The following is management's discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and nine months ended September 30, 2009. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2008 and with the unaudited consolidated financial statements and notes thereto set forth in this Report.
FORWARD-LOOKING STATEMENTS
Some of the statements under "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Form 10-Q constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange 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. 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;

• a significant number of our customers failing to perform under their loans and other terms of credit agreements;

• the effect of regulatory orders we have entered into and potential future regulatory enforcement action against us or the Bank;

• fluctuations in interest rates and a decline in the level of our interest rate spread;

• failure to attract or retain deposits;

• sources of liquidity available to us and to the Bank becoming limited or our potential inability to access sufficient sources of liquidity when needed or the requirement that we obtain government waivers to do so;

• adverse changes in domestic or global financial markets, economic conditions or business conditions or the effects of pandemic flu;

• regulatory restrictions on the Bank's ability to pay dividends to us and on our ability to make payments on Hanmi Financial obligations;

• significant reliance on loans secured by real estate and the associated vulnerability to downturns in the local real estate market, natural disasters and other variables impacting the value of real estate;

• failure to retain our key employees;

• failure to maintain our status as a financial holding company;

• 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;

• failure to manage our future growth or successfully integrate acquisitions;

• volatility and disruption in financial, credit and securities markets, and the price of our common stock;

• deterioration in the financial markets that may result in other-than-temporary impairment charges relating to our securities portfolio;

• competition in our primary market areas;

• demographic changes in our primary market areas; and

• significant government regulations, legislation and potential changes thereto.

For a discussion of some of the other factors that might cause such a difference, see the discussion contained in this Form 10-Q under the heading "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 1A. Risk Factors." Also see "Item 1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2008 as well as other factors we identify from time to time in our periodic reports filed pursuant to the Exchange Act. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.

CRITICAL ACCOUNTING POLICIES
We have established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Our significant accounting policies are described in the "Notes to Consolidated Financial Statements, Note 1 - Summary of Significant Accounting Policies"in our Annual Report on Form 10-K for the year ended December 31, 2008. Certain accounting policies require us to make significant estimates and assumptions that have a material impact on the carrying value of certain assets and liabilities, and we consider these critical accounting policies. For a description of these critical accounting policies (except for "Investment Securities," which has been updated below), see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in our Annual Report on Form 10-K for the year ended December 31, 2008. We use estimates and assumptions based on historical experience and other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods. Management has discussed the development and selection of these critical accounting policies with the Audit Committee of Hanmi Financial's Board of Directors. Investment Securities
The classification and accounting for investment securities are discussed in more detail in "Notes to Consolidated Financial Statements, Note 1 - Summary of Significant Accounting Policies"in our Annual Report on Form 10-K for the year ended December 31, 2008. Under GAAP, investment securities generally must be classified as held-to-maturity, available-for-sale or trading. The appropriate classification is based partially on our ability to hold the securities to maturity and largely on management's intentions with respect to either holding or selling the securities. The classification of investment securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. Unrealized gains and losses on trading securities flow directly through earnings during the periods in which they arise. Investment securities that are classified as held-to-maturity are recorded at amortized cost. Unrealized gains and losses on available-for-sale securities are recorded as a separate component of stockholders' equity (accumulated other comprehensive income or loss) and do not affect earnings until realized or are deemed to be other-than-temporarily impaired.
The fair values of investment securities are generally determined by reference to the average of at least two quoted market prices obtained from independent external brokers or independent external pricing service providers who have experience in valuing these securities. In obtaining such valuation information from third parties, we have evaluated the methodologies used to develop the resulting fair values. We perform a monthly analysis on the broker quotes received from third parties to ensure that the prices represent a reasonable estimate of the fair value. The procedures include, but are not limited to, initial and on-going review of third party pricing methodologies, review of pricing trends, and monitoring of trading volumes.
We are obligated to assess, at each reporting date, whether there is an other-than-temporary impairment to our investment securities. Such impairment must be recognized in current earnings rather than in other comprehensive income. The determination of other-than-temporary impairment is a subjective process, requiring the use of judgments and assumptions. We examine all individual securities that are in an unrealized loss position at each reporting date for other-than-temporary impairment. Specific investment-related factors we examine to assess impairment include the nature of the investment, severity and duration of the loss, the probability that we will be unable to collect all amounts due, an analysis of the issuers of the securities and whether there has been any cause for default on the securities and any change in the rating of the securities by the various rating agencies. Additionally, we evaluate whether the creditworthiness of the issuer calls the realization of contractual cash flows into question. We reexamine our financial resources, intent and overall ability to hold the securities until their fair values recover. Management does not believe that there are any investment securities, other than those identified in the current and previous periods, that are deemed other-than-temporarily impaired as of September 30, 2009 and December 31, 2008. Investment securities are discussed in more detail in "Notes to Consolidated Financial Statements (Unaudited), Note 5 - Investment Securities" presented elsewhere herein.

SELECTED FINANCIAL DATA
   The following tables set forth certain selected financial data for the
periods indicated.

                                                                               As of and for the
                                                         Three Months Ended                          Nine Months Ended
                                                           September 30,                               September 30,
                                                     2009                  2008                  2009                  2008
                                                                 (Dollars in Thousands, Except Per Share Data)
AVERAGE BALANCES:
Average Gross Loans, Net (1)                    $  3,078,104          $  3,341,250          $  3,235,455          $  3,320,559
Average Investment Securities                   $    209,021          $    244,027          $    190,243          $    294,130
Average Interest-Earning Assets                 $  3,552,698          $  3,630,755          $  3,718,837          $  3,659,255
Average Total Assets                            $  3,672,253          $  3,789,614          $  3,842,266          $  3,892,197
Average Deposits                                $  3,100,419          $  2,895,746          $  3,174,880          $  2,924,416
Average Borrowings                              $    297,455          $    590,401          $    374,139          $    588,267
Average Interest-Bearing Liabilities            $  2,844,821          $  2,835,917          $  3,013,651          $  2,861,288
Average Stockholders' Equity                    $    232,136          $    267,433          $    249,742          $    340,894
Average Tangible Equity (2)                     $    228,169          $    261,751          $    245,377          $    263,870
PER SHARE DATA:
Earnings (Loss) Per Share - Basic               $      (1.26 )        $       0.09          $      (1.86 )        $      (2.14 )
Earnings (Loss) Per Share - Diluted             $      (1.26 )        $       0.09          $      (1.86 )        $      (2.14 )
Common Shares Outstanding                         51,201,390            45,905,549            51,201,390            45,905,549
Book Value Per Share (3)                        $       3.65          $       5.82          $       3.65          $       5.82
Tangible Book Value Per Share (4)               $       3.58          $       5.70          $       3.58          $       5.70
Cash Dividends Per Share                        $          -          $          -          $          -          $       0.09
SELECTED PERFORMANCE RATIOS:
Return on Average Assets (5) (6)                       (6.45 %)               0.46 %               (3.01 %)              (3.37 %)
Return on Average Stockholders' Equity
(5) (7)                                              (101.97 %)               6.47 %              (46.25 %)             (38.51 %)
Return on Average Tangible Equity (5) (8)            (103.75 %)               6.61 %              (47.08 %)             (49.75 %)
Efficiency Ratio (9)                                   68.21 %               54.33 %               69.38 %              134.73 %
Net Interest Spread (10)                                2.47 %                3.21 %                2.08 %                3.02 %
Net Interest Margin (11)                                3.00 %                3.94 %                2.65 %                3.83 %
Dividend Payout Ratio (12)                                 -                     -                     -                 (4.20 %)
Average Stockholders' Equity to Average
Total Assets                                            6.32 %                7.06 %                6.50 %                8.76 %
SELECTED CAPITAL RATIOS: (13)
Total Risk-Based Capital Ratio:
Hanmi Financial                                         9.15 %               10.93 %
Hanmi Bank                                              9.69 %               10.84 %
Tier 1 Risk-Based Capital Ratio:
Hanmi Financial                                         7.86 %                9.66 %
Hanmi Bank                                              8.40 %                9.57 %
Tier 1 Leverage Ratio:
Hanmi Financial                                         6.60 %                9.02 %
Hanmi Bank                                              7.05 %                8.94 %
SELECTED ASSET QUALITY RATIOS:
Non-Performing Loans to Total Gross Loans
(14)                                                    5.85 %                3.34 %                5.85 %                3.34 %
Non-Performing Assets to Total Assets
(15)                                                    5.83 %                3.05 %                5.83 %                3.05 %
Net Loan Charge-Offs to Average Total
Gross Loans (16)                                        3.85 %                1.41 %                2.70 %                1.10 %
Allowance for Loan Losses to Total Gross
Loans                                                   4.19 %                1.91 %                4.19 %                1.91 %
Allowance for Loan Losses to
Non-Performing Loans                                   71.53 %               57.16 %               71.53 %               57.16 %

(1) Loans are net of deferred fees and related direct costs.

(2) Average tangible equity is calculated by subtracting average goodwill and average other intangible assets from average stockholders' equity. See "Non-GAAP Financial Measures."

(3) Total stockholders' equity divided by common shares outstanding.

(4) Tangible equity divided by common shares outstanding. See "Non-GAAP Financial Measures."

(5) Calculation based upon annualized net loss.

(6) Net loss divided by average total assets.

(7) Net loss divided by average stockholders' equity.

(8) Net loss divided by average tangible equity. See "Non-GAAP
Financial
Measures."

(9) Total non-interest expenses divided by the sum of net interest income before provision for credit losses and total non-interest income.

(10) Average yield earned on interest-earning assets less average rate paid on interest-bearing liabilities. Computed on a tax-equivalent basis using an effective marginal rate of 35 percent.

(11) Net interest income before provision for credit losses divided by average interest-earning assets. Computed on a tax-equivalent basis using an effective marginal rate of 35 percent.

(12) Cash dividends per share times common shares outstanding divided by net loss.

(13) The required ratios for a "well-capitalized" institution, as defined by regulations of the Board of Governors of the Federal Reserve System, are 10 percent for the Total Risk-Based Capital Ratio (total capital divided by total risk-weighted assets); 6 percent for the Tier 1 Risk-Based Capital Ratio (Tier 1 capital divided by total risk-weighted assets); and 5 percent for the Tier 1 Leverage Ratio (Tier 1 capital divided by average total assets).

(14) Non-performing loans consist of non-accrual loans and loans past due 90 days or more and still accruing interest.

(15) Non-performing assets consist of non-performing loans (see footnote
(14) above) and other real estate owned.

(16) Calculation based upon annualized net loan charge-offs.

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 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 substitute 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 the GAAP performance measure to this non-GAAP performance measure for the periods indicated:

                                                    Three Months Ended                    Nine Months Ended
                                                      September 30,                         September 30,
                                                2009                2008               2009              2008
                                                                    (Dollars in Thousands)
Average Stockholders' Equity                  $ 232,136         $    267,433         $ 249,742         $ 340,894
Less Average Goodwill and Average Other
Intangible Assets                                (3,967 )             (5,682 )          (4,365 )         (77,024 )

Average Tangible Equity                       $ 228,169         $    261,751         $ 245,377         $ 263,870


Return on Average Stockholders' Equity          (101.97 %)              6.47 %          (46.25 %)         (38.51 %)
Effect of Average Goodwill and Average
Other Intangible Assets                           (1.78 %)              0.14 %           (0.83 %)         (11.24 %)

Return on Average Tangible Equity               (103.75 %)              6.61 %          (47.08 %)         (49.75 %)

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 substitute 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 the GAAP performance measure to this non-GAAP performance measure for the periods indicated:

                                                                                      September 30,
                                                                           2009                            2008
                                                                      (Dollars in Thousands, Except Per Share Data)
Total Stockholders' Equity                                        $              187,120          $              267,196
Less Goodwill and Other Intangible Assets                                         (3,736 )                        (5,404 )

Tangible Equity                                                   $              183,384          $              261,792


Book Value Per Share                                              $                 3.65          $                 5.82
Effect of Goodwill and Other Intangible Assets                                     (0.07 )                         (0.12 )

Tangible Book Value Per Share                                     $                 3.58          $                 5.70

EXECUTIVE OVERVIEW
The focus of our business has been on commercial and real estate lending for small to medium size businesses. As of September 30, 2009, we maintained a branch network of 27 full-service branch offices in California and 2 loan production offices in Virginia and Washington.
Since the second half of 2007, the economic conditions in the markets in which our borrowers operate have continued to deteriorate and the levels of loan delinquency and defaults that we experienced have been substantially higher than historical levels. As a result, we have made substantial provisions for credit losses in 2007, 2008 and the first nine months of 2009 that have adversely affected our earnings. We believe that our results of operations will continue to be adversely affected if economic conditions, particularly in California, continue to deteriorate.
A continuing concern in the banking industry is liquidity. Our utilization of wholesale funds during the fourth quarter of 2008 improved our liquidity, and our strategic priority in 2009 has been to replace such wholesale funds with customer deposits. For the past nine months, the Bank launched two deposit campaigns to increase new deposits and reduce its reliance on wholesale funding to an optimum level. Through the first deposit campaign promoted from December 2008 and early part of March 2009, the Bank achieved the objectives of maintaining strong liquidity and reducing its reliance on wholesale funds. The second deposit campaign, which started in June 2009, has been undertaken to specifically increase new core deposits and recapture time deposits raised from the first deposit promotion. This deposit-portfolio rebalancing implemented under the Bank's de-leveraging strategy allowed some run-off of rate-sensitive deposits. As a result, total deposits slightly decreased by $78.2 million, or 2.5 percent, to $2.99 billion as of September 30, 2009, compared to $3.07 billion as of December 31, 2008. Brokered deposits and FHLB advances decreased to $391.9 million and $160.8 million, respectively, as of September 30, 2009, compared to $874.2 million and $422.2 million, respectively, as of December 31, 2008.
See "Liquidity and Capital Resources - Liquidity - Hanmi Bank" for further information.
Total assets were $3.46 billion as of September 30, 2009, compared to $3.88 billion as of December 31, 2008, and total gross loans were $2.98 billion as of September 30, 2009, compared to $3.36 billion as of December 31, 2008. The decrease in total gross loans is the result of the de-leveraging strategy implemented in 2009 by focusing on asset quality over growth to successfully mitigate the economic downturn we are experiencing, as well as loan charge-offs and transfers to other real estate owned.
In light of the ever-deepening recession and its possible effect on our customers, we continuously monitor the capital markets and review alternatives for additional capital to provide a sufficient cushion. The de-leveraging strategy we are pursuing will help our efforts to preserve such cushion in our capital in a passive manner. We have also actively searched for alternative ways to improve our capital position. On June 12, 2009, and subsequently modified on July 31, 2009 and September 28, 2009, we entered into a Securities Purchase Agreement by and between Hanmi Financial and LIS, providing for the sale of 8,079,612 unregistered shares of Hanmi Financial common stock, par value $0.001 per share, to LIS at a purchase price of $1.37 per share, resulting in gross proceeds of $11.1 million. The initial purchase of 5,070,423 shares of Hanmi Financial common stock was completed on September 4, 2009, resulting in an additional equity capital injection of $6.8 million. The purchase of the additional 3,009,189 shares of Hanmi Financial common stock is subject to receipt of regulatory approval and satisfaction of customary closing conditions. It is not anticipated that the additional acquisition will occur during 2009 and there can be no assurance that this transaction will be consummated at all.
RESULTS OF OPERATIONS
Net Interest Income Before Provision for Credit Losses Our earnings depend largely upon the difference between the interest income received from our loan portfolio and other interest-earning assets and the interest paid on deposits and borrowings. The difference is "net interest income." The difference between the yield earned on interest-earning assets and the cost of interest-bearing liabilities is "net interest spread." Net interest income, when expressed as a percentage of average total interest-earning assets, is referred to as the "net interest margin."

Net interest income is affected by the change in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as "volume changes." Our net interest income also is affected by changes in the yields earned on interest-earning assets and rates paid on interest-bearing liabilities, referred to as "rate changes." Interest rates charged on loans are affected principally by the demand for such loans, the supply of money available for lending purposes and competitive factors. Those factors are affected by general economic conditions and other factors beyond our control, such as Federal economic policies, the general supply of money in the economy, income tax policies, governmental budgetary matters and the actions of the FRB. Three Months Ended September 30, 2009 vs. Three Months Ended September 30, 2008 The following table shows the average balances of assets, liabilities and stockholders' equity; the amount of interest income and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin for the periods indicated. All average balances are daily average balances.

. . .