Hanmi Financial Corporation : Hanmi’s Earnings Increased by 154% to $14.0 Million in the Fourth Quarter of 2012

Hanmi's Earnings Increased by 154% to $14.0 Million in the Fourth Quarter of 2012;

Improvements in Loan Production, Asset Quality and Operating Efficiency Boost Earnings

LOS ANGELES - January 24, 2013 - Hanmi Financial Corporation (NASDAQ: HAFC), the holding company for Hanmi Bank (the "Bank"), today reported net income of $14.0 million, or $0.44 per diluted share, for the fourth quarter of 2012, up 5.3% from $13.3 million, or $0.42 per diluted share, for the third quarter of 2012, and more than double the earnings of $5.5 million, or $0.22 per diluted share, for the fourth quarter of 2011. For the year ended December 31, 2012, net income totaled $90.4 million, or $2.87 per diluted share, compared to $28.1 million, or $1.38 per diluted share, for the year ended December 31, 2011. Hanmi continued to benefit from a reversal of the deferred tax asset ("DTA") valuation allowance, recording a $5.5 million gross benefit which effectively offsets the tax obligation for the quarter. For the full year, the reversal of the DTA valuation allowance contributed a net benefit of $47.4 million, adding $1.50 per share to earnings on a fully taxed basis. Tangible book value increased 3.9% to $11.97 per share at December 31, 2012, from $11.52 per share at September 30, 2012, and increased 32.7% from $9.02 per share at December 31, 2011.

"During the fourth quarter of 2012, we celebrated two major milestones: the Bank's thirty-year anniversary and the lifting of regulatory enforcement actions by the Federal Reserve Bank of San Francisco and the California Department of Financial Institutions. We are no longer constrained by any of our former enforcement agreements, which allows us to focus on pursuing important strategic options. Earlier this month, we announced that we are exploring strategic alternatives for a possible business combination, merger or sale transaction. This process reflects our proactive efforts to stay ahead of the competition in an increasingly competitive market. We believe that exploring strategic options is an important step necessary for our future. However, there is no assurance that we will complete a strategic transaction." said Jay S. Yoo, President and Chief Executive Officer.

Hanmi Financial Quarterly Financial Highlights

(In Thousands, Except Per Share Data)

	At or for the Three Months Ended
	December 31,		September 30,		December 31,
	2012		2012		2011
Net Income	$ 13,979		$ 13,279		$ 5,506
Net Income Per Diluted Common Share	$ 0.44		$ 0.42		$ 0.22
Total Assets	$ 2,882,520		$ 2,841,857		$ 2,744,824
Total Net Loans	$ 1,986,051		$ 1,892,813		$ 1,849,020
Total Deposits	$ 2,395,963		$ 2,363,385		$ 2,344,910
Return on Average Assets	1.94%		1.87%		0.81%
Return on Average Stockholders' Equity	15.02%		14.97%		9.50%
Net Interest Margin	3.86%		3.69%		3.66%
Efficiency Ratio	57.66%		59.81%		69.03%
Tangible Common Equity Per Common Share	$ 11.97		$ 11.52		$ 9.02
Non-Performing Assets	$ 38,053		$ 45,056		$ 52,558
Non-Performing Assets to Total Assets	1.32%		1.59%		1.91%
Allowance for Loan Losses to Total Gross Loans	3.09%		3.38%		4.64%
Allowance for Loan Losses to Total Non-Performing Loans	169.81%		147.92%		171.71%
Classified Assets	$ 101,172		$ 131,233		$ 282,559
Classified Assets to Bank Tier 1 Capital and ALLL	21.57%		28.60%		66.14%
Hanmi Financial Capital Ratios:
Total Risk-Based Capital Ratio	20.65%		20.79%		18.66%
Tier 1 Leverage Capital Ratio	14.95%		14.71%		13.34%
Tangible Equity to Tangible Assets Ratio	13.09%		12.77%		10.36%

· Net income for the fourth quarter of 2012 increased to $14.0 million, or $0.44 per diluted share, up 5.3% from $13.3 million, or $0.42 per diluted share, in the third quarter of 2012. For the year ended December 31, 2012, net income totaled $90.4 million, or $2.87 per diluted share, compared to $28.1 million, or $1.38 per diluted share, for the year ended December 31, 2011. For the year ended December 31, 2012, the reversal of the DTA valuation allowance contributed a net of $47.4 million to net income and added $1.50 per share to earnings on a fully taxed basis.

· Net interest margin ("NIM") improved to 3.86% in the fourth quarter of 2012, up from 3.69% in the third quarter of 2012 and 3.66% in the fourth quarter of 2011. Yields on earning assets improved to 4.40% in the fourth quarter of 2012, up from 4.35% in the third quarter of 2012, but down from 4.58% in the fourth quarter of 2011. For the year ended December 31, 2012, NIM improved to 3.77% from 3.68% for the year ended December 31, 2011. Cost of deposits continued to improve to 0.56% in the fourth quarter of 2012, down from 0.61% in the third quarter of 2012 and 0.89% in the fourth quarter of 2011.

· New loan production for the fourth quarter of 2012 totaled $208.6 million, consisting of $44.2 million of SBA 504 and 7(a) loans, $156.1 million of other commercial term loans, and $7.5 million of lines of credit disbursements. For the year ended December 31, 2012, total loan production was $694.2 million, consisting of $155.3 million of SBA 504 and 7(a) loans, $434.6 million of other commercial term loans, $20.6 million of lines of credit disbursements, and purchases of $67.6 million of single family residential mortgages in the first quarter of 2012 and $15.2 million of commercial real estate loans in the second quarter of 2012.

· Asset quality improved during the fourth quarter of 2012, as indicated by lower levels of non-performing assets ("NPAs"), delinquent loans, and net charge-offs.

o The ratio of classified assets to the Bank's tier 1 capital plus the allowance for loan losses ("ALLL") dropped to 21.57% at December 31, 2012, from 28.60% at September 30, 2012, and from 66.14% at December 31, 2011. Classified assets at December 31, 2012 were $101.2 million compared to $131.2 million and $282.6 million at September 30, 2012 and December 31, 2011, respectively.

o NPAs declined to $38.1 million, or 1.32% of total assets, at December 31, 2012, from $45.1 million, or 1.59% of total assets, at September 30, 2012, and from $52.6 million, or 1.91% of total assets, at December 31, 2011.

o Delinquent loans, which are 30 to 89 days past due and still accruing, totaled $2.4 million, or 0.12% of gross loans at December 31, 2012, down from $4.0 million, or 0.20% of gross loans at September 30, 2012, and down from $13.9 million, or 0.72% of gross loans, at December 31, 2011.

o Total net charge-offs during the fourth quarter of 2012 were $3.2 million, down from $5.9 million in the third quarter of 2012, and down from $15.1 million in the fourth quarter of 2011.

o Classified loan inflows totaled $8.0 million for the fourth quarter of 2012, down from $10.7 million during the third quarter of 2012. Outflows of classified loans totaled $38.4 million during the fourth quarter of 2012, as compared to $22.5 million in the third quarter of 2012.

· Operating efficiency improved to 57.66% during the fourth quarter of 2012 from 59.81% during the third quarter of 2012, and from 69.03% during the fourth quarter of 2011, reflecting higher revenues and lower overall costs of operations. For the year ended December 31, 2012, the efficiency ratio improved to 61.07% from 67.22% for the year ended December 31, 2011.

· The Bank's tangible common equity to tangible assets ratio at December 31, 2012 was 15.29%, up from 14.96% at September 30, 2012, and up from 12.48% at December 31, 2011.

· At the holding company level, the tangible common equity ratio was 13.09% and the tangible book value was $11.97 per share at December 31, 2012, representing increases from tangible common equity ratios of 12.77% and 10.36% and tangible book values of $11.52 and $9.02 per share, at September 30, 2012 and December 31, 2011, respectively.

"Our capital position continues to be well above industry averages, with our ratio of tangible equity to tangible assets at 13.09% at year end, compared to an average of 8.16% for the SNL Bank and Thrift Index last quarter," said Mark Yoon, Senior Vice President and Interim Chief Financial Officer.

	Three Months Ended
	December 31,		September 30,		December 31,
	2012		2012		2011
Hanmi Financial
Total Risk-Based Capital Ratio	20.65%		20.79%		18.66%
Tier 1 Risk-Based Capital Ratio	19.37%		19.52%		17.36%
Tier 1 Leverage Capital Ratio	14.95%		14.71%		13.34%
Tangible Equity to Tangible Assets Ratio	13.09%		12.77%		10.36%
Hanmi Bank
Total Risk-Based Capital Ratio	19.85%		19.91%		17.57%
Tier 1 Risk-Based Capital Ratio	18.58%		18.63%		16.28%
Tier 1 Leverage Capital Ratio	14.33%		14.05%		12.50%
Tangible Equity to Tangible Assets Ratio	15.29%		14.96%		12.48%

Results of Operations

Net interest income, before the provision for credit losses, totaled $26.4 million for the fourth quarter of 2012, up 6.1% from $24.9 million for the third quarter of 2012, and up 8.2% from $24.4 million for the fourth quarter of 2011. Interest and dividend income increased 2.5% from the third quarter of 2012 but decreased 1.6% from the fourth quarter of 2011, while interest expense fell 17.3% and 40.3% compared to the third quarter of 2012 and the fourth quarter of 2011, respectively. For the year ended December 31, 2012, net interest income, before the provision for credit losses, totaled $101.1 million, down slightly from $101.2 million for the year ended December 31, 2011.

Yield on loans was 5.38% for the fourth quarter of 2012, down from 5.44% for the third quarter of 2012, and down from 5.55% for the fourth quarter of 2011. Yield on investment securities, accounting for 16.6% of current quarter average earning assets, was 2.29% for the fourth quarter of 2012, up from 2.22% for the third quarter of 2012, and up from 2.00% for the fourth quarter of 2011. For the year ended December 31, 2012, average yield on loans was 5.47%, down from 5.56% for the year ended December 31, 2011. The yields on investment securities were the same 2.22% for both years ended December 31, 2012 and 2011.

Cost of interest-bearing liabilities continues to decline, reflecting the improving mix of the deposit base. Cost of interest-bearing liabilities was 0.83% in the fourth quarter of 2012, down 18 basis points compared to the third quarter of 2012, and down 53 basis points compared to the fourth quarter of 2011. Cost of deposits was 0.56% for the fourth quarter of 2012, down from 0.61% for the third quarter of 2012, and down from 0.89% for the fourth quarter of 2011. For the year ended December 31, 2012, cost of interest bearing liabilities declined 34 basis points to 1.07% and cost of deposits declined 32 basis points to 0.68%, compared to 1.41% and 1.00%, respectively, for the year ended December 31, 2011.

Net interest margin improved to 3.86% in the fourth quarter of 2012, up 17 basis points compared to the third quarter of 2012, and up 20 basis points compared to the fourth quarter of 2011. "With improvement in the production of new loans, we are starting to grow our loan portfolio and deploy excess liquidity into higher yielding assets," said Yoon.

With steadily improving asset quality, there was no provision for credit losses in the third and fourth quarters of 2012, compared to $4.0 million in the fourth quarter of 2011. For the year ended December 31, 2012, the provision for credit losses was $6.0 million, down 50% from $12.1 million for the year ended December 31, 2011. The total net charge offs for the fourth quarter of 2012 was $3.2 million, down from $5.9 million in the third quarter of 2012, and down from $15.1 million in the fourth quarter of 2011. The allowance for loan losses decreased to $63.3 million, or 3.09% of total gross loans.

Net interest income, after the provision for credit losses, totaled $26.4 million in the fourth quarter of 2012, up from $24.9 million in the third quarter of 2012, and up from $20.4 million in the fourth quarter of 2011. For the year ended December 31, 2012, net interest income, after the provision for credit losses, totaled $95.1 million, up 6.7% from $89.1 million for the year ended December 31, 2011.

Non-interest income in the fourth quarter of 2012 was $7.5 million, up from $6.5 million in the third quarter of 2012 and $6.3 million in the fourth quarter of 2011, due mainly to increases in service charges, insurance commissions, trade finance and gain on sales of SBA loans, partially offset by net losses recognized from selling non-performing loans. The Bank recognized a $2.7 million gain on sales of SBA loans,and a $1.2 million net loss on sales of other loans in the fourth quarter of 2012, compared to a $1.8 million gain on sales of SBA loans and a $515,000 net loss on sales of other loans in the third quarter of 2012. For the year ended December 31, 2012, non-interest income totaled $24.8 million, compared to $23.9 million for the year ended December 31, 2011, due primarily to a $5.4 million increase in gain on selling SBA loans, mainly offset by a $3.5 million increase in net losses on selling non-performing loans.

Non-interest expense in the fourth quarter of 2012 was $19.5 million, compared to $18.8 million in the third quarter of 2012. The increase was due mainly to increases in deposit insurance premiums and regulatory assessments, professional fees, and advertising and promotion expenses, partially offset by decreases in other operating expenses, other real estate owned ("OREO") expenses, and supplies and communications expenses. The increase in deposit insurance premiums and regulatory assessments in the fourth quarter of 2012 was attributable to a year-to-date true-up adjustment of $300,000. Assuming the assessment factors remain constant, the quarterly assessment for 2013 is expected to be approximately $1.0 million. Professional fees increased $632,000, or 56.8%, in the fourth quarter of 2012, due mainly to additional professional services related to exploring strategic alternatives. Advertising and promotion expenses increased by $220,000, or 21.5%, in the fourth quarter of 2012, due mainly to special promotions and events related to the celebration of the Bank's 30th anniversary.

Non-interest expense for the year ended December 31, 2012 decreased by $7.2 million, or 8.6%, to $76.9 million from $84.0 million for the year ended December 31, 2011. The decrease was mainly due to a $2.2 million unconsummated capital offering expense in 2011, and reductions in deposit insurance premiums, loan and OREO related expenses, data processing, and D&O liability insurance, partially offset by an increase in salaries and employee benefits due mainly to increased incentive bonuses, an increase in professional fees related to exploring strategic alternatives, and an increase in adverting and promotion expenses related to the celebration of the Bank's 30th anniversary.

Hanmi released the remainder of the valuation allowance of $5.5 million for its deferred tax asset in the fourth quarter of 2012, and had a $374,000 provision for income taxes, which represented a 2.6% effective tax rate for the fourth quarter of 2012. "We have released a total of $62.6 million DTA valuation allowance, bringing the total income tax benefit to $47.4 million for the year ended December 31, 2012. In 2013, our effective tax rate is expected to be approximately 39% of pre-tax income." said Yoon.

Balance Sheet

Total assets were $2.88 billion at December 31, 2012, up 1.4% from $2.84 billion at September 30, 2012, and up 5.0% from $2.74 billion at December 31, 2011.

Loans receivable, excluding loans held for sale, increased 4.9% in the fourth quarter of 2012 and 7.4% year-over-year to $1.99 billion at December 31, 2012, up from $1.89 billion at September 30, 2012, and up from $1.85 billion at December 31, 2011. Loans held for sale totaled $8.3 million at December 31, 2012, down from $10.7 million at September 30, 2012, and down from $22.6 million at December 31, 2011. Average gross loans, net of deferred loan fees, increased to$2.03 billion for the fourth quarter of 2012, up from $1.96 billion for the third quarter of 2012, and up from $2.01 billion for the fourth quarter of 2011.

Liquidity remained high with the total average investment securities portfolio at $421.5 million during the fourth quarter of 2012, up from $386.5 million during the third quarter of 2012 and even with $421.4 million during the fourth quarter of 2011. Cash and cash equivalents totaled $268.0 million at December 31, 2012, down from $302.4 million at September 30, 2012, but up from $201.7 million at December 31, 2011.

Average deposits for the fourth quarter of 2012 increased slightly to $2.39 billion, up from $2.36 billion for the third quarter of 2012, and up from $2.35 billion for the fourth quarter of 2011. The overall mix of funding continued to improve with time deposits (particularly high-cost promotional accounts) declining and transaction account balances increasing. Core deposits, which are total deposits less time deposits equal to or greater than $100,000, accounted for 74.3% of total deposits at December 31, 2012, up from 64.9% of total deposits at December 31, 2011. Demand deposit accounts increased 13.6% to $720.9 million at December 31, 2012 compared to $634.5 million at December 31, 2011. Demand deposit accounts accounted for 30.1% of total deposits at December 31, 2012, up from 27.1% of total deposits at December 31, 2011. Time deposits equal to or greater than $100,000 were down $206.0 million in the past twelve months. Total deposits were $2.40 billion at December 31, 2012 compared to $2.34 billion at December 31, 2011.

At December 31, 2012, total stockholders' equity was $378.4 million, or $12.01 per share. Tangible common stockholders' equity was $377.0 million at December 31, 2012, or 13.09% of tangible assets, compared to $362.6 million, or 12.77% of tangible assets, and $284.1 million, or 10.36% of tangible assets at September 31, 2012 and December 31, 2011, respectively. Tangible book value per share was $11.97 at December 31, 2012, up 4.0% from $11.52 at September 30, 2012, and up 32.7% from $9.02 at December 31,

2011.

Non-performing loans ("NPLs"), excluding loans held for sale, decreased to $37.3 million at December 31, 2012, down 16.6% from $44.7 million at September 30, 2012, and down 28.8% from $52.4 million at December 31, 2011. Troubled debt restructurings ("TDRs"), which are loans that have been modified through interest rate concessions, term extensions or payment alterations to assist the borrowers in financial difficulty, totaled $35.7 million at December 31, 2012, down from $38.0 million at September 30, 2012, and down from $51.6 million at December 31, 2011. Of these TDRs, $18.8 million are included in NPLs. $484,000 of NPLs were recorded at the lower of cost or fair value and classified as held for sale at December 31, 2012, compared to $4.4 million at September 30, 2012 and $15.0 million at December 31, 2011. The following table shows NPLs, excluding loans held for sale, by loan category:

"In the fourth quarter of 2012, we continued to sell NPLs into the secondary market, though not as actively as we have in the previous quarters. Fourth quarter NPL sales totaled $8.2 million, bringing the year-end total NPL sales to $42.3 million," said J.H. Son, Executive Vice President and Chief Credit Officer. "While our strategy of selling loans before they are moved into foreclosure has allowed us to efficiently reduce non-performing assets over the past few years, we expect to have substantially fewer sales in the coming year, which reflects the success of this program and the continuing improvement in the performance of our loan portfolio. Reflecting the continued improvement in asset quality, classified loans were $100.4 million, or 4.9% of total gross loans, at December 31, 2012, down from $130.9 million, or 6.7% of total gross loans, at September 31, 2012, and down from $282.4 million, or 14.6% of total gross loans, at December 31, 2011."

Delinquent loans that are less than 90 days past due and still accruing interest decreased to $2.4 million at December 31, 2012, or 0.12% of gross loans, down from $4.0 million, or 0.20% of gross loans, at September 30, 2012. At December 31, 2012, the allowance for loan losses was $63.3 million, or 3.09% of gross loans. At December 31, 2012, the allowance for loan losses was 169.8% of NPLs, compared to 147.9% at September 30, 2012. For the fourth quarter of 2012, net charge-offs were $3.2 million, compared to $5.9 million in the third quarter of 2012 and $15.1 million in the fourth quarter of 2011.

Management will host a conference call today, January 24, 2013, at 1:30 p.m. Pacific Time (4:30 p.m. ET) to discuss these results. This call will also be broadcast live via the internet. Investment professionals and all current and prospective stockholders are invited to access the live call on January 24, 2013 by dialing [phone] at 1:30 p.m. Pacific Time, using access code HANMI. To listen to the call online, either live or archived, visit the Investor Relations page of Hanmi's website at www.hanmi.com.

Headquartered in Los Angeles, Hanmi Bank, a wholly-owned subsidiary of Hanmi Financial Corporation, provides services to the multi-ethnic communities of California, with 27 full-service offices in Los Angeles, Orange, San Bernardino, San Francisco, Santa Clara and San Diego counties, and a loan production office in Washington State. Hanmi Bank specializes in commercial, SBA and trade finance lending, and is a recognized community leader. Hanmi Bank's mission is to provide a full range of quality products and premier services to its customers and to maximize stockholder value.

This press release contains forward-looking statements, which are included in accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. 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. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital plans, strategic alternatives for a possible business combination, merger or sale transaction and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. These statements involve known and unknown risks, uncertainties and other 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. These factors include the following: failure to maintain adequate levels of capital and liquidity to support our operations; the effect of regulatory orders we have entered into and potential future supervisory action against us or Hanmi Bank; general economic and business conditions internationally, nationally and in those areas in which we operate; volatility and deterioration in the credit and equity markets; changes in consumer spending, borrowing and savings habits; availability of capital from private and government sources; demographic changes; competition for loans and deposits and failure to attract or retain loans and deposits; fluctuations in interest rates and a decline in the level of our interest rate spread; risks of natural disasters related to our real estate portfolio; risks associated with Small Business Administration loans; failure to attract or retain key employees; changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums; ability to receive regulatory approval for Hanmi Bank to declare dividends to Hanmi Financial; ability to identify a suitable strategic partner or to consummate a strategic transaction; adequacy of our allowance for loan losses; credit quality and the effect of credit quality on our provision for credit losses and allowance for loan losses; changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements; our ability to control expenses; and changes in securities markets. In addition, we set forth certain risks in our reports filed with the U.S. Securities and Exchange Commission ("SEC"), including, in Item 1A of our Form 10-K for the year ended December 31, 2011, our quarterly reports on Form 10-Q, and current and periodic reports that we will file with the SEC hereafter, which could cause actual results to differ from those projected. We undertake no obligation to update such forward-looking statements except as required by law.

Tangible common equity to tangible assets ratio 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 and Hanmi Bank's capital strength. Tangible equity is calculated by subtracting goodwill and other intangible assets from total stockholders' equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from total 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 capital strength of Hanmi Financial and Hanmi Bank. 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: