Written Agreement by and among HANMI FINANCIAL CORPORATION Docket Nos. 09-141-WA/RB-HC Los Angeles, California 09-141-WA/RB-SM HANMI BANK Los Angeles, California and FEDERAL RESERVE BANK OF SAN FRANCISCO San Francisco, California
Exhibit 10.30
UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
Written Agreement by and among |
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HANMI FINANCIAL CORPORATION
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Docket Nos. 09-141-WA/XX-XX | |
Los Angeles, California
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09-141-WA/XX-XX | |
HANMI BANK |
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Los Angeles, California |
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and |
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FEDERAL RESERVE BANK OF |
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SAN FRANCISCO |
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San Francisco, California |
WHEREAS, in recognition of their common goal to maintain the financial soundness of Hanmi
Financial Corporation, Los Angeles, California (“Hanmi”), a registered bank holding company, and
its subsidiary bank, Hanmi Bank, Los Angeles, California (the “Bank”), a state chartered bank that
is a member of the Federal Reserve System, Hanmi, the Bank, and the Federal Reserve Bank of San
Francisco (the “Reserve Bank”) have mutually agreed to enter into this Written Agreement (the
“Agreement”); and
WHEREAS, on September 30, 2009, Hanmi’s and the Bank’s boards of directors, at duly
constituted meetings, adopted resolutions authorizing and directing Xxxxxx X. Rho and Xxxxxx X. Rho
to consent to this Agreement on behalf of Hanmi and the Bank, respectively, and consenting to
compliance with each and every applicable provision of this Agreement by Hanmi, the Bank, and their
institution-affiliated parties, as defined in
sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12
U.S.C. §§ 1813(u) and 1818(b)(3)).
NOW, THEREFORE, Hanmi, the Bank, and the Reserve Bank agree as follows:
Board Oversight
1. Within 60 days of this Agreement, the board of directors of the Bank shall submit to the Reserve
Bank a written plan to strengthen board oversight of the management and operations of the Bank. The
plan shall, at a minimum, address, consider, and include:
(a) The actions that the board of directors will take to improve the Bank’s condition and maintain
effective control over, and supervision of, the Bank’s major operations and activities, including
but not limited to, credit risk management, credit administration, processes to mitigate risks
associated with credit concentrations, earnings, and liquidity;
(b) the responsibility of the board of directors to monitor management’s adherence to approved
policies and procedures, and applicable laws and regulations; and
(c) a description of the information and reports that will be regularly reviewed by the board of
directors in its oversight of the operations and management of the Bank, including information on
the Bank’s adversely classified assets, allowance for loan and lease losses, capital, earnings, and
liquidity.
Credit Risk Management
2. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable
written plan to strengthen credit risk management practices. The plan shall, at a minimum, address,
consider, and include:
(a) Procedures to periodically review and revise risk exposure limits to address changes in market
conditions;
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(b) strategies to minimize credit losses and reduce the level of problem assets;
(c) enhanced stress testing of loan and portfolio segments; and
(d) procedures to identify, limit, and manage concentrations of credit that are consistent with the
Interagency Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management
Practices, dated December 12, 2006 (SR 07-1).
Credit Administration
3. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank acceptable revised
written credit administration policies and procedures that shall, at a minimum, address, consider,
and include:
(a) For loans that are modified, analyses of borrowers’ current financial condition and guarantors’
cash flow and repayment sources;
(b) the appropriate use of interest reserves; and
(c) enhancements to the internal loan grading system to timely and accurately identify individual
problem credits.
Asset Improvement
4. (a) The Bank shall not, directly or indirectly, extend or renew any credit to or for the benefit
of any borrower, including any related interest of the borrower, who is obligated to the Bank in
any manner on any extension of credit or portion thereof that has been charged off by the Bank or
classified, in whole or in part, “loss” in the report of examination of the Bank conducted by the
Reserve Bank and the State of California Department of Financial Institutions (the “Department”)
that commenced on April 13, 2009 (the “Report of Examination”) or in any subsequent report of
examination, as long as such credit remains uncollected.
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(b) The Bank shall not, directly or indirectly, extend or renew any credit to or for the benefit of
any borrower, including any related interest of the borrower, whose extension of credit has been
classified “doubtful” or “substandard” in the Report of Examination or in any subsequent report of
examination, without the prior approval of the Bank’s board of directors or the Bank’s loan
committee. The board of directors or loan committee shall document in writing the reasons for the
extension of credit or renewal, specifically certifying that: (i) the extension of credit is
necessary to protect the Bank’s interest in the ultimate collection of the credit already granted
or (ii) the extension of credit is in full compliance with the Bank’s written loan policy, is
adequately secured, and a thorough credit analysis has been performed indicating that the extension
or renewal is reasonable and justified, all necessary loan documentation has been properly and
accurately prepared and filed, the extension of credit will not impair the Bank’s interest in
obtaining repayment of the already outstanding credit, and the board of directors or loan committee
reasonably believes that the extension of credit or renewal will be repaid according to its terms.
The written certification shall be made a part of the minutes of the board of directors meetings,
and a copy of the signed certification, together with the credit analysis and related information
that was used in the determination, shall be retained by the Bank in the borrower’s credit file for
subsequent supervisory review. For purposes of this Agreement, the term “related interest” is
defined as set forth in section 215.2(n) of Regulation O of the Board of Governors of the Federal
Reserve System (the “Board of Governors”) (12 C.F.R. § 215.2(n)).
5. (a) Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable
written plan designed to improve the Bank’s position through repayment, amortization, liquidation,
additional collateral, or other means on each loan or other asset in excess of $3 million,
including OREO, that (i) is past due as to principal or interest more than
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90 days as of the date of this Agreement; (ii) is on the Bank’s problem loan list; or (iii) was
adversely classified in the Report of Examination. In developing the plan for each loan, the Bank
shall, at a minimum, review, analyze, and document the financial position of the borrower,
including source of repayment, repayment ability, and alternative repayment sources, as well as
the value and accessibility of any pledged or assigned collateral, and any possible actions to
improve the Bank’s collateral position.
(b) Within 30 days of the date that any additional loan or other asset in excess of $3 million,
including OREO, becomes past due as to principal or interest for more than 90 days, is on the
Bank’s problem loan list, or is adversely classified in any subsequent report of examination of the
Bank, the Bank shall submit to the Reserve Bank an acceptable written plan to improve the Bank’s
position on such loan or asset.
(c) Within 30 days after the end of each calendar quarter thereafter, the Bank shall submit a
written progress report to the Reserve Bank to update each asset improvement plan, which shall
include, at a minimum, the carrying value of the loan or other asset and changes in the nature and
value of supporting collateral, along with a copy of the Bank’s current problem loan list, a list
of all loan renewals and extensions without full collection of interest in the last quarter, and
past due/non-accrual report. The board of directors shall review the progress reports before
submission to the Reserve Bank and shall document the review in the minutes of the board of
directors’ meetings.
Allowance for Loan and Lease Losses
6. (a) Within 10 days of this Agreement, the Bank shall eliminate from its books, by charge-off or
collection, all assets or portions of assets classified “loss” in the Report of Examination that
have not been previously collected in full or charged off. Thereafter the
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Bank shall, within 30 days from the receipt of any federal or state report of examination, charge
off all assets classified “loss” unless otherwise approved in writing by the Reserve Bank.
(b) Within 60 days of this Agreement, the Bank shall review and revise its allowance for loan and
lease losses (“ALLL”) methodology consistent with relevant supervisory guidance, including the
Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR
01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the
ALLL set forth in the Report of Examination, and submit a description of the revised methodology to
the Reserve Bank. The revised ALLL methodology shall be designed to maintain an adequate ALLL and
shall address, consider, and include, at a minimum, the reliability of the Bank’s loan grading
system, the volume of criticized loans, concentrations of credit, the current level of past due and
nonperforming loans, past loan loss experience, evaluation of probable losses in the Bank’s loan
portfolio, including adversely classified loans, and the impact of market conditions on loan and
collateral valuations and collectibility.
(c) Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable
written program for the maintenance of an adequate ALLL. The program shall include policies and
procedures to ensure adherence to the revised ALLL methodology and provide for periodic reviews and
updates to the ALLL methodology, as appropriate. The program shall also provide for a review of the
ALLL by the board of directors on at least a quarterly calendar basis. Any deficiency found in the
ALLL shall be remedied in the quarter it is discovered, prior to the filing of the Consolidated
Reports of Condition and Income, by additional provisions. The board of directors shall maintain
written documentation of its review, including the factors considered and conclusions reached by
the Bank in determining the adequacy of the
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ALLL. During the term of this Agreement, the Bank shall submit to the Reserve Bank, within 30 days
after the end of each calendar quarter, a written report regarding the board of directors’
quarterly review of the ALLL and a description of any changes to the methodology used in
determining the amount of ALLL for that quarter.
Capital Plan
7. Within 60 days of this Agreement, Hanmi and the Bank shall submit to the Reserve Bank an
acceptable joint written plan to maintain sufficient capital at Hanmi on a consolidated basis, and
the Bank as a separate legal entity on a stand-alone basis. The plan shall, at a minimum, address,
consider, and include:
(a) Hanmi’s current and future capital requirements, including compliance with the Capital Adequacy
Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A
and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);
(b) the Bank’s current and future capital requirements, including compliance with the Capital
Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure,
Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);
(c) the adequacy of the Bank’s capital, taking into account the volume of classified credits,
concentrations of credit, ALLL, current and projected asset growth, and projected retained
earnings;
(d) the source and timing of additional funds to fulfill Hanmi’s and the Bank’s future capital
requirements; and
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(e) the requirements of section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R.
§ 225.4(a)) that Hanmi serve as a source of strength to the Bank.
8. Hanmi and the Bank shall notify the Reserve Bank, in writing, no more than 30 days after the end
of any quarter in which any of Hanmi’s consolidated capital ratios or the Bank’s capital ratios
(total risk-based, Tier 1, or leverage) fall below the approved capital plan’s minimum ratios.
Together with the notification, Hanmi and the Bank, as appropriate, shall submit an acceptable
written plan that details the steps Hanmi or the Bank, as appropriate, will take to increase
Hanmi’s or the Bank’s capital ratios to or above the approved capital plan’s minimums.
Strategic Plan and Budget
9. (a) Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank a strategic plan
to improve the Bank’s earnings, and a budget for 2010. The written plan and budget shall include,
but not be limited to:
(i) Identification of the major areas where, and means by which, the board of directors will seek
to improve the Bank’s operating performance;
(ii) a realistic and comprehensive budget for calendar year 2010, including income statement and
balance sheet projections; and
(iii) a description of the operating assumptions that form the basis for, and adequately support,
major projected income, expense, and balance sheet components.
(b) A strategic plan and budget for each calendar year subsequent to 2010 shall be submitted
to the Reserve Bank at least 30 days prior to the beginning of that calendar year.
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Liquidity/Funds Management
10. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable
written plan designed to improve management of the Bank’s liquidity position and funds management
practices that includes, but is not limited to, measures to reduce reliance on short-term wholesale
funding, including brokered deposits.
11. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable
revised written contingency funding plan that, at a minimum, identifies available sources of
liquidity and includes adverse scenario planning.
Dividends
12. (a) Hanmi and the Bank shall not declare or pay any dividends without the prior written
approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation
of the Board of Governors (the “Director”).
(b) Hanmi shall not take any other form of payment representing a reduction in capital from
the Bank without the prior written approval of the Reserve Bank.
(c) Hanmi and its nonbank subsidiaries shall not make any distributions of interest, principal, or
other sums on subordinated debentures or trust preferred securities without the prior written
approval of the Reserve Bank and the Director.
(d) All requests for prior approval shall be received at least 30 days prior to the proposed
dividend declaration date, proposed distribution on subordinated debentures, and required notice of
deferral on trust preferred securities. All requests shall contain, at a minimum, current and
projected information, as appropriate, on Hanmi’s capital, earnings, and cash flow; the Bank’s
capital, asset quality, earnings and ALLL needs; and identification of the sources of funds for the
proposed payment or distribution. Hanmi and the Bank, as appropriate, must also
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demonstrate that the requested declaration or payment of dividends is consistent with the Board of
Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding
Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).
Debt and Stock Redemption
13. (a) Hanmi shall not, directly or indirectly, incur, increase, or guarantee any debt without the
prior written approval of the Reserve Bank. All requests for prior written approval shall contain,
but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and
the planned source(s) for debt repayment, and an analysis of the cash flow resources available to
meet such debt repayment.
(b) Hanmi shall not, directly or indirectly, purchase or redeem any shares of its stock
without the prior written approval of the Reserve Bank.
Compliance with Laws and Regulations
14. (a) In appointing any new director or senior executive officer, or changing the
responsibilities of any senior executive officer so that the officer would assume a different
senior executive officer position, Hanmi and the Bank shall comply with the notice provisions of
section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of
Governors (12 C.F.R. §§ 225.71 et seq.).
(b) Hanmi and the Bank shall comply with the restrictions on indemnification and severance
payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit
Insurance Corporation’s regulations (12 C.F.R. Part 359).
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Compliance with the Agreement
15. (a) Within 10 days of this Agreement, the boards of directors of Hanmi and the Bank shall
appoint a joint committee (the “Compliance Committee”) to monitor and coordinate Hanmi’s and the
Bank’s compliance with the provisions of this Agreement. The Compliance Committee shall include a
majority of outside directors who are not executive officers or principal shareholders of Hanmi and
the Bank, as defined in sections 215.2(e)(1) and 215.2(m)(1) of Regulation O of the Board of
Governors (12 C.F.R. §§ 215.2(e)(1) and 215.2(m)(1)). At a minimum, the Compliance Committee shall
meet at least monthly, keep detailed minutes of each meeting, and report its findings to the boards
of directors of Hanmi and the Bank.
(b) Within 30 days after the end of each calendar quarter following the date of this Agreement, the
Bank shall submit to the Reserve Bank written progress reports detailing the form and manner of all
actions taken to secure compliance with this Agreement and the results thereof.
Approval and Implementation of Plans, Policies, Procedures, and Program
16. (a) The Bank and, as applicable, Hanmi shall submit written plans, policies, procedures, and a
program that are acceptable to the Reserve Bank within the applicable time periods set forth in
paragraphs 2, 3, 5, 6(c), 7, 8, 10, and 11 of this Agreement.
(b) Within 10 days of approval by the Reserve Bank, the Bank and, as applicable, Hanmi shall adopt
the approved plans, policies, procedures, and program. Upon adoption, the Bank and, as applicable,
Hanmi shall promptly implement the approved plans, policies, procedures, and program, and
thereafter fully comply with them.
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(c) During the term of this Agreement, the approved plans, policies, procedures, and program shall
not be amended or rescinded without the prior written approval of the Reserve Bank.
Communications
17. All communications regarding this Agreement shall be sent to:
(a)
|
Xx. Xxxxxxx Xxxxx | |
| Vice President | ||
| Regional Financial Institutions Group | ||
| Banking Supervision & Regulation | ||
| Federal Reserve Bank of San Francisco | ||
| 000 Xxxxxx Xxxxxx | ||
| Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 | ||
(b)
|
Xx. Xxx X. Xxx | |
| President and Chief Executive Officer | ||
| Hanmi Financial Corporation | ||
| Hanmi Bank | ||
| 0000 Xxxxxxxx Xxxxxxxxx | ||
| Xxxxxxxxx X | ||
| Xxx Xxxxxxx, Xxxxxxxxxx 00000 |
Miscellaneous
18. Notwithstanding any provision of this Agreement, the Reserve Bank may, in its sole discretion,
grant written extensions of time to Hanmi and the Bank to comply with any provision of this
Agreement.
19. The provisions of this Agreement shall be binding upon Hanmi, the Bank, and their
institution-affiliated parties, in their capacities as such, and their successors and assigns.
20. Each provision of this Agreement shall remain effective and enforceable until stayed,
modified, terminated, or suspended in writing by the Reserve Bank.
21. The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of
Governors, the Reserve Bank, the Department, or any other federal or state agency
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from taking any other action affecting Hanmi, the Bank, or any of their current or former
institution-affiliated parties and their successors and assigns.
22. Pursuant to Section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable
by the Board of Governors under Section 8 of the FDI Act (12 U.S.C. § 1818).
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 2nd day of
November, 2009.
| HANMI FINANCIAL CORPORATION | FEDERAL RESERVE BANK OF SAN FRANCISCO | |||||||
By:
|
/s/ Xxxxxx X. Rho | By: | /s/ Xxxxxxx Xxxxx | |||||
| Xxxxxx X. Rho | Xxxxxxx Xxxxx | |||||||
| Chairman of the Board | Vice President | |||||||
| HANMI BANK | ||||||||
By:
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/s/ Xxxxxx X. Rho | |||||||
| Xxxxxx X. Rho | ||||||||
| Chairman of the Board | ||||||||
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