Hanmi Financial Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Securities

Securities

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity Securities [Abstract]

The following is a summary of securities available for sale as of September 30, 2015 and December 31, 2014:



	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(in thousands)
September 30, 2015
Mortgage-backed securities ^{(1) (2)}	$	323,046	$	2,233	$	775	$	324,504
Collateralized mortgage obligations ⁽¹⁾	116,145		544		375		116,314
U.S. government agency securities	57,971		14		311		57,674
SBA loan pool securities	68,434		68		201		68,301
Municipal bonds-tax exempt	47,737		304		40		48,001
Municipal bonds-taxable	13,975		397		—		14,372
Corporate bonds	17,019		—		14		17,005
U.S. treasury securities	160		2		—		162
Other securities	22,916		179		88		23,007
Total securities available for sale	$	667,403	$	3,741	$	1,804	$	669,340
December 31, 2014
Mortgage-backed securities ^{(1) (2)}	$	571,678	$	2,811	$	1,203	$	573,286
Collateralized mortgage obligations ⁽¹⁾	188,704		417		1,074		188,047
U.S. government agency securities	129,857		172		1,822		128,207
SBA loan pool securities	109,983		52		588		109,447
Municipal bonds-tax exempt	4,319		71		—		4,390
Municipal bonds-taxable	16,615		398		91		16,922
Corporate bonds	17,018		2		72		16,948
U.S. treasury securities	163		—		—		163
Other securities	22,916		57		80		22,893
Equity securities	450		—		36		414
Total securities available for sale	$	1,061,703	$	3,980	$	4,966	$	1,060,717


⁽¹⁾	Collateralized by residential mortgages and guaranteed by U.S. government sponsored entities


⁽²⁾	A portion of the mortgage-backed securities is comprised of home mortgage-backed securities backed by home equity conversion mortgages

The amortized cost and estimated fair value of securities as of September 30, 2015, by contractual maturity, are shown below. Although mortgage-backed securities and collateralized mortgage obligations have contractual maturities through 2064, expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Available for Sale
	Amortized Cost		Estimated Fair Value
	(in thousands)
Within one year	$	11,999	$	11,994
Over one year through five years	14,316		14,342
Over five years through ten years	106,586		106,963
Over ten years	72,395		72,216
Mortgage-backed securities	323,046		324,504
Collateralized mortgage obligations	116,145		116,314
Other securities	22,916		23,007
Total	$	667,403	$	669,340

FASB ASC 320, Investments – Debt and Equity Securities, requires us to periodically evaluate our investments for other-than-temporary impairment (“OTTI”). There was no OTTI charge during the nine months ended September 30, 2015 and 2014.

Gross unrealized losses on securities available for sale, the estimated fair value of the related securities and the number of securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows as of September 30, 2015 and December 31, 2014:



	Holding Period
	Less Than 12 Months					12 Months or More					Total
	Gross Unrealized Loss		Estimated Fair Value		Number of Securities	Gross Unrealized Loss		Estimated Fair Value		Number of Securities	Gross Unrealized Loss		Estimated Fair Value		Number of Securities
	(in thousands, except number of securities)
September 30, 2015
Mortgage-backed securities	$	369	$	76,181	20	$	406	$	22,447	9	$	775	$	98,628	29
Collateralized mortgage obligations	21		20,276		5	354		27,156		12	375		47,432		17
U.S. government agency securities	24		7,971		3	287		27,694		9	311		35,665		12
SBA loan pool securities	15		13,911		3	186		7,474		3	201		21,385		6
Municipal bonds-tax exempt	40		3,864		2	—		—		—	40		3,864		2
Municipal bonds-taxable	—		374		1	—		—		—	—		374		1
Corporate bonds	9		5,010		1	5		7,994		2	14		13,004		3
Other securities	—		—		—	88		937		3	88		937		3
Total	$	478	$	127,587	35	$	1,326	$	93,702	38	$	1,804	$	221,289	73
December 31, 2014
Mortgage-backed securities	$	288	$	102,704	21	$	915	$	50,625	19	$	1,203	$	153,329	40
Collateralized mortgage obligations	350		78,191		21	724		33,308		13	1,074		111,499		34
U.S. government agency securities	—		5,000		1	1,822		73,142		26	1,822		78,142		27
SBA loan pool securities	155		85,062		15	433		11,975		4	588		97,037		19
Municipal bonds-taxable	—		—		—	91		5,538		5	91		5,538		5
Corporate bonds	4		5,021		1	68		7,925		2	72		12,946		3
Other securities	—		—		—	80		1,945		4	80		1,945		4
Equity securities	36		214		1	—		—		—	36		214		1
Total	$	833	$	276,192	60	$	4,133	$	184,458	73	$	4,966	$	460,650	133

All individual securities that have been in a continuous unrealized loss position for 12 months or longer as of September 30, 2015 and December 31, 2014 had investment grade ratings upon purchase. The issuers of these securities have not established any cause for default on these securities and the various rating agencies have reaffirmed these securities’ long-term investment grade status as of September 30, 2015 and December 31, 2014. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated.

FASB ASC 320 requires OTTI securities to be written down when fair value is below amortized cost in circumstances where: (1) an entity has the intent to sell a security; (2) it is more likely than not that an entity will be required to sell the security before recovery of its amortized cost basis; or (3) an entity does not expect to recover the entire amortized cost basis of the security. If an entity intends to sell a security or if it is more likely than not the entity will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value. If an entity does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI write-down is separated into an amount representing credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in other comprehensive income.

The Company does not intend to sell these securities and it is more likely than not that we will not be required to sell the investments before the recovery of its amortized cost basis. In addition, the unrealized losses on municipal and corporate bonds are not considered other-than-temporarily impaired, as the bonds are rated investment grade and there are no credit quality concerns with the issuers. Interest payments have been made as scheduled, and management believes this will continue in the future and that the bonds will be repaid in full as scheduled. Therefore, in management’s opinion, all securities that have been in a continuous unrealized loss position for the past 12 months or longer as of September 30, 2015 and December 31, 2014 were not other-than-temporarily impaired, and therefore, no impairment charges as of September 30, 2015 and December 31, 2014 were warranted.

Realized gains and losses on sales of securities and proceeds from sales of securities were as follows for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015			2014
	(in thousands)
Gross realized gains on sales of securities	$	2,048	$	67	$	6,310		$	1,853
Gross realized losses on sales of securities	—		—		(166		)	(1		)
Net realized gains on sales of securities	$	2,048	$	67	$	6,144		$	1,852
Proceeds from sales of securities	$	44,782	$	9,778	$	352,224		$	135,834
Proceeds from called, matured and paid-down of securities	$	31,245	$	24,591	$	94,108		$	61,145

For the three months ended September 30, 2015, there was a $2.0 million net gain in earnings resulting from the sale of securities that had previously been recorded as net unrealized gains of $1.2 million in comprehensive income. For the three months ended September 30, 2014, there was a $67,000 net gain in earnings resulting from the sale of securities that had previously been recorded as net unrealized gains of $23,000 in comprehensive income.

For the nine months ended September 30, 2015, there was a $6.1 million net gain in earnings resulting from the redemption and sale of securities that had previously been recorded as net unrealized gains of $2.0 million in comprehensive income. For the three months ended September 30, 2014, there was a $1.9 million net gain in earnings resulting from the redemption and sale of securities that had previously been recorded as net unrealized losses of $498,000 in comprehensive income.

Securities available for sale with market values of $71.6 million and $76.2 million as of September 30, 2015 and December 31, 2014, respectively, were pledged to secure FHLB advances, public deposits and for other purposes as required or permitted by law.

- Definition

The entire disclosure for investments in certain debt and equity securities.

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