have accepted based on the amount of the payment received. If the payment exceeds the subscription price for the full exercise of your basic subscription privilege and any applicable over-subscription request that we have accepted, or if you subscribe for more shares than you are eligible to purchase pursuant to the over-subscription privilege, then the excess will be returned to you as soon as practicable following the earlier of the Escrow Release Date (as defined below), November 15, 2010 or cancellation of the rights offering, as applicable. You will not receive interest on any payments refunded to you under the rights offering.

 

How do I subscribe for shares in the best efforts public offering?

 

You should complete, date and sign the subscription agreement and related materials for the best efforts public offering, which accompany this prospectus supplement and return them to our placement agent, Cappello Capital Corp., at the address set forth on page S-56 of this prospectus supplement. Do not send payment for the shares of common stock with your subscription agreement and related materials. As soon as practicable after the Escrow Release Date, Cappello will request that all persons who previously submitted completed subscription agreements provide an acknowledgement of subscription, in writing or orally, at Cappello’s discretion, if and to the extent that all or a portion of the number of shares subscribed for in the previously submitted subscription agreements have been accepted by us, and Cappello will provide further instructions to such prospective purchasers on the process for completing the purchase of the shares. Upon receipt of the request to acknowledge subscription, each prospective purchaser will be asked to do the following:

 

 

We have the right, in our sole discretion, to accept or reject any subscription in whole or in part.

 

What should I do if I want to participate in the rights offering, but my shares are held in the name of my broker, dealer, custodian bank or other nominee?

 

If your shares of common stock are held in the name of a broker, dealer, custodian bank or other nominee, then your broker, dealer, custodian bank or other nominee is the record holder of the shares you own. You will not receive a subscription rights certificate. The record holder must exercise the subscription rights on your behalf for the shares of common stock you wish to purchase.

 

We will ask your broker, dealer, custodian bank or other nominee to notify you of the rights offering. You should complete and return to your record holder the form provided to you that allows you to instruct your broker, dealer, custodian bank or other nominee whether, and to what extent you wish to participate in the rights offering. You should receive this form from your record holder with the other rights offering materials.

 

If you wish to participate in the rights offering and purchase shares of our common stock, please contact the record holder of your shares promptly. Your bank, broker or other nominee holder is the holder of the shares you own and must exercise the subscription rights on your behalf for shares you wish to purchase. Your broker, dealer, custodian bank or other nominee may establish a deadline to participate in the rights offering prior to the 5:00 p.m., New York time on July 6, 2010.

 

After I exercise my subscription rights, can I change my mind?

 

No. All exercises of subscription rights are irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights. You should not exercise your subscription rights unless you are certain that you wish to purchase shares of our common stock at a price of $1.20 per share.

 

Will the subscription rights be listed on a stock exchange or trading market?

 

No. The subscription rights will not be listed on the NASDAQ Global Select Market or any other stock exchange or trading market. Our common stock trades on the NASDAQ Global Select Market under the symbol “HAFC” and we will apply to list the shares to be issued in connection with the rights offering and the best efforts public offering for trading on the NASDAQ Global Select Market under the same symbol.

 

What happens if I choose not to exercise my subscription rights?

 

If you do not exercise your subscription rights and the offerings are consummated, the number of shares of our common stock you own will not change but your percentage ownership of our total outstanding voting stock will decrease because shares will be purchased by other stockholders in the rights offering and other investors in the best efforts public offering. Regardless of whether you exercise your subscription rights, if the transactions contemplated by the securities purchase agreement with Woori are completed, there will be substantial dilution to the existing stockholders at that time.

 

Has our Board of Directors made a recommendation to our stockholders regarding the offerings?

 

No. Our Board of Directors is making no recommendation regarding your exercise of the subscription rights or the purchase of shares in the best efforts public offering. Stockholders who exercise subscription rights or purchase shares in the best efforts public offering risk total loss of their investment. We cannot assure you that the market price of our common stock will be above the subscription price at the time of exercise or at the expiration of the rights offering subscription period or that anyone purchasing shares in the offerings will be able to sell those shares in the future at the same price or a higher price. You must decide whether or not to exercise your subscription rights or participate in the best efforts public offering based on your own assessment of our business and the offerings. Among other things, you should carefully consider the risks described under the heading “Risk Factors” in this prospectus supplement and accompanying prospectus and the risks described in documents incorporated by

reference in this prospectus supplement and accompanying prospectus, including but not limited to the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, as amended and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.

 

Will our directors and executive officers participate in the rights offering?

 

We expect our directors and executive officers to participate in the rights offering at varying levels, but they are not required to do so. See “Subscriptions by Directors and Executive Officers” for additional information on each directors’ and executive officers’ intentions, as of the date of this prospectus supplement, with respect to the exercise of their basic and over-subscription privileges. If the rights offering is fully subscribed by our existing stockholders pursuant to the exercise of their basic subscription privileges, including our directors and executive officers who are stockholders, we anticipate that directors and executive officers will purchase approximately 4,349,515 shares, or $5,219,000 of our common stock. Our directors, officers and employees are entitled to participate in the rights offering on the same terms and conditions applicable to all stockholders with the exception of a lower minimum threshold amount of 1,000 shares of common stock for over-subscription requests applicable to non-executive officers and employees (as compared to 10,000 shares for all other stockholders, including our directors and executive officers). Following the rights offering and best efforts public offering, our directors and executive officers are expected to own approximately 8,767,000 shares of common stock, or 5.79% of our total outstanding shares of common stock, including shares of our common stock they currently own, but not including the dilutive effects they will experience if we consummate the transaction contemplated by the securities purchase agreement with Woori, if we sell all of the shares in the rights offering and the best efforts public offering.

 

How do I exercise my subscription rights if I live outside of the United States or have an army post office or foreign post office address?

 

The subscription agent will hold subscription rights certificates for stockholders having addresses outside the United States or who have an army post office or foreign post office address. In order to exercise subscription rights, our foreign stockholders and stockholders with an army post office or foreign post office address must notify the subscription agent and in a timely manner follow other procedures described below under the heading “The Rights Offering — Foreign Stockholders.”

 

Where will my money be held prior to the closing of the rights offering?

 

All subscription payments we receive in connection with the rights offering will be deposited into an escrow account maintained by our escrow agent, until the earlier of when we have received total subscriptions in the offerings of at least $105,000,000 in the aggregate, or the closing of the transaction with Woori (the “Escrow Release Date”), or such earlier time as we cancel the rights offering. Subscription payments will initially be received by our subscription agent and will be swept on a weekly basis into the escrow account maintained by our escrow agent. If the Escrow Release Date has not occurred on or prior to November 15, 2010, we will cancel the rights offering, the escrow agent will disburse the subscription funds to the subscription agent, and the subscription agent will return the subscription payments received in the rights offering, without interest or penalty.

 

If the rights offering is not completed, will my subscription payment be refunded to me?

 

Yes. We will hold all funds received in the rights offering in an escrow account maintained by the escrow agent until the earlier of the Escrow Release Date or the cancellation of the rights offering. If the rights offering is cancelled or the Escrow Release Date has not occurred on or prior to November 15, 2010, the subscription agent will return, without interest or penalty, all subscription payments for rights in the rights offering as soon as practicable. If you own shares in “street name,” it may take longer for you to receive payment because the subscription agent will return payments through the record holder of the shares.

 

Can a stockholder purchase shares in the best efforts public offering?

 

Stockholders who wish to purchase shares should exercise their basic subscription privilege and over-subscription privilege to purchase the number of shares they wish to purchase. If stockholders do not exercise

their basic or over-subscription rights, they may still subscribe for shares in the best efforts public offering, but there is no assurance that subscriptions in the best efforts public offering will be accepted in full or at all. We have the right to accept or reject any subscriptions in the best efforts public offering in our sole discretion and to accept or reject over-subscriptions in the rights offering in our sole discretion.

 

If I am not a stockholder but want to purchase shares of common stock in the best efforts public offering, what do I do?

 

Our placement agent will accept subscriptions on our behalf for up to 50,000,000 shares of common stock, totaling $60,000,000 in the aggregate, in the best efforts public offering during the pendency of the rights offering. Upon completion of the rights offering, any shares not subscribed for in the rights offering will also be available for purchase in the best efforts public offering. The best efforts public offering of our shares of common stock will commence on the date of this prospectus supplement. We may choose to cancel the best efforts public offering at any time and for any reason.

 

Are there any conditions to the completion of the offerings?

 

We will not consummate the offerings and issue shares to subscribers in the rights offering or purchasers in the best efforts public offering until the Escrow Release Date. However, if we receive subscriptions for $105,000,000 in the aggregate through both offerings, you may own our shares prior to the closing of the transaction with Woori, which we believe we will need to complete to provide us with sufficient capital resources to satisfy our regulatory enforcement actions and continue as a going concern.

 

If the Escrow Release Date has not occurred on or prior to November 15, 2010, we will cancel the rights offering and the best efforts public offering and the subscription agent will return the subscription payments received in the rights offering, without interest or penalty.

 

Furthermore, we reserve the right to cancel the rights offering and/or best efforts public offering for any reason at any time. If either offering is cancelled, all subscription proceeds received will be returned, without interest or penalty, as soon as practicable. See “The Rights Offering — Conditions and Cancellation” for further information regarding the conditions to which the rights offering is subject.

 

Are the offerings subject to any other restrictions?

 

Our securities purchase agreement with Woori provides that we may offer and sell in the best efforts public offering up to 4.9% of the shares of our common stock (on a fully-diluted basis, taking into account the rights offering and the best efforts public offering (fully diluted)) to any single investor or group of investors acting together, other than Woori. To the extent we wish to offer and sell more than 4.9% of the shares of our common stock (on a fully-diluted basis) to any single investor or group of investors acting together (other than Woori), we have agreed to consult with Woori. Notwithstanding the foregoing, in no event are we permitted to offer and sell more than 9.9% of the shares of common stock (on a fully diluted basis) to any single investor or group of investor acting together (other than Woori) without the prior written consent of Woori.

 

In addition, we will not sell shares to any purchaser who, in our sole opinion, could be required to obtain prior clearance or approval from or submit a notice to any state, federal or foreign regulatory authority to acquire, own or control those shares if, as of July 6, 2010, that clearance or approval has not been obtained or any applicable waiting period has not expired. If, after giving effect to the offering, you will hold 10% or more of our common stock, you will be presumed to control us and would need to obtain prior approval of the San Francisco Federal Reserve Bank (the “Federal Reserve Bank”) to complete the purchase unless the facts and circumstances support a rebuttal of such presumption.

 

We will not accept any subscriptions in the best efforts public offering or over-subscription requests in the rights offering for less than 10,000 shares of our common stock, except from our non-executive officers and employees from whom we will accept subscriptions and over-subscription requests for 1,000 or more shares of our common stock.

You may not revoke or change your subscription to purchase shares of our common stock in the best efforts public offering after you have submitted your acknowledgement of subscription (which must be accompanied by payment).

 

What form of payment must I use to pay the subscription price for the rights offering?

 

You must pay in a timely manner the full subscription price for the full number of shares of common stock you wish to acquire in the rights offering by delivering to the subscription agent, a certified or cashier’s check, a bank draft drawn on a U.S. bank or a personal check that clears before the expiration of the rights offering subscription period. See “The Rights Offering — Payment Method” for further information regarding the conditions to which the rights offering is subject.

 

What form of payment must I use to pay the purchase price for shares subscribed for in the best efforts public offering?

 

You must pay in a timely manner as instructed by our placement agent the full purchase price for the number of shares of common stock you wish to acquire in the best efforts public offering by making a wire transfer of immediately available U.S. funds to an account instructed by our placement agent, which account is one designated by us or delivering a certified or cashier’s check payable to “Hanmi Financial Corporation” (for aggregate purchase prices at or below $250,000) to Hanmi Financial Corporation, 3660 Wilshire Boulevard, Penthouse A, Los Angeles, California 90010, in each case for an amount equal to the purchase price of $1.20 per share multiplied by the number of shares of common stock you intend to purchase in the best efforts public offering and acknowledged by our placement agent.

 

What fees or charges apply if I exercise my subscription rights or subscribe to purchase shares in the best efforts public offering?

 

We are not charging any fees or sales commissions to issue subscription rights to you or to issue shares to you if you exercise your subscription rights or purchase shares in the best efforts public offering. If you exercise your subscription rights or purchase shares in the best efforts public offering through a broker or other holder of your shares, you are responsible for paying any fees that person may charge.

 

Are there risks in buying shares of our common stock?

 

Yes. The exercise of your subscription rights and/or the purchase of shares in the best efforts public offering involves risks. Exercising your subscription rights and/or subscribing for shares in the best efforts public offering means buying shares of our common stock and should be considered as carefully as you would consider any other equity investment. Among other things, you should carefully consider the risks described under the heading “Risk Factors” in this prospectus supplement and the accompanying prospectus and the risks described in documents incorporated by reference in this prospectus supplement, including but not limited to the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, as amended, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.

 

When will I receive my new shares of common stock?

 

We will not issue you new shares of common stock in the offerings until after the Escrow Release Date, and if the Escrow Release Date does not occur on or prior to November 15, 2010, we will cancel the offerings and we will not issue any shares of common stock in connection therewith. You will not be issued shares of our common stock or have any of the rights of a stockholder with respect to the shares of our common stock that you subscribe for in the offerings until as soon as practicable after the occurrence of the Escrow Release Date.

 

All shares that you purchase in the offerings will be issued in book-entry, or uncertificated, form. When issued, the shares will be registered in the name of the subscription rights holder of record or in the name of the person who appears on the subscription agreement.

As soon as practicable after the Escrow Release Date, the subscription agent will arrange for the issuance of the shares of common stock purchased pursuant to the basic subscription privilege. Shares purchased pursuant to the over-subscription privilege will be issued as soon as practicable after the Escrow Release Date, and following the completion of any pro-rations as may be necessary in the event the over-subscription requests exceed the number of shares available to satisfy such requests.

 

As soon as practicable after the Escrow Release Date, we will arrange for the issuance of the shares of common stock purchased pursuant to accepted subscription agreements executed in connection with the best efforts public offering.

 

Subject to state securities laws and regulations, we have the discretion to delay distribution of any shares you may have elected to purchase by exercise of your rights in the rights offering or subscription for shares in the best efforts public offering in order to comply with state securities laws.

 

What are the U.S. federal income tax consequences of receiving and exercising my subscription rights, and purchasing shares of common stock in the best efforts public offering?

 

The receipt and exercise of subscription rights pursuant to the basic subscription privilege or subscription for shares pursuant to the over-subscription privilege, and the purchase of shares of common stock in the best efforts public offering should generally not be taxable for U.S. federal income tax purposes. You should, however, seek specific tax advice from your tax advisor in light of your particular circumstances and as to the applicability and effect of any other tax laws. See “Certain Material U.S. Federal Income Tax Consequences.”

 

How many shares of common stock will be outstanding after the offering?

 

As of June 7, 2010, there were 51,198,390 shares of our common stock outstanding. We will issue up to 100,000,000 shares of common stock in the aggregate in the rights offering and best efforts public offering. Based on the number of shares of common stock outstanding as of June 7, 2010, and without giving effect to the Woori investment, if we issue all 100,000,000 shares of common stock available in the stock offering, we would have 151,198,390 shares of common stock outstanding following the completion of the rights offering and best efforts public offering.

 

How much money will the Company receive from the offerings?

 

The total proceeds to us from the offerings will depend on the number of subscription rights that are exercised and number of shares sold in the best efforts public offering. If we issue all 100,000,000 shares available in the offerings, the total proceeds to us, before expenses, will be $120,000,000.

 

What if I have more questions?

 

If you have more questions about the rights offering or need additional copies of the rights offering documents, please contact the information agent, Georgeson. Banks and brokers should call (212) 440-9800 and stockholders should call (800) 509-0983.

 

This summary highlights the information contained elsewhere in or incorporated by reference into this prospectus supplement and accompanying prospectus. Because this is only a summary, it does not contain all of the information that you should consider before deciding whether to exercise your subscription rights or purchase shares in the best efforts public offering. You should carefully read this entire prospectus supplement and accompanying prospectus, including the information contained under the heading “Risk Factors” and the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, as amended, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, and all other information included or incorporated by reference into this prospectus supplement and accompanying prospectus in their entirety before you decide to exercise your subscription rights or subscribe to purchase shares in the best efforts public offering.

 

Company Information

 

Hanmi Financial Corporation is a Delaware corporation and the holding company for Hanmi Bank, a California state chartered bank. Hanmi Bank is a community bank conducting general business banking, with its primary market encompassing the Korean-American community as well as other communities in the multi-ethnic populations of Los Angeles County, Orange County, San Bernardino County, San Diego County, the San Francisco Bay area, and the Silicon Valley area in Santa Clara County. Hanmi Bank’s full-service offices are located in business areas where many of the businesses are run by immigrants and other minority groups. Hanmi Bank’s client base reflects the multi-ethnic composition of these communities. At March 31, 2010, Hanmi Bank maintained a branch network of 27 full-service branch offices in California and 1 loan production office in Washington. Our other subsidiaries are Chun-Ha Insurance Services, Inc. and All World Insurance Services, Inc., which were acquired in January 2007. Founded in 1989, Chun-Ha and All World are insurance agencies that offer a complete line of insurance products, including life, commercial, automobile, health, and property and casualty.

 

Our principal office is located at 3660 Wilshire Boulevard, Penthouse Suite A, Los Angeles, California 90010, and our telephone number is (213) 382-2200.

 

Our website address is www.hanmi.com. Except for those SEC filings incorporated by reference in this prospectus supplement and accompanying prospectus, none of the information contained on, or that may be accessed through, our website is a prospectus or constitutes part of, or is otherwise incorporated into, this prospectus supplement and accompanying prospectus.

 

Regulatory Requirements and Agreements

 

On October 8, 2008, Hanmi Bank entered into an informal supervisory agreement (a memorandum of understanding) with the Federal Reserve Bank of San Francisco (the “Federal Reserve Bank”) and the California Department of Financial Institutions to address certain issues raised in Hanmi Bank’s then most recent regulatory examination. Under the terms of the memorandum of understanding, Hanmi Bank was required to address: (i) Board and senior management maintenance and succession planning; (ii) Board oversight and education; (iii) Board assessment and enhancement; (iv) loan policies and procedures; (v) allowance for loan losses policies and procedures; (vi) liquidity and funds management policies; (vii) strategic planning; and (viii) capital maintenance. In addition, the memorandum of understanding included a requirement that Hanmi Bank maintain a minimum Tier 1 leverage ratio and tangible stockholder’s equity to total tangible assets ratio of not less than 8.0 percent.

 

Hanmi Bank undertook to comply with the memorandum of understanding. To date none of its requirements have been deemed to be satisfied by the California Department of Financial Institutions. After further negative financial results and additional regulatory examinations by the Federal Reserve Bank and the California Department of Financial Institutions, on November 2, 2009, the members of the Board of Directors of Hanmi Bank consented to the issuance of a Final Order from the California Department of Financial Institutions (the “Final Order”). On the same date, we and Hanmi Bank entered into a Written Agreement (the “Written Agreement”) with the Federal Reserve Bank. The Final Order and the Written Agreement contain substantially similar provisions.

The Final Order and the Written Agreement require the Board of Directors of Hanmi Bank to prepare and submit written plans to the California Department of Financial Institutions and the Federal Reserve Bank that address the following items: (i) strengthening Board oversight of the management and operation of Hanmi Bank; (ii) strengthening credit risk management practices; (iii) improving credit administration policies and procedures; (iv) improving Hanmi Bank’s position with respect to problem assets; (v) maintaining adequate reserves for loan and lease losses; (vi) improving the capital position of Hanmi Bank and, with respect to the Written Agreement, of the Company; (vii) improving Hanmi Bank’s earnings through a strategic plan and a budget for 2010; (viii) improving Hanmi Bank’s liquidity position and funds management practices; and (ix) contingency funding. In addition, the Final Order and the Written Agreement place restrictions on Hanmi Bank’s lending to borrowers who have adversely classified loans with Hanmi Bank and requires Hanmi Bank to charge off or collect certain problem loans. The Final Order and the Written Agreement also require Hanmi Bank to review and revise its allowance for loan and lease losses consistent with relevant supervisory guidance. Hanmi 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 California Department of Financial Institutions, and we and Hanmi Bank must obtain approval from the Federal Reserve Bank prior to declaring and paying dividends. The Final Order and Written Agreement also require that we and Hanmi Bank notify, and obtain the non-disapproval from the California Department of Financial Institutions and Federal Reserve Bank prior to adding any individual as a Board member or senior executive officer.

 

We and Hanmi Bank have initiated action to comply with the Final Order and Written Agreement; however, none of the requirements have yet formally been deemed satisfied by the California Department of Financial Institutions or the Federal Reserve Bank and the failure to satisfy the provisions of the Final Order and Written Agreement could result in further supervisory enforcement action by the California Department of Financial Institutions and the Federal Reserve Bank. We also are not currently in compliance with the capital and management requirements to remain a financial holding company. As a result, we could be required by the Federal Reserve Bank to either divest ownership of our two insurance agency subsidiaries or sell Hanmi Bank.

 

Under the Final Order, Hanmi Bank is required to increase its capital and maintain certain capital ratios prior to certain dates specified in the Final Order. Further, under the Written Agreement and based on the most recent capital ratios of Hanmi Bank, we and the Bank are required to submit a capital plan and maintain sufficient capital that is satisfactory to the Federal Reserve Bank.

 

Under the Final Order, by July 31, 2010, Hanmi Bank is required to increase its contributed equity capital by not less than an additional $100,000,000. Hanmi Bank is also required to maintain a ratio of tangible stockholder’s equity to total tangible assets as follows:

 

 

Such requirements are in addition to a fully funded allowance for loan and lease losses. Based on its capital ratios at March 31, 2010, Hanmi Bank is no longer deemed to be “well capitalized” for regulatory purposes as of March 31, 2010 and therefore was “undercapitalized” as defined in the federal prompt corrective action regulations.

 

If we are unable to raise a sufficient amount of capital to satisfy the regulators we are currently subject to and that we may become subject to in the future, further regulatory action could be taken against us and Hanmi Bank, including additional orders and further restrictions on our business, the possible assessment of civil money penalties, removal of one or more officers and/or directors, termination of deposit insurance and the liquidation or other closure of Hanmi Bank.

The capital ratios of the Company and Hanmi Bank were as follows as of March 31, 2010:

 

 

Prompt Corrective Action Regulations

 

Federal law requires each federal banking agency to take prompt corrective action when a bank falls below one or more prescribed minimum capital ratios. The federal banking agencies have, by regulation, defined the following five capital categories:

 

 

As of March 31, 2010, Hanmi Bank’s total risk-based capital ratio was below the minimum regulatory requirement and placed Hanmi Bank within the definition of “undercapitalized” under the regulatory framework for prompt corrective action. If a state member bank, like Hanmi Bank, is classified as undercapitalized, the bank is required pursuant to the Federal Deposit Insurance Corporation Improvement Act and the regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) to submit a capital restoration plan, which must be guaranteed by its parent holding company up to certain limits. Further, an undercapitalized bank is prohibited from increasing its assets, engaging in a new line of business, acquiring any interest in any company or insured depository institution, or opening or acquiring a new branch office, except under certain circumstances, including the acceptance by the Federal Reserve Bank of a capital restoration plan for the bank.

 

If a bank is classified as significantly undercapitalized or an undercapitalized bank fails to submit and implement an acceptable capital restoration plan, the Federal Reserve Bank would be required to take one or more prompt corrective actions. These actions would include, among other things, requiring sales of new securities to bolster capital; improvements in management; limits on interest rates paid; prohibitions on transactions with affiliates; termination of certain risky activities and restrictions on compensation paid to executive officers. These

actions may be taken by the Federal Reserve Bank at any time at its discretion with respect to an undercapitalized bank, if it determines any such restrictions are necessary.

 

If a bank is classified as critically undercapitalized, in addition to the foregoing restrictions, the Federal Deposit Insurance Corporation Improvement Act and Federal Reserve Board’s implementing regulation, Regulation H, prohibit payment on any subordinated debt and requires the bank to be placed into conservatorship or receivership within 90 days, unless the Federal Reserve Board determines that other action would better achieve the purposes of the Federal Deposit Insurance Corporation Improvement Act regarding prompt corrective action with respect to undercapitalized banks.

 

Even if the rights and best efforts public offerings are fully subscribed for, we believe that we will also need to complete the contemplated transaction with Woori to provide us with sufficient capital resources for us to satisfy the regulatory enforcement actions and continue as a going concern.

 

Recent Developments

 

On May 25, 2010, we entered into a securities purchase agreement with Woori, pursuant to which Woori has agreed to purchase, subject to certain conditions, for $210,000,000 in cash, newly issued shares of common stock at a purchase price of $1.20 per share. Upon consummation of the transactions contemplated by the securities purchase agreement, we will issue to Woori 175,000,000 shares of common stock. In addition, pursuant to the terms of the securities purchase agreement Woori has the option to purchase an additional 25,000,000 shares of common stock at a purchase price of $1.20 per share. Woori’s aggregate investment in us will not exceed $240,000,000. Following consummation of the transactions contemplated by the securities purchase agreement and the rights and best efforts public offerings, it is anticipated that Woori will own at least a majority of our outstanding common stock. The closing of the Woori transaction is subject to various closing conditions, including, among others, the receipt of certain required governmental and regulatory approvals, including the approval of the Federal Reserve Board, the California Department of Financial Institutions and the Korean Financial Services Commission, and the receipt of approval from our stockholders for an amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock to 500,000,000 and the issuance of common stock to Woori for purposes of NASDAQ Marketplace Rule 5635. We cannot provide any assurance that the transactions with Woori will be consummated on the terms set forth in the securities purchase agreement or at all.

 

If we consummate the transactions with Woori, we will issue a minimum of 175,000,000 shares and a maximum of 200,000,000 shares of our common stock to Woori. None of our stockholders will have the ability to maintain their proportional ownership of our common stock in connection with the shares being offered to Woori. As a result, we expect there to be a significant dilutive effect to our existing stockholders on both the earnings per share of our common stock and the book value per share of our common stock. In addition, our existing stockholders will incur substantial dilution to their voting interests and will own a significantly smaller percentage of our outstanding common stock.

 

If the transactions with Woori are consummated, Woori will control us as it will own in excess of 50% of our common stock. As a result, and subject to compliance with applicable law and our charter documents, Woori will have the ability to (i) elect all of the members of our Board of Directors; (ii) adopt amendments to our charter documents; and (iii) subject to the limitations set forth in the securities purchase agreement regarding a cash-out merger, control the vote on any merger, sale of assets or other fundamental corporate transaction of the Company or Hanmi Bank or the issuance of additional equity securities or incurrence of debt, in each case without the approval of our other stockholders. It will also be impossible for a third party, other than Woori, to obtain control of us through purchases of our common stock not beneficially owned or controlled by Woori, which could have a negative impact on our stock price.

 

Woori would also then have the ability to sell large amounts of shares of our common stock. It could cause us to file a registration statement that would allow it to sell shares more easily, or Woori could sell shares of our common stock without registration under certain circumstances, such as in a private transaction. Although we can make no prediction as to the effect, if any, that such sales would have on the market price of our common stock, sales of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect the

market price of our common stock. If Woori were to sell or transfer shares of our common stock as a block, another person or entity could become our controlling stockholder, subject to any required regulatory approvals.

 

Our common stock is currently listed on the NASDAQ Global Select Market under the symbol “HAFC”. NASDAQ generally requires a majority of directors to be independent and requires independent director oversight over the nominating and executive compensation functions. Nevertheless, under the rules applicable to the NASDAQ Global Select Market, if another company owns more than 50% of the voting power of a listed company, that company is considered a “controlled company” and exempt from rules relating to independence of our Board of Directors and the compensation and nominating committees. If the transaction with Woori is completed, we will be a controlled company because Woori will beneficially own more than 50% of our outstanding voting stock. Accordingly, we would be exempt from certain corporate governance requirements and our stockholders may not have all the protections that these corporate governance rules are intended to provide.

 

Woori is also subject to regulatory oversight, review and supervisory action (which can include fines or penalties) by Korean banking authorities and U.S. regulatory authorities as a result of its 100% indirect controlling interest in Woori America Bank, which is headquartered in New York. Our business operations and expansion plans could be negatively affected by regulatory concerns or supervisory action in the U.S. and in Korea against Woori and its affiliates. The views of Woori regarding possible new businesses, strategies, acquisitions, divestitures or other initiatives, including compliance and risk management processes, may differ from ours. Additionally, Woori America Bank has branches in California and competes with Hanmi Bank for customers. Woori may take actions with respect to Woori America Bank’s business in California or elsewhere that could be disadvantageous to Hanmi Bank and to stockholders of Hanmi Financial other than Woori. If the transactions with Woori are consummated, this may delay or hinder us from pursuing initiatives or cause us to incur additional costs and subject us to additional oversight. Also, to the extent any directors, officers or employees serve us and Woori at the same time that could create or create the appearance of, conflicts of interest.

 

The following summary describes the principal terms of the rights offering and best efforts public offering, but is not intended to be complete. See the information under the heading “The Rights Offering” and “The Best Efforts Public Offering” in this prospectus supplement for a more detailed description of the terms and conditions of the rights and best efforts public offerings.

 

 

 

 

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and in the accompanying prospectus on page 5, together with the other information contained or incorporated by reference into this prospectus, including the information contained in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, as amended, and any risks described in our other filings with the Securities and Exchange Commission, pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act of 1934, as amended, before making a decision to invest in our common stock. The risks described below and in the documents referred to in the preceding sentence are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. If any of the following risks actually occurs, our business, results of operations and financial condition could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

 

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.

 

Our independent registered public accounting firm in their audit report for fiscal year 2009 has expressed substantial doubt about our ability to continue as a going concern. Continued operations may depend on our ability to comply with the terms of the Final Order and Written Agreement and the financing or other capital required to do so may not be available or may not be available on acceptable terms. Our audited financial statements were prepared under the assumption that we will continue our operations on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. Our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. If we cannot continue as a going concern, you will lose some or all of your investment in us.

 

We, and our independent registered public accounting firm, have identified a material weakness in our internal control over financial reporting.

 

Management and our independent registered public accountants have identified a material weakness in our internal control over financial reporting related to the allowance for loan losses. The identified deficiency that was considered a material weakness related to management’s policies and procedures for the monitoring and timely evaluation of and revision to management’s approach for assessing credit risk inherent in the Company’s loan portfolio to reflect changes in the economic environment.

 

While we are taking steps to address the identified material weakness and prevent additional material weaknesses from occurring, there is no guarantee that these steps will be sufficient to remediate the identified material weakness or prevent additional material weaknesses from occurring. If we fail to remediate the material weakness, or if additional material weaknesses are discovered in the future, we may fail to meet our future reporting obligations and our financial statements may contain material misstatements. Any such failure could also adversely affect the results of the periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting.

 

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.

 

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. As part of the Final Order, the Bank is also required to increase its capital and maintain certain regulatory capital ratios prior to certain dates specified in the Final Order. By July 31, 2010, the Bank will be

required to increase its contributed equity capital by not less than an additional $100.0 million. The Bank will be required to maintain a ratio of tangible stockholder’s equity to total tangible assets as follows:

 

 

Pursuant to the Written Agreement, we are also required to increase and maintain sufficient capital at the Company and at Hanmi Bank that is satisfactory to the Federal Reserve Bank. We have also committed to the Federal Reserve Bank to adopt a consolidated capital plan to augment and maintain a sufficient capital position. Our existing capital resources may not satisfy our capital requirements for the foreseeable future and may not be sufficient to offset any problem assets. Even if we are successful in raising the maximum amount from the offerings and complete the transaction with Woori, we may still need to raise additional capital in the future to support our operations. Further, should our asset quality erode and require significant additional provision for credit losses, resulting in consistent net operating losses at Hanmi Bank, our capital levels will decline and we will need to raise capital to satisfy our agreements with the regulators and any future regulatory orders or agreements we may be subject to.

 

Our ability to raise additional capital will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, we cannot be certain of our ability to raise additional capital on terms acceptable to us. Inability to raise additional capital when needed, raises substantial doubt about our ability to continue as a going concern. In addition, if we were to raise additional capital through the issuance of additional shares, our stock price could be adversely affected, depending on the terms of any shares we were to issue.

 

Hanmi Bank is “undercapitalized” under the prompt corrective action regulations and guidelines and as a result is subject to various operating restrictions and other limitations.

 

The total risk-based capital ratio of 7.81 percent as of March 31, 2010 set forth in Hanmi Bank’s Call Report filed for the quarter ending March 31, 2010 places Hanmi Bank within the definition of “undercapitalized” for purposes of Section 38 of the Federal Deposit Insurance Act (Prompt Corrective Action), 12 U.S.C. 1831o and Federal Reserve Board Regulations 12 C.F.R. 240 et seq. Pursuant to Section 38 and Federal Reserve Board Regulation H, Hanmi Bank was required to submit a capital restoration plan to the Federal Reserve Bank that must be guaranteed by the Company. Hanmi Bank has taken action to submit the required capital restoration plan but there can be no assurances whether or when the Federal Reserve Bank will determine if the plan submitted by Hanmi Bank is acceptable. Hanmi Bank is also subject to other restrictions pursuant to Section 38 and Federal Reserve Board Regulation H, including restrictions on dividends, asset growth and expansion through acquisitions, branching or new lines of business and is prohibited from paying certain management fees. The Federal Reserve Bank also has the discretion to impose certain other corrective actions pursuant to Section 38 and Regulation H.

 

Hanmi Bank is prohibited from accepting, renewing or rolling over brokered deposits, which could significantly affect its liquidity.

 

As a result of its “undercapitalized” capital ratio category, the Bank is also prohibited by Section 29 of the Federal Deposit Insurance Act from accepting, renewing or rolling over any brokered deposits and we are restricted from offering interest rates on deposits that are higher than the prevailing rates in our market because the Bank is less than adequately capitalized. Our financial flexibility could be severely constrained if we are unable to renew our wholesale funding or if adequate financing is not available in the future at acceptable rates of interest. We may not have sufficient liquidity to continue to fund new loan originations, and we may need to liquidate loans or other assets unexpectedly in order to repay obligations as they mature. Our inability to obtain regulatory consent to accept or renew brokered deposits could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or future prospects and our ability to continue as a going concern.

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.

 

On November 2, 2009, the members of the Board of Directors of the Bank consented to the issuance of the Final Order from the California Department Financial Institutions. On the same date, we and the Bank entered into the Written Agreement with the Federal Reserve Bank. Under the terms of the Final Order and the Written Agreement, Hanmi Bank is required to implement certain corrective and remedial measures under strict time frames and we can offer no assurance that Hanmi Bank will be able to meet the deadlines imposed by the regulatory orders.

 

These regulatory actions will remain in effect until modified, terminated, suspended or set aside by the Federal Reserve Bank or the California Department of Financial Institutions, as applicable. Failure to comply with the terms of these regulatory actions within the applicable time frames provided could result in additional orders or penalties from the Federal Reserve Bank and the California Department of Financial Institutions, which could include further restrictions on our business, assessment of civil money penalties on us and the Bank, as well as our respective directors, officers and other affiliated parties, termination of deposit insurance, removal of one or more officers and/or directors, the liquidation or other closure of the Bank and our ability to continue as a going concern. Generally, these enforcement actions will be lifted only after subsequent examinations substantiate complete correction of the underlying issues. Therefore they are not expected to be lifted if and when the Woori transaction is consummated.

 

We may become subject to additional regulatory restrictions in the event that our regulatory capital levels continue to decline.

 

As of March 31, 2010, Hanmi Bank’s total risk-based capital ratio was below the minimum regulatory requirement and placed Hanmi Bank within the definition of “undercapitalized” under the regulatory framework for prompt corrective action. If a state member bank, like Hanmi Bank, is classified as undercapitalized, the bank is required to submit a capital restoration plan to the Federal Reserve Bank. Pursuant to Federal Deposit Insurance Corporation Improvement Act, an undercapitalized bank is prohibited from increasing its assets, engaging in a new line of business, acquiring any interest in any company or insured depository institution, or opening or acquiring a new branch office, except under certain circumstances, including the acceptance by the Federal Reserve Bank of a capital restoration plan for the bank.

 

If a bank is classified as significantly undercapitalized, the Federal Reserve Bank would be required to take one or more prompt corrective actions. These actions would include, among other things, requiring sales of new securities to bolster capital; improvements in management; limits on interest rates paid; prohibitions on transactions with affiliates; termination of certain risky activities and restrictions on compensation paid to executive officers. These actions may also be taken by the Federal Reserve Bank at any time on an undercapitalized bank if it determines those restrictions are necessary. If a bank is classified as critically undercapitalized, in addition to the foregoing restrictions, the Federal Deposit Insurance Corporation Improvement Act prohibits payment on any subordinated debt and requires the bank to be placed into conservatorship or receivership within 90 days, unless the Federal Reserve Bank determines that other action would better achieve the purposes of the Federal Deposit Insurance Corporation Improvement Act regarding prompt corrective action with respect to undercapitalized banks.

 

Finally, the capital classification of a bank affects the frequency of examinations of the bank, the deposit insurance premiums paid by such bank, and the ability of the bank to engage in certain activities, all of which could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or future prospects and our ability to continue as a going concern. Under Federal Deposit Insurance Corporation Improvement Act, the Federal Deposit Insurance Corporation is required to conduct a full-scope, on-site examination of every bank at least once every twelve months.

 

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.

 

The primary source of our income from which we pay our obligations and distribute dividends to our stockholders is from the receipt of dividends from Hanmi Bank. The availability of dividends from Hanmi Bank is limited by various statutes and regulations. Hanmi Bank currently has deficit retained earnings and has suffered net

losses in 2009 and 2008, largely caused by provision for credit losses and goodwill impairments. As a result, the California Financial Code does not provide authority for Hanmi Bank to declare a dividend to us, with or without Commissioner approval. In addition, Hanmi Bank is prohibited from paying dividends to us unless it receives prior regulatory approval. Furthermore, we agreed that we will not pay any dividends or make any payments on our outstanding $82.4 million of trust preferred securities or any other capital distributions without the prior written consent of the Federal Reserve Bank. We began to defer interest payment on our trust preferred securities commencing with the interest payment that was due on January 15, 2009. If we defer interest payments for more than 20 consecutive quarters under any of our outstanding trust preferred instruments, then we would be in default under such trust preferred arrangements and the amounts due under the agreements pursuant to which we issued our trust preferred securities would be immediately due and payable.

 

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

 

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us.

 

For example, the Federal Reserve Bank’s lending to Hanmi Bank is limited as provided for in Regulation A (12 C.F.R. 201). Currently, the Federal Reserve Bank will not lend to Hanmi Bank for more than 60 days in any 120 day period and Hanmi Bank must maintain a minimum of $20.7 million to offset the risk from Hanmi Bank’s non-Fedwire activity. In addition, due to continued deterioration in credit and capital, Hanmi Bank’s maximum borrowing capacity from the Federal Home Loan Bank has been reduced from 20% of total assets to 15% of total assets and the maximum term has been reduced from 84 to 12 months.

 

Our ability to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole as a result of the recent turmoil faced by banking organizations in the domestic and worldwide credit markets.

 

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.

 

During the year ended December 31, 2009, we recorded a $196.4 million provision for credit losses and gross charge-offs of $125.4 million in loans, offset by recoveries of $2.8 million. For the year ended December 31, 2009, we recognized net losses of $122.3 million. For the quarter ended March 31, 2010, we recorded a $58.0 million provision for credit losses and gross charge-offs of $30.1 million in loans, offset by recoveries of $3.7 million. For the quarter ended March 31, 2010, we recognized net losses of $49.5 million. There has been a general slowdown in the economy and in particular, in the housing market in areas of Southern California where a majority of our loan customers are based. This slowdown reflects declining prices and excess inventories of homes to be sold, which has contributed to a financial strain on homebuilders and suppliers, as well as an overall decrease in the collateral value of real estate securing loans. As of March 31, 2010, we had $986.4 million in commercial real estate, construction and residential property loans. Continuing deterioration in the real estate market generally and in the residential property and construction segment in particular could result in additional loan charge-offs and provisions for credit losses in the future, which could have an adverse effect on our net income and capital levels.

 

Our allowance for loan losses may not be adequate to cover actual losses.

 

A significant source of risk arises from the possibility that we could sustain losses because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loans. The underwriting and credit monitoring policies and procedures that we have adopted to address this risk may not prevent unexpected losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows. We maintain an allowance for loan losses to provide for loan defaults and non-performance. The allowance is also increased for new loan growth. While we believe that our allowance for loan losses is adequate to cover

inherent losses, we cannot assure you that we will not increase the allowance for loan losses further or that our regulators will not require us to increase this allowance.

 

Our Southern California business focus and economic conditions in Southern California could adversely affect our operations.

 

Hanmi Bank’s operations are located primarily in Los Angeles and Orange counties. Because of this geographic concentration, our results depend largely upon economic conditions in these areas. The continued deterioration in economic conditions in Hanmi Bank’s market areas, or a significant natural or man-made disaster in these market areas, could have a material adverse effect on the quality of Hanmi Bank’s loan portfolio, the demand for its products and services and on its overall financial condition and results of operations.

 

Our concentration in commercial real estate loans located primarily in Southern California could have adverse effects on credit quality.

 

As of March 31, 2010, Hanmi Bank’s loan portfolio included commercial real estate and construction loans, primarily in Southern California, totaling $986.4 million, or 36.8% of total gross loans. Because of this concentration, a continued deterioration of the Southern California commercial real estate market could exacerbate adverse consequences for Hanmi Bank. Among the factors that could contribute to such a continued decline are general economic conditions in Southern California, interest rates and local market construction and sales activity.

 

Our concentration in commercial and industrial loans could have adverse effects on credit quality.

 

As of March 31, 2010, Hanmi Bank’s loan portfolio included commercial and industrial loans, primarily in Southern California, totaling $1.64 billion, or 61.1% of total gross loans. Because of this concentration, a continued deterioration of the Southern California economy could affect the ability of borrowers, guarantors and related parties to perform in accordance with the terms of their loans, which could have adverse consequences for Hanmi Bank.

 

Our concentrations of loans in certain industries could have adverse effects on credit quality.

 

As of March 31, 2010, Hanmi Bank’s loan portfolio included loans to: 1) lessors of non-residential buildings totaling $406.9 million, or 15.2% of total gross loans; 2) borrowers in the accommodation industry totaling $403.5 million, or 15.0% of total gross loans; and 3) gas stations totaling $312.2 million, or 11.6% of total gross loans. Most of these loans are in Southern California. Because of these concentrations of loans in specific industries, a continued deterioration of the Southern California economy overall, and specifically within these industries, could affect the ability of borrowers, guarantors and related parties to perform in accordance with the terms of their loans, which could have material and adverse consequences for Hanmi Bank.

 

The Woori investment is subject to conditions to closing and may not close at all.

 

The transactions contemplated by the securities purchase agreement with Woori is subject to numerous closing conditions, many of which are outside of our control and might not be fulfilled. The transaction with Woori must be approved by certain governmental agencies, including the Federal Reserve Board, the California Department of Financial Institutions and the Korean Financial Services Commission, which could delay or prevent the closing. There can be no assurance that the transaction with Woori will receive the necessary regulatory approvals within a reasonable period of time, if at all. The securities purchase agreement may be terminated in the event that the closing does not occur on or before July 31, 2010 (which date may be extended, upon the mutual agreement of the parties, up to sixty days in the event the necessary regulatory or stockholder approvals have not been obtained); however, we cannot assure you that the investment by Woori in us will close in the near term or at all. If we fail to consummate the transactions contemplated by the securities purchase agreement and we otherwise fail to raise sufficient capital to satisfy the terms of the Final Order and the Written Agreement, further regulatory action could be taken against us and Hanmi Bank and we may not be able to continue as a going concern. Failure to comply with the terms of the regulatory orders within the applicable time frames provided could result in additional orders or penalties from the Federal Reserve Bank, the Federal Deposit Insurance Corporation and the California Department

of Financial Institutions, which could include further restrictions on our business, assessment of civil money penalties on us and Hanmi Bank, as well as our respective directors, officers and other affiliated parties, termination of deposit insurance, removal of one or more officers and/or directors and the liquidation or other closure of Hanmi Bank.

 

Even if we were to consummate the transactions contemplated by the securities purchase agreement with Woori and are able to raise additional capital through the rights offering and the best efforts public offering, we may still need to raise additional capital in the future and there can be no assurance that we would be able to do so in the amounts required and in a timely manner, or at all. Failure to raise sufficient capital could have a material adverse effect on our business, financial conditions and results of operations and subject us to further regulatory restrictions or penalties.

 

Existing stockholders will experience substantial dilution from the best efforts public offering and the Woori investment.

 

The Woori investment will involve the issuance of a substantial number of shares of our common stock. If the Woori investment is completed, current stockholders will have less than a majority interest in us. In addition, to the extent existing stockholders do not subscribe for all of the shares offered in the rights offering, we will offer the remaining shares to the public. As a result of the sale of such a large number of shares of our common stock, the market price of our common stock could decline and we could experience dilution to earnings and book value.

 

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 completion of the Woori investment and the offerings, we may decide to raise additional funds through public or private debt or equity financings for a number of reasons, including in response to regulatory or other requirements to meet our liquidity and capital needs, to finance our operations and business strategy or for other reasons. If we raise funds by issuing equity securities or instruments that are convertible into equity securities, the percentage ownership of our existing stockholders will further be reduced, the new equity securities may have rights, preferences and privileges superior to those of our common stock, and the market of our common stock could decline.

 

Even after the Woori investment, the rights offering and best efforts public offering we may still be subject to continued regulatory scrutiny.

 

Even if we complete the Woori investment, the rights offering and the best efforts public offering, we cannot assure you whether or when the regulatory agreements and orders we have entered into will be lifted or terminated. Even if they are lifted or terminated in whole or in part, we may still be subject to supervisory enforcement actions that restrict our activities.

 

If the Woori investment is completed, we will have a controlling stockholder who will be able to control certain corporate matters.

 

If the transactions with Woori are consummated, Woori will control us as it will own in excess of 50% of our common stock. As a result, and subject to compliance with applicable law and our charter documents (subject to the limitations contained in our securities purchase agreement with Woori), Woori will have voting control of us, and will be able to (i) elect all of the members of our Board of Directors; (ii) adopt amendments to our charter documents; and (iii) subject to the limitations set forth in the securities purchase agreement regarding a cash-out merger, control the vote on any merger, sale of assets or other fundamental corporate transaction of the Company or Hanmi Bank or the issuance of additional equity securities or incurrence of debt, in each case without the approval of our other stockholders. It will also be impossible for a third party, other than Woori, to obtain control of us through purchases of our common stock not beneficially owned or controlled by Woori, which could have a negative impact on our stock price. Furthermore, in pursuing its economic interests, Woori may make decisions with respect to fundamental corporate transactions that may be different than the decisions of other stockholders.

If the transactions with Woori are consummated, Woori is entitled to nominate five of our seven directors, one of whom would be the Chief Executive Officer of Hanmi Financial. In conjunction therewith, up to five of our directors designated by us may resign to accommodate Woori’s contractual rights. The directors identified by Woori shall serve until our next annual meeting of stockholders and until their successors are elected and qualified. So long as Woori holds more than 50% of our outstanding common stock on a fully-diluted basis, it shall have the contractual right to nominate two-thirds of our Board (rounded to the nearest whole number). We have agreed to recommend to our stockholders the election of the Woori nominees. The appointment of the Woori nominees is subject to non-disapproval requirements of the Order and the notice requirements of the Written Agreement.

 

Woori would also then have the ability to sell large amounts of shares of our common stock by causing us to file a registration statement that would allow it to sell shares more easily. In addition, Woori could sell shares of our common stock without registration under certain circumstances, such as in a private transaction. Sales of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect the market price of our common stock. If Woori were to sell or transfer shares of our common stock as a block, another person or entity could become our controlling stockholder, subject to any required regulatory approvals.

 

Woori is also subject to regulatory oversight, review and supervisory action (which can include fines or penalties) by Korean banking authorities and U.S. regulatory authorities as a result of its 100% indirect controlling interest in Woori America Bank headquartered in New York. Our business operations and expansion plans could be negatively affected by regulatory concerns or supervisory action in the U.S. and in Korea against Woori and its affiliates. The views of Woori regarding possible new businesses, strategies, acquisitions, divestitures or other initiatives, including compliance and risk management processes, may differ from ours. Additionally, Woori America Bank has branches in California and competes with Hanmi Bank for customers. Woori may take actions with respect to Woori America Bank’s business in California or elsewhere that could be disadvantageous to Hanmi Bank and to stockholders of Hanmi Financial other than Woori. If the transaction with Woori are consummated, this may delay or hinder us from pursuing initiatives or cause us to incur additional costs and subject us to additional oversight. Also, to the extent any directors, officers or employees serve us and Woori at the same time that could create or create the appearance of, conflicts of interest.

 

If the Woori investment is completed, we would qualify as a “controlled company” for NASDAQ corporate governance purposes.

 

Our common stock is currently listed on the NASDAQ Global Select Market. NASDAQ generally requires a majority of directors to be independent and requires independent director oversight over the nominating and executive compensation functions. However, under the rules applicable to NASDAQ, if another company owns more than 50% of the voting power of a listed company, that company is considered a “controlled company” and exempt from rules relating to independence of the Board of Directors and the compensation and nominating committees. If the Woori investment is completed, we will be a controlled company because Woori will beneficially own more than 50% of our outstanding voting stock. Accordingly, we would be exempt from certain corporate governance requirements and our stockholders may not have all the protections that these rules are intended to provide.

 

Difficult economic and market conditions have adversely affected our industry.

 

Dramatic declines in the housing market, with decreasing home prices and increasing delinquencies and foreclosures, have negatively impacted the credit performance of mortgage and construction loans and resulted in significant write-downs of assets by many financial institutions. General downward economic trends, reduced availability of commercial credit and increasing unemployment have negatively impacted the credit performance of commercial and consumer credit, resulting in additional write-downs. Concerns over the stability of the financial markets and the economy have resulted in decreased lending by financial institutions to their customers and to each other. This market turmoil and tightening of credit has led to increased commercial and consumer deficiencies, lack of customer confidence, increased market volatility and widespread reduction in general business activity. Financial institutions have experienced decreased access to deposits and borrowings. The resulting economic pressure on consumers and businesses and the lack of confidence in the financial markets may adversely affect our business, financial condition, results of operations and stock price. We do not expect that the difficult conditions in the

financial markets are likely to improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial institutions industry. In particular, we may face the following risks in connection with these events:

 

 

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.

 

Recent legislative and regulatory initiatives to address difficult market and economic conditions may not stabilize the U.S. banking system. There can be no assurance as to the actual impact regulatory initiatives will have on the financial markets, including the extreme levels of volatility and limited credit availability currently being experienced. The failure of regulatory initiatives to help stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect our business, financial condition, results of operations, access to capital and credit or the value of our securities.

 

U.S. and international financial markets and economic conditions could adversely affect our liquidity, results of operations and financial condition.

 

Global capital markets and economic conditions continue to be adversely affected and the resulting disruption has been particularly acute in the financial sector. Our capital ratios have been adversely affected and the cost and availability of funds may be adversely affected by illiquid credit markets and the demand for our products and services may decline as our borrowers and customers realize the impact of an economic slowdown and recession. In addition, the severity and duration of these adverse conditions is unknown and may exacerbate our exposure to credit risk and adversely affect the ability of borrowers to perform under the terms of their lending arrangements with us. Accordingly, continued turbulence in the U.S. and international markets and economy may adversely affect our liquidity, financial condition, results of operations and profitability.

 

Our success depends on our key management.

 

Our success depends in large part on our ability to attract key people who are qualified and have knowledge and experience in the banking industry in our markets and to retain those people to successfully implement our business objectives. The unexpected loss of services of one or more of our key personnel or the inability to maintain consistent personnel in management could have a material adverse impact on our business and results of operations.

 

Changes in economic conditions could materially hurt our business.

 

Our business is directly affected by changes in economic conditions, including finance, legislative and regulatory changes and changes in government monetary and fiscal policies and inflation, all of which are beyond

our control. In 2009, the economic conditions in the markets in which our borrowers operate deteriorated and the levels of loan delinquency and defaults that we experienced were substantially higher than historical levels.

 

If economic conditions continue to deteriorate, it may exacerbate the following consequences:

 

 

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.

 

A significant source of risk arises from the possibility that losses will be sustained because borrowers, guarantors or related parties may fail to perform in accordance with the terms of their loans. We have adopted underwriting and credit monitoring procedures and credit policies, including the establishment and review of the allowance for loan losses, that management believes are appropriate to limit this risk by assessing the likelihood of non-performance, tracking loan performance and diversifying our credit portfolio. These policies and procedures, however, may not prevent unexpected losses that could have a material adverse effect on our financial condition and results of operations. As described herein, the Bank substantially increased its provision for credit losses in 2009, 2008 and 2007, as compared to previous years, as a result of increases in historical loss factors, increased charge-offs and migration of more loans into more adverse risk categories.

 

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.

 

A downturn in the real estate markets could hurt our business because many of our loans are secured by real estate. Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature, such as earthquakes and national disasters particular to California. Substantially all of our real estate collateral is located in California. If real estate values continue to decline, the value of real estate collateral securing our loans could be significantly reduced. Our ability to recover on defaulted loans by foreclosing and selling the real estate collateral would then be diminished and we would be more likely to suffer material losses on defaulted loans.

 

We are exposed to risk of environmental liabilities with respect to properties to which we take title.

 

In the course of our business, we may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean-up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we become subject to significant environmental liabilities, our business, financial condition, results of operations and prospects could be materially and adversely affected.

 

Our earnings are affected by changing interest rates.

 

Changes in interest rates affect the level of loans, deposits and investments, the credit profile of existing loans, the rates received on loans and securities and the rates paid on deposits and borrowings. Significant fluctuations in interest rates may have a material adverse effect on our financial condition and results of operations. The current historically low interest rate environment caused by the response to the financial market crisis and the global economic recession in 2008 may affect our operating earnings negatively.

The impact of the Basel II capital standards on Hanmi Bank and Woori and potential changes or additions to those standards are uncertain.

 

The implementation of Basel II became mandatory in 2008 for only certain large U.S. and international banks. It is optional for other banks. The Basel Committee is reconsidering regulatory-capital standards, supervisory and risk-management requirements and additional disclosures to further strengthen the Basel II framework in response to recent worldwide economic developments. It is expected the Basel Committee may reinstitute a minimum leverage ratio requirement. The U.S. banking agencies have indicated separately that they will retain the minimum leverage requirement for all U.S. banks. It also is possible that a new tangible common equity ratio standard will be added.

 

We are subject to government regulations that could limit or restrict our activities, which in turn could adversely affect our operations.

 

The financial services industry is subject to extensive federal and state supervision and regulation. Significant new laws, changes in existing laws, or repeals of existing laws may cause our results to differ materially from historical and projected performance. Further, federal monetary policy, particularly as implemented through the Federal Reserve Board, significantly affects credit conditions and a material change in these conditions could have a material adverse affect on our financial condition and results of operations.

 

Competition may adversely affect our performance.

 

The banking and financial services businesses in our market areas are highly competitive. We face competition in attracting deposits, making loans, and attracting and retaining employees. The increasingly competitive environment is a result of changes in regulation, changes in technology and product delivery systems, new competitors in the market, and the pace of consolidation among financial services providers. Our results in the future may be materially and adversely impacted depending upon the nature and level of competition.

 

We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements.

 

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our clients by using technology to provide products and services that will satisfy client demands for convenience, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.

 

We rely on communications, information, operating and financial control systems technology from third-party service providers, and we may suffer an interruption in those systems.

 

We rely heavily on third-party service providers for much of our communications, information, operating and financial control systems technology, including our internet banking services and data processing systems. Any failure or interruption of these services or systems or breaches in security of these systems could result in failures or interruptions in our customer relationship management, general ledger, deposit, servicing and/or loan origination systems. The occurrence of any failures or interruptions may require us to identify alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources, if at all.

 

Negative publicity could damage our reputation.

 

Reputation risk, or the risk to our earnings and capital from negative publicity or public opinion, is inherent in our business. Negative publicity or public opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences. Negative public opinion could result from our actual or

perceived conduct in any number of activities, including lending practices, corporate governance, regulatory compliance, mergers and acquisitions, and disclosure, sharing or inadequate protection of customer information, and from actions taken by government regulators and community organizations in response to that conduct.

 

The price of our common stock may be volatile or may decline.

 

The trading price of our common stock may fluctuate widely because of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations could adversely affect the market price of our common stock. Among the factors that could affect our stock price are:

 

 

The stock market and, in particular, the market for financial institution stocks, has experienced significant volatility recently. As a result, the market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate more than usual and cause significant price variations to occur. The trading price of the shares of our common stock and the value of our other securities will depend on many factors, which may change from time to time, including, without limitation, our financial condition, performance, creditworthiness and prospects, future sales of our equity or equity-related securities, and other factors identified above in “Cautionary Note Regarding Forward-Looking Statements.” Current levels of market volatility are unprecedented. The capital and credit markets have been experiencing volatility and disruption for more than a year. In recent months, the volatility and disruption has reached unprecedented levels. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength. A significant decline in our stock price could result in substantial losses for individual stockholders and could lead to costly and disruptive securities litigation and potential delisting from the NASDAQ Stock Market, Inc.

 

Your share ownership may be diluted by the issuance of additional shares of our common stock in the future.

 

In addition to the substantial dilution you will experience upon the completion of the Woori transaction and the offerings, your share ownership may be diluted by the issuance of additional shares of our common stock in the future. First, we have adopted a stock option plan that provides for the granting of stock options to our directors, executive officers and other employees. As of March 31, 2010, 1,137,515 shares of our common stock were issuable under options granted in connection with our stock option plans. In addition, 1,663,618 shares of our common stock

are reserved for future issuance to directors, officers and employees under our stock option plan. It is probable that the stock options will be exercised during their respective terms if the fair market value of our common stock exceeds the exercise price of the particular option. If the stock options are exercised, your share ownership will be diluted.

 

In addition, our Amended and Restated Certificate of Incorporation authorizes the issuance of up to 200,000,000 shares of common stock and we will be seeking stockholder approval to increase the authorized shares of common stock up to 500,000,000 shares of common stock. Our Amended and Restated Certificate of Incorporation does not provide for preemptive rights to the holders of our common stock. Any authorized but unissued shares are available for issuance by our Board of Directors. As a result, if we issue additional shares of common stock to raise additional capital or for other corporate purposes, you may be unable to maintain your pro rata ownership in the Company.

 

Future sales of common stock by existing stockholders may have an adverse impact on the market price of our common stock.

 

Sales of a substantial number of shares of our common stock in the public market, or the perception that large sales could occur, could cause the market price of our common stock to decline or limit our future ability to raise capital through an offering of equity securities. As of June 7, 2010, there were 51,198,390 shares of our common stock outstanding, which are freely tradable without restriction or further registration under the federal securities laws unless purchased or sold by our “affiliates” within the meaning of Rule 144 under the Securities Act.

 

Holders of our junior subordinated debentures have rights that are senior to those of our stockholders.

 

As of March 31, 2010, we had outstanding $82.4 million of trust preferred securities issued by our subsidiary trusts. Payments of the principal and interest on the trust preferred securities are conditionally guaranteed by us. The junior subordinated debentures underlying the trust preferred securities are senior to our shares of common stock. As a result, we must make payments on the junior subordinated debentures before any dividends can be paid on our common stock and, in the event of our bankruptcy, dissolution or liquidation, the holders of the junior subordinated debentures must be satisfied before any distributions can be made on our common stock. We have the right to defer distributions on the junior subordinated debentures (and the related trust preferred securities) for up to five years, during which time no dividends may be paid on our common stock.

 

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.

 

Various provisions of our Amended and Restated Certificate of Incorporation and By-laws could delay or prevent a third-party from acquiring us, even if doing so might be beneficial to our stockholders. These provisions provide for, among other things, supermajority voting approval for certain actions, limitation on large stockholders taking certain actions and the authorization to issue “blank check” preferred stock by action of the Board of Directors acting alone, thus without obtaining stockholder approval. The Bank Holding Company Act of 1956, as amended, and the Change in Bank Control Act of 1978, as amended, together with federal regulations, require that, depending on the particular circumstances, either Federal Reserve Bank approval must be obtained or notice must be furnished to the Federal Reserve Bank and not disapproved prior to any person or entity acquiring “control” of a state member bank, such as the Bank. These provisions may prevent a merger or acquisition that would be attractive to stockholders and could limit the price investors would be willing to pay in the future for our common stock.

 

Subject to the limitations set forth in the securities purchase agreement regarding a cash-out merger, following the completion of the transaction with Woori, Woori would control the vote on any merger, sale of assets or other fundamental corporate transaction of the Company or Hanmi Bank or the issuance of additional equity securities or incurrence of debt, in each case without the approval of our other stockholders. It will also be impossible for a third party, other than Woori, to obtain control of us through purchases of our common stock not beneficially owned or controlled by Woori, which could have a negative impact on our stock price. If Woori were to sell or transfer shares of our common stock as a block, another person or entity could become our controlling stockholder, subject to any required regulatory approvals.

Risks Related to the Offerings

 

We may close the offerings and accept your subscriptions even if the Woori transaction never closes.

 

In the event we receive the minimum subscription amount of $105.0 million in the aggregate in the offerings, we will release subscriptions for the rights offering from the escrow account and issue shares of our common stock to purchasers in the offerings, which may occur prior to the closing of the transaction with Woori. Upon contribution of at least $100.0 million of this amount to the Hanmi Bank we will be in compliance with the Final Order but we will still be required to increase the Hanmi Bank’s capital to restore it to a safe and sound condition and satisfy the Written Agreement. Even if we raise the maximum amount available for sale in the offerings of $120.0 million, we will also need to complete the contemplated transaction with Woori to provide us with sufficient capital resources. We cannot provide any assurance that the transactions with Woori will be consummated on the terms set forth in the securities purchase agreement or at all. In the event we close on the offerings and issue shares of our common stock to purchasers in the offerings, and the Woori transaction is never completed, further regulatory action could be taken against us and Hanmi Bank, we may not have sufficient capital to support our operations, we may not be able to satisfy the regulatory enforcement actions and continue as a going concern and you could lose your entire investment in us. If we do not close the Woori transaction, we may be required to seek additional capital from other sources. No assurance can be given that capital will be available under such circumstances, and, even if available, on terms that would not be highly unfavorable to you as a stockholder.

 

The subscription price for the rights offering and the purchase price for the best efforts public offering is not an indication of the value of our common stock.

 

The subscription price and the purchase price for the offerings were established by our Board of Directors and is the same price per share of common stock that was negotiated with Woori. In determining the subscription price, our Board of Directors considered a number of factors, including, historical and current trading prices for our common stock, the need for liquidity and capital, negotiations with Woori and the desire to provide an opportunity to our stockholders and other investors to participate in the offerings on the same financial terms as Woori. In conjunction with its review of these factors, our Board of Directors also reviewed our history and prospects, including our past and present earnings, our prospects for future earnings and our current financial condition. Our Board of Directors received a fairness opinion from McGladrey Capital Markets LLC that the price per share to be paid by Woori was fair, from a financial point of view, to our stockholders. A Special Committee of the Board of Directors also received a fairness opinion from Cappello that, as of May 19, 2010, and subject to the assumptions, qualifications and limitations set forth in its opinion, the price per share of our common stock to be received by Hanmi Financial in the Transaction, was fair, from a financial point of view, to the holders of our common stock, other than the Investors. McGladrey and Cappello did not advise on, and their opinions did not address, the fairness to any of our stockholders or any other person purchasing shares in the rights offering or the best efforts public offering of the subscription price or purchase price or any other terms of the rights offering or the best efforts public offering. Neither the subscription price nor the purchase price is necessarily related to our book value, results of operations, cash flows, financial condition or the future market value of our common stock. We cannot assure you that the trading price of our common stock will not decline during or after the offerings. We also cannot assure you that you will be able to sell shares purchased in these offerings at a price equal to or greater than the subscription price or the purchase price. We do not intend to change the subscription price or purchase price in response to changes in the trading price of our common stock prior to the closing of the offerings. You should not assume or expect that, after the offerings, our shares of common stock will trade at or above $1.20.

 

We do not have any formal commitments to participate in the offerings.

 

We do not have any formal commitments from any of our stockholders or other potential investors to participate in the offerings, and we cannot assure you that our other stockholders will exercise all or any part of their basic subscription privilege or their over-subscription privilege or that anyone will subscribe to purchase shares of our common stock in the best efforts public offering. We cannot provide any assurance about how much the net proceeds from the offerings will be. See “Subscriptions by Directors and Executive Officers” for additional information on each directors’ and executive officers’ intentions as of the date of this prospectus supplement with respect to the exercise of their basic and over-subscription privileges. If we do not receive subscriptions for the

maximum number of shares we are offering through this prospectus supplement, we may not be able to contribute to Hanmi Bank sufficient capital to support its operations, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or future prospects and our ability to continue as a going concern.

 

We currently do not have sufficient authorized and unissued shares of common stock to consummate the offerings and the Woori transaction.

 

Our authorized capital stock consists of 210,000,000 shares, of which 200,000,000 shares are common stock, and 10,000,000 shares are preferred stock. As of June 7, 2010, there were 51,198,390 shares of our common stock issued and outstanding, and 1,121,115 shares of our common stock were reserved for issuance upon the exercise of options that have been granted under our existing stock option plan, leaving 147,680,495 shares of common stock available for issuance. We may be required to issue up to 200,000,000 shares of our common stock to Woori, and at a minimum would be required to issue 175,000,000 shares of our common stock to Woori, upon the closing of the transaction contemplated by the securities purchase agreement we entered into with Woori. We also would be required to issue up to 100,000,000 shares of our common stock in the aggregate upon the consummation of the offerings.

 

At our upcoming Annual Meeting of Stockholders, currently scheduled for July 28, 2010, we are asking our stockholders to approve an amendment to our Amended and Restated Certificate of Incorporation to increase our authorized shares of common stock from 200,000,000 shares to 500,000,000 shares. If our stockholders do not approve the amendment to our Amended and Restated Certificate of Incorporation to increase our authorized shares of common stock to 500,000,000 shares, we would not have sufficient unissued shares of common stock to consummate both the Woori transaction and the offerings.

 

Between the time you irrevocably subscribe for shares of our common stock in the rights offering, and the Escrow Release Date, our liquidity, financial condition and results of operations could deteriorate substantially and we could become subject to further regulatory enforcement actions.

 

Our liquidity, financial condition and results of operations could deteriorate substantially between the time when you irrevocably exercise your subscription rights in the rights offering and the Escrow Release Date, including as a result of the need to take additional provisions for credit losses, further charge-offs loans or otherwise suffer additional losses. In addition, we could become subject to further regulatory enforcement actions, which could have a material adverse effect on our business and financial condition. We are under no obligation to update you in the event any of the foregoing were to occur or we otherwise experience a material adverse event and we expressly disclaim any intention to do so. Notwithstanding any material adverse event we experience, your subscription for shares of our common stock in the rights offering is irrevocable. There can be no assurances that the trading price of our common stock will equal or exceed the subscription price at the time of exercise or at the Escrow Release Date.

 

The offerings may cause the price of our common stock to decline.

 

The announcement of the offerings and their terms, including the subscription price, together with the number of shares of common stock we could issue if the offerings are completed, may result in a decrease in the trading price of our common stock. This decrease may continue after the completion of the offerings. If that occurs, your purchase of shares of our common stock in the offerings may be at a price greater than the prevailing trading price.

 

Because you may not revoke or change your exercise of the subscription rights, you could be committed to buying shares above the prevailing trading price at the time the shares are issued.

 

Once you exercise your subscription rights, you may not revoke or change the exercise or subscription. The trading price of our common stock may decline before the Escrow Release Date. If you exercise your subscription rights, and, afterwards, the trading price of our common stock decreases below the $1.20 per share subscription price, you will have committed to buying shares of our common stock at a price above the prevailing trading price and could have an immediate unrealized loss.

 

Our common stock is traded on the NASDAQ Global Select Market under the symbol, “HAFC,” and the closing sale price of our common stock on the NASDAQ Global Select Market on June 7, 2010 was $1.64 per share.

There can be no assurances that the trading price of our common stock will equal or exceed the subscription price at the time of exercise, or at the Escrow Release Date.

 

If you are an existing stockholder and do not timely exercise your subscription rights in the rights offering, you will suffer dilution.

 

If you are an existing stockholder and do not timely exercise your subscription rights, and other stockholder exercise their rights, you will suffer dilution of your percentage ownership of our equity securities relative to stockholders who exercise their rights.

 

As of June 7, 2010, there were 51,198,390 shares of our common stock outstanding. We will issue up to 100,000,000 shares of common stock in the offerings, depending on the number of rights that are exercised and the number of shares of common stock subscribed for in the best efforts public offering.

 

Based on the number of shares of common stock outstanding as of June 7, 2010, and assuming that no options are exercised and there are no other changes in the number of outstanding shares prior to the expiration of the offerings, if we issue all 100,000,000 shares of common stock available in the offerings, we would have 151,198,390 shares of common stock outstanding following the completion of the offerings.

 

In addition, and notwithstanding whether your exercise your subscription rights in full, upon completion of the transaction with Woori you will suffer substantial additional dilution.

 

We may cancel the offerings at any time and for any reason, and neither we nor the placement agent or the subscription agent will have any obligation to you except to return your subscription payment with respect to the rights offering.

 

We may at our sole discretion cancel the offerings at any time and for any reason. If we elect to cancel either or both of the offerings, neither we nor the placement agent or subscription agent will have any obligation with respect to the subscription rights in the rights offering for shares of our common stock or subscriptions for shares of our common stock in the best efforts public offering, except, in the case of subscribers in the rights offering, to return to you, without interest or penalty, as soon as practicable any subscription payments.

 

If you subscribe for shares of our common stock in the offerings, and we fail to raise at least $105.0 million in the offerings or close the transaction with Woori on or prior to November 15, 2010, we have no obligation to issue the shares for which you subscribed.

 

We will deposit subscription payments received in the rights offering into an escrow account with the escrow agent until the Escrow Release Date. We will not issue any shares of our common stock or return any funds at the closing of the rights offering subscription period or at any other time prior to the Escrow Release Date. If the Escrow Release Date has not occurred on or prior to November 15, 2010, we will cancel the offerings and the subscription agent will return the subscription payments received in the rights offering , without interest or penalty. Therefore, your money may be irrevocably committed to purchase shares of our common stock in the rights offering and we may never accept such funds and issue you shares of our common stock; instead, after several months we may return your funds to you, without interest or penalty. Similarly, you may complete a subscription agreement with the intent to purchase shares of our common stock in the best efforts public offering and after several months we may notify you that we have cancelled the best efforts public offering.

 

If you do not act promptly and follow the instructions from the subscription agent or the placement agent, as applicable, your exercise of subscription rights and/or your subscription for shares of our common stock in the best efforts public offering will be rejected.

 

Stockholders that desire to purchase shares in the rights offering or the best efforts public offering must act promptly to ensure that all required forms and payments are actually received by the subscription agent, placement agent and Hanmi Financial, as applicable.

 

With respect to the rights offering, if you are a beneficial owner of shares, you must act promptly to ensure that your broker, dealer, custodian bank or other nominee acts for you and that all required forms and payments are

actually received by the subscription agent prior to the expiration of the rights offering subscription period. We are not responsible if your broker, dealer, custodian bank or nominee fails to ensure that all required forms and payments are actually received by the subscription agent prior to the expiration of the rights offering subscription period.

 

With respect to the rights offering, if you fail to complete and sign the required subscription forms, send an incorrect payment amount or otherwise fail to follow the subscription procedures that apply to your exercise in the rights offering prior to the expiration of the rights offering subscription period, the subscription agent may, depending on the circumstances, reject your subscription or accept it only to the extent of the payment received. Neither we nor the subscription agent undertakes to contact you concerning, or attempt to correct, an incomplete or incorrect subscription form. We have the sole discretion to determine whether the exercise of your subscription rights properly and timely follows the subscription procedures and whether your subscription for shares of our common stock properly and timely follows the subscription procedures. Furthermore, we reserve the right to reject in whole or in part any over-subscription requests, regardless of the availability of shares to satisfy these requests.

 

With respect to the best efforts public offering, if you fail to initially complete the subscription agreement and related materials accompanying this prospectus supplement, acknowledge the number of shares of our common stock you intend to purchase upon request by our placement agent or send in the funds in the manner and at such time as instructed by our placement agent, you may not be able to purchase shares of our common stock in the best efforts public offering. Also, we may choose to reject your subscription for shares of our common stock in the best efforts public offering entirely or accept it for only a portion of the shares for which you subscribe, in each case in our sole discretion.

 

If you make payment of the subscription price by uncertified personal check, your check may not clear in sufficient time to enable you to purchase shares in the rights offering.

 

Any uncertified personal check used to pay the subscription price in the rights offering must clear prior to the expiration date of the rights offering, and the clearing process may require five or more business days. As a result, if you choose to use an uncertified personal check to pay the subscription price, it may not clear prior to the expiration date, in which event you would not be eligible to exercise your subscription rights.

 

The rights are non-transferable and thus there will be no market for them.

 

You may not sell, transfer or assign your rights to anyone else. We do not intend to list the rights on any securities exchange or any other trading market. Because the subscription rights are non-transferable, there is no market or other means for you to directly realize any value associated with the subscription rights.

 

The rights offering may limit our ability to use some or all of our net operating loss carryforwards.

 

There is a significant likelihood that the offerings and/or the Woori investment will cause a reduction in the value of our net operating loss carryforwards (“NOLs”) realizable for income tax purposes. Section 382 of the Internal Revenue Code imposes restrictions on the use of a corporation’s NOLs, as well as certain recognized built-in losses and other carryforwards, after an “ownership change” occurs. A Section 382 “ownership change” occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. If an “ownership change” occurs, Section 382 would impose an annual limit on the amount of pre-change NOLs and other losses we can use to reduce our taxable income generally equal to the product of the total value of our outstanding equity immediately prior to the “ownership change” and the applicable federal long-term tax-exempt interest rate for the month of the “ownership change.

 

The total proceeds to us from the offerings will depend on the number of rights that are exercised and the number of shares of common stock that are subscribed for. If we issue all 100,000,000 shares available in the offerings the total proceeds to us, before expenses, will be $120,000,000. We estimate that the expenses of the offerings will be approximately $4,600,000, resulting in estimated net proceeds to us, assuming that all of the shares available in the offerings are sold, of approximately $115,400,000. We intend to contribute a substantial portion of the net proceeds from the rights offering and best efforts public offering to Hanmi Bank as additional capital. We will retain the remaining net proceeds at the Company level to satisfy our cash needs and for general corporate purposes, subject to any regulatory requirements.

 

Shares of our common stock are traded on the NASDAQ Global Select Market under the symbol “HAFC” The following table sets forth, for the periods indicated, the quarterly high and low sales prices of our common stock on the NASDAQ Global Select Market and the cash dividends declared on the common stock.

 

 

The last reported sale price of our common stock on the NASDAQ Global Select Market on June 7, 2010 was $1.64 per share.

 

Dividends

 

We have agreed with the Federal Reserve Bank that we will not pay any cash dividends to our stockholders without its prior consent. Hanmi Bank is also required to seek prior approval from the regulators to pay cash dividends to us. Our ability to pay dividends to our stockholders is also directly dependent on the ability of Hanmi Bank to pay dividends to us. Section 642 of the California Financial Code provides that neither a California state-chartered bank nor a majority-owned subsidiary of a bank can pay dividends to its stockholders in an amount which exceeds the lesser of (a) the retained earnings of the bank or (b) the net income of the bank for its last three fiscal years, in each case less the amount of any previous distributions made during such period.

 

As a result of net losses incurred by Hanmi Bank in recent years, Hanmi Bank is currently not able to pay dividends to us under Section 642. California Financial Code Section 643 provides, however, that, notwithstanding the foregoing restriction, dividends in an amount not exceeding the greatest of (a) the retained earnings of the bank; (b) the net income of the bank for its last fiscal year or (c) the net income of the bank for its current fiscal year, may be declared with the prior approval of the California Commissioner of Financial Institutions. Hanmi Bank had an accumulated deficit of $219.8 million as of March 31, 2010.

 

Due to net losses in 2009 and 2008, Federal Reserve Bank approval is required for payment of dividends by Hanmi Bank to us. Federal Reserve Board, Regulation H, Section 208.5, provides that Hanmi Bank must obtain Federal Reserve Bank approval to declare and pay a dividend if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of Hanmi Bank’s net income during the current calendar year and the retained net income of the prior two calendar years. On August 29, 2008, we announced the suspension of our quarterly cash dividend. As a result of the Final Order and the Written Agreement, we are required to obtain regulatory approval prior to our declaration or Hanmi Bank’s declaration of any dividends to our respective stockholders.

 

The following summary describes the material features and rights of our capital stock and is subject to, and qualified in its entirety by, applicable law and the provisions of our Amended and Restated Certificate of Incorporation and By-laws. For information on how to obtain copies of our Amended and Restated Certificate of Incorporation and By-laws, see “Where You Can Find More Information.”

 

General

 

Our authorized capital stock consists of 210,000,000 shares, of which 200,000,000 shares are common stock, par value $0.001 per share, and 10,000,000 shares are preferred stock, par value $0.001 per share. Our outstanding shares of common stock are, and the shares of common stock to be issued in the offerings will be, validly issued, fully paid and non-assessable.

 

At our upcoming Annual Meeting of Stockholders, currently scheduled for July 28, 2010, we are asking our stockholders to approve an amendment to our Amended and Restated Certificate of Incorporation to increase our authorized shares of common stock from 200,000,000 shares to 500,000,000 shares.

 

As of June 7, 2010, there were 51,198,390 shares of our common stock outstanding, held by approximately 315 stockholders of record, and no shares of our preferred stock were outstanding. As of June 7, 2010, 1,121,115 shares of our common stock were reserved for issuance upon the exercise of options that have been granted under our existing stock option plan.

 

Shares of our common stock are, and we expect that the shares of common stock to be issued in the rights offering and best efforts public offering will be, traded on the NASDAQ Global Market under the symbol “HAFC.”

 

Common Stock

 

Liquidation Rights.  Upon our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive, pro rata, our assets which are legally available for distribution, after payment of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then outstanding (including holders of our junior subordinated debentures).

 

Our Board of Directors may approve for issuance, without approval of the holders of common stock, preferred stock that has voting, dividend or liquidation rights superior to that of our common stock and which may adversely affect the rights of holders of common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of common stock and could have the effect of delaying, deferring or preventing a change in control of our company.

 

Dividends and Other Distributions.  Subject to certain regulatory restrictions, we may pay dividends out of our statutory surplus or from certain net profits if, as and when declared by our Board of Directors. The holders of our common stock are entitled to receive and share equally in dividends declared by our Board of Directors out of funds legally available for such dividends. If we issue preferred stock in the future, the holders of that preferred stock may have a priority over the holders of our common stock with respect to dividends.

 

We are a bank holding company, and our primary source for the payment of dividends is dividends from our direct, wholly-owned subsidiary, Hanmi Bank. Various banking laws applicable to Hanmi Bank limit the payment of dividends, management fees and other distributions by Hanmi Bank to us, and may therefore limit our ability to pay dividends on our common stock. On August 29, 2008, our Board of Directors announced its decision to suspend the quarterly cash dividend previously paid on shares of our common stock. In addition, on November 2, 2009, the Board of Directors of Hanmi Bank consented to the issuance of the Final Order that currently restricts the Bank from paying dividends without the prior approval of the Department. In addition, on November 2, 2009, the Company and Hanmi Bank entered into the Written Agreement that restricts each of the Company and Hanmi Bank from paying dividends without the prior approval of the Federal Reserve Bank. Accordingly, our ability to pay dividends will be restricted until these regulatory orders are lifted.

Under the terms of our trust preferred financings we cannot declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of our capital stock if (1) an event of default under such debt instrument has occurred and is continuing, or (2) if we give notice of our election to begin an extension period whereby we may defer payment of interest on the trust preferred securities for a period of up to twenty consecutive quarterly interest payment periods. In October 2008, our Board of Directors elected to defer quarterly interest payments on its trust preferred securities until further notice. In addition, we are currently restricted from making payments of principal or interest on our trust preferred securities under the terms of the Written Agreement without the prior approval of the Federal Reserve Bank.

 

Any future determination relating to dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including our future earnings, capital requirements, financial condition, future prospects and such other factors as our Board of Directors may deem relevant.

 

Voting Rights.  The holders of our common stock currently possess exclusive voting rights on matters that come before our stockholders. Our common stockholders elect our Board of Directors and act on such other matters as are required to be presented to our stockholders under Delaware law, our Amended and Restated Certificate of Incorporation or as may be otherwise presented to our stockholders by our Board of Directors. Each outstanding share of our common stock is entitled to one vote on all matters submitted to a vote of our stockholders. There is no cumulative voting in the election of directors.

 

Anti-Takeover Provisions.  Provisions of our Amended and Restated Certificate of Incorporation and By-laws may have anti-takeover effects. These provisions may discourage attempts by others to acquire control of us without negotiation with our Board of Directors. The effect of these provisions is discussed briefly below.

 

 

Business Combination Provisions.  Our Amended and Restated Certificate of Incorporation elects to be subject to the requirements of Section 203 of the Delaware General Corporation Law.

 

Section 203 of the Delaware General Corporation Law generally prohibits business combinations, including mergers, sales and leases of assets, issuances of securities and similar transactions by a corporation or a subsidiary, with an interested stockholder, which is defined generally as someone who beneficially owns 15% or more of a corporation’s voting stock, within three years after the person or entity becomes an interested stockholder, unless:

 

 

 

In addition to the foregoing, our Amended and Restated Certificate of Incorporation contains heightened restrictions on business combinations with an interested stockholder or an affiliate of any interested stockholder, which is defined generally as someone who is the beneficial owner of 10% or more of our capital stock or who is an affiliate of ours and who, within the past two years, was the beneficial owner of 10% or more of our capital stock, unless:

 

 

A business combination may also be permitted under our Amended and Restated Certificate of Incorporation if a majority of our disinterested directors have approved the business combination and the business combination has been approved by the affirmative vote of our stockholders as required by law. Alternatively, our Amended and Restated Certificate of Incorporation permits a business combination if, among other things, it has been approved by a majority of the voting power of all outstanding shares of our voting common stock and if certain price considerations required by our Amended and Restated Certificate of Incorporation have been satisfied.

 

The effect of Section 203 of the Delaware General Corporation Law and the business combination provisions of our Amended and Restated Certificate of Incorporation could have the effect of preventing the acquisition of control of us by an interested stockholder or its affiliate, even though that interested stockholder or its affiliate would otherwise have the ability to engage in the business combination.

 

Preemptive Rights.  Holders of our common stock do not have preemptive rights with respect to any shares that may be issued. Shares of our common stock are not subject to redemption.

 

Listing.  Our common stock is listed on the NASDAQ Global Select Market under the symbol “HAFC.”

 

Transfer Agent.  The transfer agent for our common stock is Computershare Limited. The transfer agent’s address is Computershare Investor Services, 250 Royall Street, Canton, MA 02021.

 

The following table sets forth our capitalization as of March 31, 2010, on an actual basis and on a pro forma basis, as adjusted, to give effect to the sale of approximately 100,000,000 shares offered in the rights offering and the best efforts public offering at the subscription price of $1.20 per share. The net proceeds from the rights offering and best efforts public offering is estimated to be approximately $115,400,000. This table should be read in conjunction with our consolidated audited and unaudited financial statements and the notes thereto. See “Incorporation By Reference.” In preparing the pro forma table below, we have not made any adjustments for the potential purchase of shares by Woori pursuant to its securities purchase agreement with us.

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

The following tables set forth selected consolidated financial data for us at and for the three months ended March 31, 2010 and 2009 and at and for each of the years in the five-year period ended December 31, 2009. You should read this data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes to those financial statements appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as amended, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, which are incorporated by reference into this prospectus supplement and accompanying prospectus.

 

The selected consolidated statement of operations data for the years ended December 31, 2009, 2008 and 2007, and the selected balance sheet data as of December 31, 2009 and 2008, have been derived from our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009, as amended, which is incorporated by reference into this prospectus supplement and accompanying prospectus. The selected consolidated statement of operations data for the years ended December 31, 2006 and 2005 and the selected consolidated balance sheet data as of December 31, 2006 and 2005 have been derived from our audited financial statements that are not included in or incorporated by reference into this prospectus supplement and accompanying prospectus. The selected consolidated statement of operations data for the three months ended March 31, 2010 and 2009, and the selected balance sheet data as of March 31, 2010 and 2009 have been derived from our unaudited interim consolidated financial statements incorporated by reference into this prospectus supplement and accompanying prospectus. In the opinion of our management, such amounts contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly our financial position and results of operations for such periods in accordance with generally accepted accounting principles.

 

Historical results are not necessarily indicative of future results, and our results for the three months ended March 31, 2010 are not necessarily indicative of our results of operations that may be expected for any future period.

 

 

 

 

Non-GAAP Financial Measures

 

Return on Average Tangible Equity

 

Return on average tangible equity is supplemental financial information determined by a method other than in accordance with U.S. generally accepted accounting principles (“GAAP”). This non-GAAP measure is used by

management in the analysis of Hanmi Financial’s performance. Average tangible equity is calculated by subtracting average goodwill and average other intangible assets from average stockholders’ equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from stockholders’ equity when assessing the capital adequacy of a financial institution. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results of Hanmi Financial, as it provides a method to assess management’s success in utilizing tangible capital. This disclosure should not be viewed as a substitution for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

 

The following table reconciles this non-GAAP performance measure to the GAAP performance measure for the periods indicated:

 

 

Tangible Book Value Per Share

 

Tangible book value per share is supplemental financial information determined by a method other than in accordance with GAAP. This non-GAAP measure is used by management in the analysis of Hanmi Financial’s performance. Tangible book value per share is calculated by subtracting goodwill and other intangible assets from total stockholders’ equity and dividing the difference by the number of shares of common stock outstanding. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results of Hanmi Financial, as it provides a method to assess management’s success in utilizing tangible capital. This disclosure should not be viewed as a substitution for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following table reconciles this non-GAAP performance measure to the GAAP performance measure for the periods indicated:

 

 

The table below sets forth, for each of our directors and executive officers and for all of the directors and executive officers as a group, the following information:

 

(i) the proposed purchases of shares in the offerings, assuming sufficient shares of common stock are available to satisfy their purchase intentions; and

 

(ii) the total amount of common stock to be held following the offerings.

 

Information is based on the number of shares outstanding as of June 7, 2010, and including stock options currently exercisable or exercisable within 60 days of June 7, 2010.

 

 

 

 

The following describes the rights offering in general and assumes, unless specifically provided otherwise, that you are a record holder of our common stock on the record date. If you hold your shares in a brokerage account or through a dealer or other nominee, please also refer to “— Notice to Brokers and Nominees” below.

 

The Subscription Rights

 

We are distributing at no charge to our common stockholders non-transferable subscription rights to purchase up to 50,000,000 shares of our common stock. You will receive one subscription right for each share of common stock held of record at the close of business on June 7, 2010 (the “record date”). Subscription rights may only be exercised for whole shares. Each subscription right will entitle you to purchase one share of our common stock at a subscription price equal to $1.20 per share. The subscription rights will be evidenced by subscription rights certificates.

 

Basic Subscription Privilege

 

Each subscription right that you receive will entitle you to purchase one share of our common stock at a subscription price of $1.20 per share. You may exercise your basic subscription privilege for some or all of your subscription rights, or you may choose not to exercise any subscription rights.

 

For example, if you owned 1,000 shares of our common stock as of 5:00 p.m., New York time, on the record date, you would receive 1,000 subscription rights and would have the right to purchase 1,000 shares of common stock for $1.20 per share with your basic subscription privilege.

 

Over-Subscription Privilege

 

If you exercise your basic subscription privilege in full, you will also have an over-subscription privilege to subscribe for any shares that our other subscription rights holders do not purchase under their basic subscription privilege. The subscription price for shares purchased pursuant to the over-subscription privilege will be the same as the subscription price for the basic subscription privilege.

 

You may exercise your over-subscription privilege only if you exercise your basic subscription privilege in full. To determine if you have fully exercised your basic subscription privilege, we will consider only the basic subscription privileges held by you in the same capacity. For example, if you are granted subscription rights for shares of our common stock that you own individually and shares of our common stock that you own jointly with your spouse, you may exercise your over-subscription privilege with respect to the subscription rights you own individually, as long as you fully exercise your basic subscription privilege with respect to your individually owned subscription rights. You will not, however, be able to exercise the over-subscription privilege you have collectively with your spouse unless the basic subscription privilege collectively held by you and your spouse is fully exercised. You do not have to subscribe for any shares under the basic subscription privilege owned jointly with your spouse to exercise your individual over-subscription privilege.

 

When you complete the portion of your subscription rights certificate to exercise your over-subscription privilege, you will be representing and certifying that you have fully exercised your basic subscription privileges as to shares of our common stock that you hold in that capacity. You must exercise your over-subscription privilege at the same time you exercise your basic subscription privilege in full. We will not accept any over-subscription requests for less than 10,000 shares of our common stock, except from our non-executive officers and employees from whom we will accept over-subscription requests for 1,000 or more shares of our common stock. We reserve the right to reject in whole or in part any over-subscription requests, regardless of the availability of shares to satisfy these requests.

 

If holders exercise their over-subscription privileges for more shares than are available to be purchased pursuant to the over-subscription privileges, we will allocate the shares of our common stock to be issued pursuant to the exercise of over-subscription privileges pro rata among those over-subscribing rights holders, subject to our right to reject in whole or in part any over-subscription request. “Pro rata” means in proportion to the number of shares of our common stock that you and the other subscription rights holders have agreed to purchase by exercising

the basic subscription privilege. If there is a pro rata allocation of the remaining shares of our common stock and you would otherwise receive an allocation of a greater number of shares than you subscribed for under your over-subscription privilege, then, subject to our accepting your over-subscription request, we will allocate to you only the number of shares for which you over-subscribed. We will allocate the remaining shares among all other holders exercising their over-subscription privilege, again subject to our right to reject in whole or in part any over-subscription request. If you are not allocated the full amount of shares for which you over-subscribe, you will receive a refund of the subscription price, without interest or penalty, that you delivered for those shares of our common stock that are not allocated to you. The subscription agent will mail such refunds as soon as practicable after the earlier of the Escrow Release Date, November 15, 2010 or cancellation of the rights offering.

 

Limitation on Exercise of Basic Subscription Privilege and Over-Subscription Privilege

 

Under applicable federal and state banking laws, any purchase of shares of our common stock may also require the prior clearance or approval of, or prior notice to, federal and state bank regulatory authorities if the purchase will result in any person or entity or group of persons or entities acting in concert owning or controlling shares in excess of 9.9% ownership interest.

 

No Fractional Rights

 

Subscription rights may only be exercised for whole shares. Any excess subscription funds will be returned, without interest or penalty, as soon as practicable after the Escrow Release Date, November 15, 2010 or cancellation of the rights offering.

 

Subscription Price

 

The subscription price per share of common stock shall equal $1.20. The subscription price is the same price that Woori has agreed to acquire common stock from us in the securities purchase agreement. The subscription price is not necessarily related to our book value, results of operations, cash flows, financial condition or the future market value of our common stock. We cannot assure you that the market price of the common stock will not decline during or after the rights offering. We also cannot assure you that you will be able to sell shares of common stock purchased during the rights offering at a price equal to or greater than the subscription price. We urge you to obtain a current quote for our common stock before exercising your subscription rights. We do not intend to change the subscription price in response to changes in the trading price of our common stock prior to the closing of the rights offering. You should not assume or expect that, after the offering, our shares of common stock will trade at or above the $1.20 purchase price. To be effective, any payment related to the exercise of a subscription right must clear prior to the expiration of the rights offering subscription period.

 

We are not charging any fees or sales commissions to issue subscription rights to you or to issue shares to you if you exercise your subscription rights. If you exercise your subscription rights through a broker or other holder of your shares, you are responsible for paying any fees that person may charge.

 

Rights offering subscription period Expiration Time and Date; Amendments

 

The rights offering subscription period will expire at 5:00 p.m., New York time, on July 6, 2010. Although we have the option of extending the expiration date of the rights offering subscription period, we currently do not intend to do so. We will notify you of any extension of the expiration date of the rights offering subscription period by issuing a press release.

 

You must properly complete the subscription rights certificate and deliver it, along with the full subscription price (including any amounts in respect of your over-subscription privilege), to the subscription agent before 5:00 p.m., New York time, on July 6, 2010, unless the rights offering subscription period expiration date is extended. After the expiration of the rights offering subscription period, all unexercised subscription rights will be null and void. We will not be obligated to honor any attempted exercise of subscription rights that the subscription agent receives after the expiration of the rights offering subscription period, regardless of when you sent the documents regarding that exercise, unless you have used the guaranteed delivery procedures described under “— Notice of Guaranteed Delivery.”

All shares purchased in the rights offering will be issued in book-entry, or uncertificated, form, following the Escrow Release Date, not the expiration of the rights offering subscription period. Any subscription payments for shares not allocated or validly purchased will be returned to you, without interest or penalty, as soon as practicable following the earlier of the Escrow Release Date, November 15, 2010 or cancellation of the rights offering.

 

We reserve the right, in our sole discretion, to amend or modify the terms of the rights offering prior to the expiration of the rights offering subscription period.

 

Reasons for the Rights Offering

 

We are conducting the rights offering to raise equity capital and to provide our existing stockholders with the opportunity to purchase our common stock at the same price per common share to be paid by Woori pursuant to their securities purchase agreement.

 

Anticipated Proceeds From the Rights Offering

 

The total proceeds to us from the rights offering will depend on the number of rights that are exercised. If we issue all 50,000,000 shares available in the rights offering, the total proceeds to us, before expenses, will be $60,000,000. We estimate that the expenses of the rights offering will be approximately $2,300,000, resulting in estimated net proceeds to us, assuming all of the shares available in the rights offering are sold, of approximately $57,700,000. We intend to contribute a substantial portion of the net proceeds from the rights offering to Hanmi Bank as additional capital. We will retain the remaining net proceeds at the Company level to satisfy our cash needs and for general corporate purposes, subject to any regulatory requirements.

 

Method of Exercising Subscription Rights

 

The exercise of subscription rights is irrevocable and may not be cancelled or modified. You may exercise your subscription rights as follows:

 

Subscription by Registered Holders.  To exercise your basic subscription privilege and your over-subscription privilege, you must properly complete and execute the subscription rights certificate, together with any required signature guarantees, and forward it, together with payment in full of the subscription price for each share of our common stock you are subscribing for, including any shares you subscribe for pursuant to the over-subscription privilege, to the subscription agent at the address set forth under “— Subscription Agent” below, on or prior to the expiration date.

 

Subscription by Beneficial Owners.  If you are a beneficial owner of shares of our common stock, meaning that you hold your shares in “street name” through a broker, custodian bank or other nominee, we will ask your broker, custodian bank or other nominee to notify you of the rights offering. If you wish to exercise your subscription rights, you will need to have your broker, custodian bank or other nominee act for you and exercise your subscription rights and deliver all documents and payment on your behalf, including a “Nominee Holder Certification,” prior to 5:00 p.m., New York time, on July 6, 2010. If you hold certificates of our common stock directly and would prefer to have your broker, custodian bank or other nominee act for you, you should contact your nominee and request it to effect the transactions for you.

 

To indicate your decision with respect to your subscription rights, you should complete and return to your broker, custodian bank or other nominee the form provided to you that allows you to instruct your broker, dealer, custodian bank or other nominee whether, and to what extent you wish to participate in the rights offering. You should receive this form from your broker, custodian bank or other nominee with the other subscription rights offering materials. If you wish to obtain a separate subscription rights certificate, you should contact the nominee as soon as possible and request that a separate subscription rights certificate be issued to you. You should contact your broker, custodian bank or other nominee if you do not receive this form, but you believe you are entitled to participate in the rights offering. We are not responsible if you do not receive the form from your broker, custodian bank or nominee or if you receive it without sufficient time to respond.

 

Your subscription rights will not be considered exercised unless the subscription agent actually receives from you, your broker, custodian, bank or other nominee, as the case may be, all of the required documents and your full

subscription price payment prior to 5:00 p.m., New York time, on July 6, 2010, the scheduled expiration date of the rights offering subscription period.

 

Payment Method

 

Your payment of the subscription price must be made in U.S. dollars for the full number of shares of common stock you wish to acquire under the basic subscription privilege and the over-subscription privilege. Your payment must be delivered in one of the following ways:

 

 

Your payment will be considered received by the subscription agent only upon:

 

 

Clearance of Uncertified Personal Checks

 

If you are paying by uncertified personal check, please note that payment will not be deemed to have been received by the subscription agent until the check has cleared, which could take at least five or more business days to clear. If you wish to pay the subscription price by uncertified personal check, we urge you to make payment sufficiently in advance of the time the rights offering subscription period expires to ensure that your payment is received by the subscription agent and clears by the rights offering subscription period expiration date. We urge you to consider using a certified or cashier’s check or bank draft drawn upon a U.S. bank.

 

Instructions for Completing Your Subscription Rights Certificate

 

You should read the instruction letter accompanying the subscription rights certificate carefully and strictly follow it. Do not send subscription rights certificates or payments to us. Except as described below under “— Notice of Guaranteed Delivery,” we will not consider your subscription received until the subscription agent has received delivery of a properly completed and duly executed subscription rights certificate and payment of the full subscription amount. The risk of delivery of all documents and payments is on you or your nominee, not us or the subscription agent.

 

The method of delivery of subscription rights certificates and payment of the subscription amount to the subscription agent will be at the risk of the holders of subscription rights. If sent by mail, we recommend that you send those certificates and payments by overnight courier or by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the subscription agent and clearance of payment before the expiration of the rights offering subscription period. Because uncertified personal checks may take at least five or more business days to clear, we urge you to pay or arrange for payment by means of a certified or cashier’s check or bank draft to avoid missing the opportunity to exercise your subscription rights should you decide to exercise your subscription rights.

 

Missing or Incomplete Subscription Information

 

If you do not indicate the number of subscription rights being exercised, or do not forward full payment of the total subscription price payment for the number of subscription rights that you indicate are being exercised, then you will be deemed to have exercised your subscription rights with respect to the maximum number of whole subscription rights that may be exercised with the aggregate subscription price payment you delivered to the subscription agent. If your aggregate subscription price payment is greater than the amount you owe for exercise of your basic subscription privilege in full, you will be deemed to have exercised your over-subscription privilege to purchase the maximum number of shares of our common stock with your over-payment. If we do not apply your full subscription price payment to your purchase of shares of our common stock, the subscription agent will return the

excess amount to you by mail, without interest or penalty, as soon as practicable after the earlier of the Escrow Release Date, November 15, 2010 or cancellation of the rights offering.

 

Conditions and Cancellation

 

We will deposit subscriptions in the rights offering into an escrow account with our escrow agent until the earlier of when we have received total subscriptions in the rights offering and the best efforts public offering for at least 87,500,000 of the offered shares, representing $105,000,000 in gross proceeds, or the closing of the transaction with Woori (the “Escrow Release Date”). Therefore, you may own our shares prior to the closing of the transaction with Woori, which we believe we will need to complete to provide us with sufficient capital resources for us to continue as a going concern.

 

If the Escrow Release Date has not occurred on or prior to November 15, 2010, we will cancel the rights offering and the subscription agent will return the subscription payments received in the rights offering, without interest or penalty.

 

We reserve the right to cancel the rights offering at any time and for any reason. We may extend or otherwise amend the rights offering, in whole or in part, at any time before the expiration of the rights offering subscription period. If we cancel the rights offering, in whole or in part, all affected subscription rights will expire without value, and all subscription payments received by the subscription agent will be returned as soon as practicable, without interest or penalty. If we cancel the rights offering or amend its terms, we will issue a press release notifying stockholders of the changes.

 

Subscription Agent

 

Computershare Inc. is acting as the subscription agent for the rights offering under an agreement with us. All subscription rights certificates, payments of the subscription price, and nominee holder certifications, to the extent applicable to your exercise of rights, must be delivered to Computershare Inc. as follows:

 

 

You should direct any questions or requests for assistance concerning the method of subscribing for the shares of common stock or for additional copies of this prospectus to Georgeson, the information agent. Banks and brokers should call (212) 440-9800 and stockholders should call (800) 509-0983.

 

We have agreed to indemnify Computershare Inc. and Georgeson against certain liabilities in connection with the rights offering.

 

If you deliver subscription documents, subscription rights certificates or notices of guaranteed delivery in a manner different than that described in this prospectus supplement, we may not honor the exercise of your subscription privileges.

 

Fees and Expenses

 

We will pay all fees charged by the subscription agent, the information agent and the escrow agent. You are responsible for paying any other commissions, fees, taxes or other expenses incurred in connection with the exercise of the subscription rights. Neither the subscription agent nor the Company will pay such expenses.

Notice to Brokers and Nominees

 

If you are a broker, a custodian bank, a trustee, a depositary for securities or other nominee holder who holds shares of our common stock for the account of others on the rights offering record date, you should notify the respective beneficial owners of such shares of the rights offering as soon as possible to learn their intentions with respect to exercising their subscription rights. You should obtain instructions from the beneficial owner with respect to their subscription rights, as set forth in the instructions we have provided to you for your distribution to beneficial owners. If the beneficial owner so instructs, you should complete the appropriate subscription rights certificates and submit them to the subscription agent with the proper payment. If you hold shares of our common stock for the account(s) of more than one beneficial owner, you may exercise the number of subscription rights to which all such beneficial owners in the aggregate otherwise would have been entitled had they been direct record holders of our common stock on the rights offering record date, provided that you, as a nominee record holder, make a proper showing to the subscription agent by submitting the form entitled “Nominee Holder Certification” that we will provide to you with your rights offering materials. If you did not receive this form, you should contact the subscription agent to request a copy.

 

In the case of subscription rights that you hold of record on behalf of others through the Depository Trust Company (“DTC”), those subscription rights may be exercised by instructing DTC to transfer the subscription rights from your DTC account to the subscription agent’s DTC account, and by delivering to the subscription agent the required certification as to the number of shares subscribed for pursuant to the exercise of the subscription rights of the beneficial owners on whose behalf you are acting, together with payment of the full subscription price.

 

Notice of Guaranteed Delivery

 

If you wish to exercise your subscription rights, but you do not have sufficient time to deliver the subscription rights certificate evidencing your subscription rights to the subscription agent, on or before the time the rights offering subscription period expires, you may exercise your subscription rights by the following guaranteed delivery procedures:

 

 

Your Notice of Guaranteed Delivery must be delivered in substantially the same form provided with the Instructions For Use of Hanmi Financial Corporation Subscription Rights Certificates, which will be distributed to you with your subscription rights certificate. Your Notice of Guaranteed Delivery must include a signature guarantee from a member firm of a registered national securities exchange or a member of the Financial Industry Regulatory Authority, Inc., or a commercial bank or trust company having an office or correspondent in the United States, or a bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program, pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended, each an “Eligible Institution.” A form of that guarantee is included with the Notice of Guaranteed Delivery.

 

In your Notice of Guaranteed Delivery, you must state:

 

 

 

You may deliver your Notice of Guaranteed Delivery to the subscription agent in the same manner as your subscription rights certificate at the address set forth above under “— Subscription Agent” or it may be transmitted, if transmitted by an Eligible Institution, to the subscription agent by facsimile transmission to (617) 360-6810. You should confirm receipt of all facsimile transmissions by calling the subscription agent at (781) 575-2332.

 

The information agent will send you additional copies of the form of Notice of Guaranteed Delivery if you request them. Please call Georgeson, the information agent, to request any copies of the form of Notice of Guaranteed Delivery. Banks and brokers should call (212) 440-9800 and stockholders should call (800) 509-0983.

 

Questions About Exercising Subscription Rights

 

If you have any questions or require assistance regarding the method of exercising your subscription rights or requests for additional copies of this document, the “Instructions For Use of Hanmi Financial Corporation Subscription Rights Certificates or the Notice of Guaranteed Delivery, you should contact the information agent, Georgeson. Banks and brokers should call (212) 440-9800 and stockholders should call (800) 509-0983.

 

Transferability of Rights

 

The subscription rights granted to you may be exercised only by you, and, therefore, you may not sell, transfer or assign your subscription rights to anyone else.

 

Validity of Subscriptions

 

We will resolve all questions regarding the validity and form of the exercise of your subscription privileges, including time of receipt and eligibility to participate in the rights offering. Our determination will be final and binding. Once made, subscriptions and directions are irrevocable, and we will not accept any alternative, conditional or contingent subscriptions or directions. We reserve the absolute right to reject any subscriptions or directions not properly submitted or the acceptance of which would be unlawful. You must resolve any irregularities in connection with your subscriptions before the rights offering subscription period expires, unless waived by us in our sole discretion. Neither the subscription agent nor we shall be under any duty to notify you or your representative of defects in your subscriptions. A subscription will be considered accepted, subject to our right to cancel the rights offering, only when a properly completed and duly executed subscription rights certificate and any other required documents and payment of the full subscription amount have been received by the subscription agent (and any payment by uncertified personal check has cleared). Our interpretations of the terms and conditions of the rights offering will be final and binding.

 

Escrow Account; Return of Funds

 

Subscription payments in the rights offering will initially be received by our subscription agent and will be swept on a weekly basis into the escrow account maintained by our escrow agent. We will hold funds received in payment for shares of common stock in the rights offering in the escrow account maintained by our escrow agent pending the Escrow Release Date or cancellation of the rights offering. If the rights offering is cancelled for any reason, including if the Escrow Release Date fails to occur on or prior to November 15, 2010, the subscription agent will return this money to subscribers as soon as practicable, without interest or penalty.

Certificates for Shares of Common Stock

 

All shares that you purchase in the rights offering will be issued in book-entry, or uncertificated, form. When issued, the shares will be registered in the name of the subscription rights holder of record. As soon as practicable after the Escrow Release Date, the subscription agent will arrange for the issuance of the shares of common stock purchased pursuant to the basic subscription privilege. Shares purchased pursuant to the over-subscription privilege will be issued as soon as practicable after the Escrow Release Date, and following the completion of any pro-rations as may be necessary in the event the over-subscription requests exceed the number of shares available to satisfy such requests.

 

Subject to state securities laws and regulations, we have the discretion to delay distribution of any shares you may have elected to purchase by exercise of your rights in the rights offering in order to comply with state securities laws.

 

Rights of Subscribers

 

We will not issue you new shares of common stock in the rights offering until after the Escrow Release Date, and if the Escrow Release Date does not occur on or prior to November 15, 2010, we will cancel the rights offering and we will not issue any new shares in connection therewith. You will not have any rights as a stockholder with respect to the shares of our common stock subscribed for in the rights offering until your account, or your account at your broker, custodian bank or other nominee, is credited with such shares. This will not necessarily occur on or around the expiration of the rights offering subscription period; rather it will occur, if at all, as soon as practicable following the Escrow Release Date. In any event, you will have no right to revoke your subscriptions after you deliver your completed subscription rights certificate, payment and any other required documents to the subscription agent.

 

Foreign Stockholders

 

We will not mail subscription rights certificates to stockholders whose addresses are outside the United States or who have an army post office or foreign post office address. The subscription agent will hold these subscription rights certificates for their account. To exercise subscription rights, our foreign stockholders must notify the subscription agent prior to 11:00 a.m., New York time, at least three business days prior to the expiration date of the rights offering subscription period and demonstrate to the satisfaction of the Company that the exercise of such subscription rights does not violate the laws of the jurisdiction of such stockholder.

 

No Revocation or Change

 

Once you submit your subscription rights certificate to exercise any subscription rights, you are not allowed to revoke or change the exercise or request a refund of monies paid. All exercises of subscription rights are irrevocable, even if you later learn information about us that you consider to be unfavorable. You should not exercise your subscription rights unless you are certain that you wish to purchase the shares of our common stock offered pursuant to the rights offering at a $1.20 price per share.

 

Regulatory Limitation

 

We will not be required to issue to you shares of our common stock pursuant to the rights offering if, in our sole opinion, you are required to obtain prior clearance or approval from, or submit a prior notice to, any state or federal regulatory authorities to own or control the shares and if, at the time the rights offering subscription period expires, we determine that you have not properly obtained such clearance or approval or submitted such notice. See also “— Limitation on Exercise of Basic Subscription Privilege and Over-Subscription Privilege.”

 

No Recommendation to Subscription Rights Holders

 

Our Board of Directors is making no recommendations regarding your exercise of the subscription rights. Stockholders who exercise subscription rights risk total loss of all money invested. We cannot assure you that the market price of our common stock will be above the subscription price at the time of exercise, at the expiration of the

rights offering subscription period, at the time of the Escrow Release Date or that anyone purchasing shares at the subscription price will be able to sell those shares in the future at the same price or a higher price. You are urged to decide whether or not to exercise your subscription rights based on your own assessment of our business and the rights offering. Among other things, you should carefully consider the risks described under the heading “Risk Factors” in this prospectus supplement and the accompanying prospectus and the risks described in the documents incorporated by reference in this prospectus, including but not limited to the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, as amended, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.

 

Listing

 

The subscription rights may not be sold, transferred or assigned to anyone else and will not be listed on the NASDAQ Global Select Market or any other stock exchange or trading market. Our common stock trades on the NASDAQ Global Select Market under the symbol “HAFC” and we will apply to list the shares to be issued in connection with the rights offering for trading on the NASDAQ Global Select Market under the same symbol.

 

Shares of Common Stock Outstanding After the Rights Offering

 

As of June 7, 2010, there were 51,198,390 shares of our common stock outstanding. We will issue up to 50,000,000 shares of common stock in the rights offering, depending on the number of rights that are exercised. Based on the number of shares outstanding as of June 7, 2010, and assuming that no options are exercised, there are no other changes in the number of outstanding shares prior to the expiration of the rights offering subscription period and no shares are issued in the best efforts public offering, if we issue all 50,000,000 shares of common stock available in this rights offering, we would have 101,198,390 shares of common stock outstanding following the completion of the rights offering, an increase in the number of outstanding shares of our common stock of approximately 97.7%.

 

Other Matters

 

We are not making the rights offering in any state or other jurisdiction in which it is unlawful to do so, nor are we distributing or accepting any offers to purchase any shares of our common stock from subscription rights holders who are residents of those states or other jurisdictions or who are otherwise prohibited by federal or state laws or regulations to accept or exercise the subscription rights. We may delay the commencement of the rights offering in those states or other jurisdictions, or change the terms of the rights offering, in whole or in part, in order to comply with the securities laws or other legal requirements of those states or other jurisdictions. Subject to state securities laws and regulations, we also have the discretion to delay allocation and distribution of any shares you may elect to purchase by exercise of your subscription privileges in order to comply with state securities laws. We may decline to make modifications to the terms of the rights offering requested by those states or other jurisdictions, in which case, if you are a resident in those states or jurisdictions or if you are otherwise prohibited by federal or state laws or regulations from accepting or exercising the subscription rights, you will not be eligible to participate in the rights offering. However, we are not currently aware of any states or jurisdictions that would preclude participation in the rights offering.

 

Acceptance of Subscriptions

 

We are offering initially up to 50,000,000 shares of common stock to the public, totaling $60,000,000 in the aggregate, to be offered and sold by our exclusive placement agent on a “best efforts” basis at a subscription price of $1.20 per share during the pendency of the rights offering. Upon completion of the rights offering, any shares not subscribed for in the rights offering will also be available for purchase in the best efforts public offering. The best efforts public offering of our shares of common stock will commence on the date of this prospectus supplement. Prospective purchasers should complete, date and sign the subscription agreement and related materials, which accompany this prospectus supplement, and return them to Cappello Capital Corp., 100 Wilshire Blvd., Suite 1200, Santa Monica, California 90401. Do not send payment for the shares of common stock with your subscription agreement and related materials.

 

As soon as practicable upon the earlier of when we have received total subscriptions in the offerings of at least $105,000,000 in the aggregate, or the closing of the transaction with Woori (the “Escrow Release Date”), Cappello will request that all persons who previously submitted completed subscription agreements provide an acknowledgement of subscription, in writing or orally, at Cappello’s discretion, if and to the extent that all or a portion of the number of shares subscribed in the previously submitted subscription agreements have been accepted by us, and Cappello will provide further instructions to such prospective purchasers on the process for completing the purchase of the shares. Upon receipt of the request to acknowledge subscription, each prospective purchaser will be asked to do the following:

 

 

Conditions to the Completion of the Best Efforts Public Offering

 

Subscription agreements executed by prospective purchasers will not be binding and effective and we will not consummate the best efforts public offering and issue shares to purchasers in the best efforts public offering until the occurrence of the Escrow Release Date, and then as soon as practicable thereafter. If the Escrow Release Date has not occurred on or prior to November 15, 2010, we will cancel the best efforts public offering. We may choose to cancel the best efforts public offering at any time and for any reason.

 

Restrictions on the Best Efforts Public Offering

 

Our securities purchase agreement with Woori provides that we may offer and sell in the best efforts public offering up to 4.9% of the shares of our common stock (on a fully-diluted basis, taking into account the offerings (fully diluted)) to any single investor or group of investors acting together, other than Woori. To the extent we wish

to offer and sell more than 4.9% of the shares of our common stock (on a fully-diluted basis) in the best efforts public offering to any single investor or group of investors acting together (other than Woori), we have agreed to consult with Woori. Notwithstanding the foregoing, in no event are we permitted to offer and sell more than 9.9% of the shares of common stock (on a fully diluted basis) in the best efforts public offering to any single investor or group of investor acting together (other than Woori) without the prior written consent of Woori.

 

In addition, we will not sell shares to any purchaser who, in our sole opinion, could be required to obtain prior clearance or approval from or submit a notice to any state or federal bank regulatory authority to acquire, own or control those shares if, as of July 6, 2010, that clearance or approval has not been obtained or any applicable waiting period has not expired. If, after giving effect to the offerings, you will hold 10% or more of our common stock, you will be presumed to control us and would need to obtain prior approval of the Federal Reserve Bank to complete the purchase, unless the facts and circumstances support a rebuttal of such presumption.

 

We will not accept any subscriptions in the best efforts public offering for less than 10,000 shares of our common stock, except from our non-executive officers and employees from whom we will accept subscriptions for 1,000 or more shares of our common stock.

 

Discretion to Accept Subscriptions

 

We have the right, in our sole discretion, to accept or reject any subscription in whole or in part. As a result, you may not receive any or all of the shares for which you subscribe. Our placement agent will notify subscribers as soon as practicable following the Escrow Release Date as to whether and to what extent their subscriptions have been accepted. Our placement agent will provide further instructions to those prospective purchasers whose subscriptions we accepted regarding the process for completing the purchase of the shares in the best efforts public offering.

 

Cancellation Rights

 

We may cancel the best efforts public offering at any time for any reason. If the Escrow Release Date has not occurred on or prior to November 15, 2010, we will cancel the best efforts public offering.

 

No Revocation or Change

 

Once you submit the acknowledgement of subscription, in writing or orally, at our placement agent’s discretion, to our placement agent you will not be allowed to revoke your subscription (including to change the number of shares subscribed for), even if you later learn information about us that you consider to be unfavorable. You should not submit an acknowledgement of subscription to our placement agent unless you are certain that you wish to purchase the shares of our common stock specified in the acknowledgement at the subscription price of $1.20 per share.

 

Reasons for the Best Efforts Public Offering

 

We are conducting the best efforts public offering to raise equity capital and to provide potential investors with the opportunity to purchase our common stock at the same price per common share to be paid by Woori pursuant to their securities purchase agreement.

 

Anticipated Proceeds From the Best Efforts Public Offering

 

The total proceeds to us from the best efforts public offering will depend on the number of shares subscribed for by potential investors. If we issue all 50,000,000 shares available in the offering, the total proceeds to us, before expenses, will be $60,000,000. We estimate that the expenses of the best efforts public offering will be approximately $2,300,000, resulting in estimated net proceeds to us, assuming all of the shares available in the offering are sold, of approximately $57,700,000. We intend to contribute a substantial portion of the net proceeds from the best efforts public offering to Hanmi Bank as additional capital. We will retain the remaining net proceeds at the Company level to satisfy our cash needs and for general corporate purposes, subject to any regulatory requirements.

Certificates for Shares of Common Stock

 

All shares that you purchase in the best efforts public offering will be issued in book-entry, or uncertificated, form. When issued, the shares will be registered in the name designated by the purchaser. As soon as practicable after the Escrow Release Date, we will arrange for the issuance of the shares of common stock purchased in the offering.

 

Subject to state securities laws and regulations, we have the discretion to delay distribution of any shares you may have elected to purchase in order to comply with state securities laws.

 

Rights of Potential Investors

 

We will not issue you any shares of common stock in the best efforts public offering, notwithstanding your delivery of the completed subscription agreement and related materials, until after the Escrow Release Date, and if the Escrow Release Date does not occur on or prior to November 15, 2010, we will cancel the best efforts public offering and we will not issue any shares in connection therewith. You will not have any rights as a stockholder with respect to the shares of our common stock subscribed for in the best efforts public offering until your account, or your account at your broker, custodian bank or other nominee, is credited with such shares.

 

Regulatory Limitation

 

We will not be required to issue to you shares of our common stock pursuant to the best efforts public offering if, in our sole opinion, you are required to obtain prior clearance or approval from, or submit a prior notice to, any state or federal regulatory authorities to own or control the shares and if we determine that you have not properly obtained such clearance or approval or submitted such notice.

 

No Recommendation to Potential Investors

 

Our Board of Directors is making no recommendations regarding your subscription of our common stock in the best efforts public offering. Potential investors risk total loss of all money invested. We cannot assure you that the market price of our common stock will be at or above $1.20 per share after completion of the offering. You are urged to decide whether or not to subscribe for shares based on your own assessment of our business and the offering terms. Among other things, you should carefully consider the risks described under the heading “Risk Factors” in this prospectus supplement and the accompanying prospectus and the risks described in the documents incorporated by reference in this prospectus, including but not limited to the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, as amended, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.

 

Listing

 

Our common stock trades on the NASDAQ Global Select Market under the symbol “HAFC” and we will apply to list the shares to be issued in connection with the best efforts public offering for trading on the NASDAQ Global Select Market under the same symbol.

 

Shares of Common Stock Outstanding After the Best Efforts Public Offering

 

As of June 7, 2010, there were 51,198,390 shares of our common stock outstanding. We will issue up to 50,000,000 shares of common stock in the best efforts public offering. Based on the number of shares outstanding as of June 7, 2010, and assuming that no options are exercised , there are no other changes in the number of outstanding shares prior to completion of the best efforts public offering and no shares are issued in the rights offering, if we issue all 50,000,000 shares of common stock available for purchase in the best efforts public offering, we would have 101,198,390 shares of common stock outstanding following the completion of the best efforts public offering, an increase in the number of outstanding shares of our common stock of approximately 97.7%.