Disclosures

Hanmi Financial Corporation

I, Joe Gladue , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

• B. Riley & Co., LLC does and seeks to do business with companies covered in its research reports.
• A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
• B. Riley & Co., LLC makes a market in the securities of the company covered in this report.

Initiated coverage on 10/10/2011 with a "Neutral" rating and $1.00 price target.

Explanation of B. Riley & Co. LLC's Rating System

• Buy: We generally expect "Buy" rated stocks to materially outperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly attractive.
• Neutral: We generally believe "Neutral" rated stocks will perform roughly in line with the S&P 500 and Russell 2000 over the intermediate and long term.
• Sell: We generally expect "Sell" rated stocks to materially underperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly unattractive.

Risks and Considerations

Additional Risks and Considerations

• Asset Quality – HAFC has reported favorable trends in NPAs and NCOs in recent quarters, but the level of problem assets remains very high. The company still has considerable work ahead to reduce NPAs to more manageable levels.
• Economic Slowdown – Economic news over the past few months has been very disappointing. There is growing concern that the economy could slip into a double-dip recession or could continue to struggle along with little growth and sustained unemployment. This could cause a very unfavorable environment for banks, with low interest rates causing NIM compression and no loan growth.
• Shifting Regulatory Landscape – Since the financial meltdown in 2008, the regulatory framework affecting banks in the U.S has changed considerably. Many elements of the Dodd-Frank Wall Street Reform and Consumer Protection Act will remain unclear until rules are put in place by various agencies. Capital rules under Basel III are also becoming more stringent. These and other changes to the legal, regulatory and accounting framework affecting banks could have a significant impact on future profitability.
• Flattening Yield Curve – The Federal Reserve has recently begun Operation Twist, which seeks to prod economic activity by lowering long-term interest rates. This effort could lead to a flatter yield curve, which would have a negative impact on banks’ net interest margins and their ability to grow net interest income.
• Geographic Concentration – Hanmi’s banking operations are concentrated in the state of California, particularly in the southern part of the state. This subjects the company to risks that affect the economy of this region. Any downturn in the regional economy could have a more serious impact on First PacTrust than on other more geographically diversified banks.
• Depressed Valuations –The banking sector has suffered from low valuations relative to historical norms since the financial crisis began a few years ago. Increased regulatory burdens, the prospects for an extended period of weak loan demand and low interest rates have led many investors to conclude that profitability in the industry will remain depressed for a considerable period. The resulting low valuations for bank stocks could persist for an extended period.
• See the company’s financial statements for a further discussion of risks and considerations.