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

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2015

Assets and Liabilities Measured at Fair Value on Recurring Basis

As of September 30, 2015 and December 31, 2014, assets and liabilities measured at fair value on a recurring basis are as follows:



	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs with No Active Market with Identical Characteristics		Significant Unobservable Inputs		Balance
	(in thousands)
September 30, 2015
Assets:
Securities available for sale:
Mortgage-backed securities	$	—	$	324,504	$	—	$	324,504
Collateralized mortgage obligations	—		116,314		—		116,314
U.S. government agency securities	—		57,674		—		57,674
SBA loan pools securities	—		68,301		—		68,301
Municipal bonds-tax exempt	—		48,001		—		48,001
Municipal bonds-taxable	—		14,372		—		14,372
Corporate bonds	—		17,005		—		17,005
U.S. treasury securities	162		—		—		162
Other securities	23,007		—		—		23,007
Total securities available for sale	$	23,169	$	646,171	$	—	$	669,340
December 31, 2014
Assets:
Securities available for sale:
Mortgage-backed securities	$	—	$	573,286	$	—	$	573,286
Collateralized mortgage obligations	—		188,047		—		188,047
U.S. government agency securities ⁽¹⁾	—		128,207		—		128,207
SBA loan pools securities	—		109,447		—		109,447
Municipal bonds-tax exempt	—		3,681		709		4,390
Municipal bonds-taxable	—		16,922		—		16,922
Corporate bonds	—		16,948		—		16,948
U.S. treasury securities	163		—		—		163
Other securities ⁽²⁾	22,893		—		—		22,893
Equity securities	—		—		414		414
Total securities available for sale	$	23,056	$	1,036,538	$	1,123	$	1,060,717


⁽¹⁾	U.S. government agency securities of $128.2 million were reclassified as level 2 rather than level 1 as originally classified due to significant other observable inputs other than quoted prices for identical assets in active markets.


⁽²⁾	Other securities of $22.9 million were reclassified as level 1 rather than level 2 as originally classified due to the availability of quoted prices in active markets of the holdings.

Reconciliation and Income Statement Classification of Gains and Losses for All Assets and Liabilities

The table below presents a reconciliation and income statement classification of gains and losses for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2015:



	Beginning Balance as of January 1, 2015		Purchases, Issuances and Settlement			Realized Gains or (Losses) in Earnings			Unrealized Gains or Losses in Other Comprehensive Income		Ending Balance as of September 30, 2015
	(in thousands)
Assets:
Municipal bonds-tax exempt ⁽¹⁾	$	709	$	(709	)	$	—		$	—	$	—
Equity securities ⁽²⁾	$	414	$	(339	)	$	(75	)	$	—	$	—


⁽¹⁾	A zero coupon tax credit municipal bond matured during the first quarter of 2015.


⁽²⁾	Reflects two equity securities that were not actively traded. During the second quarter of 2015, one equity security with a book value of $200,000 with a fair value of $200,000 as of December 31, 2014 was sold at $75,000 loss and the other equity security with a book value of $250,000 with a fair value of $214,000 as of December 31, 2014 was reclassified to other assets.

Assets and Liabilities Measured at Fair Value on Non-Recurring Basis

As of September 30, 2015 and December 31, 2014, assets and liabilities measured at fair value on a non-recurring basis are as follows:



	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs With No Active Market With Identical Characteristics		Significant Unobservable Inputs		Loss During the nine Months Ended September 30, 2015
	(in thousands)
September 30, 2015
Assets:
Impaired loans (excluding PCI loans) ⁽¹⁾	$	—	$	24,794	$	1,202	$	1,985
OREO ⁽²⁾	$	—	$	13,249	$	—	$	444
	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs With No Active Market With Identical Characteristics		Significant Unobservable Inputs		Loss During the Twelve Months Ended December 31, 2014
	(in thousands)
December 31, 2014
Assets:
Impaired loans (excluding PCI loans) ⁽³⁾	$	—	$	32,171	$	781	$	2,774
OREO ⁽⁴⁾	$	—	$	15,790	$	—	$	—


⁽¹⁾	Consists of real estate loans of $23.4 million, commercial and industrial loans of $896,000, and consumer loans of $1.7 million.


⁽²⁾	Consists of properties obtained from the foreclosure of commercial property loans of $11.5 million and residential property loans of $1.7 million.


⁽³⁾	Consists of real estate loans of $30.0 million, commercial and industrial loans of $1.2 million and consumer loans of $1.7 million.


⁽⁴⁾	Consists of properties obtained from the foreclosure of commercial property loans of $13.2 million and residential property loans of $2.6 million.

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments were as follows:



	September 30, 2015
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	235,342	$	235,342	$	—	$	—
Securities available for sale	669,340		23,169		646,171		—
Loans receivable, net of allowance for loan losses	2,998,712		—		—		3,006,747
Loans held for sale	4,871		—		4,871		—
Accrued interest receivable	8,722		8,722		—		—
Servicing assets	11,986		—		—		11,986
FHLB stock	16,385		—		16,385		—
FRB stock	14,098		—		14,098		—
Financial liabilities:
Noninterest-bearing deposits	1,114,621		—		1,114,621		—
Interest-bearing deposits	2,404,073		—		—		2,404,110
Servicing liabilities	5,176		—		—		5,176
Borrowings	168,669		—		—		168,669
Accrued interest payable	2,985		2,985		—		—
Off-balance sheet items:
Commitments to extend credit	314,303		—		—		314,303
Standby letters of credit	5,603		—		—		5,603



	December 31, 2014
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	158,320	$	158,320	$	—	$	—
Securities available for sale ⁽¹⁾	1,060,717		23,056		1,036,538		1,123
Loans receivable, net of allowance for loan losses	2,735,832		—		—		2,738,401
Loans held for sale	5,451		—		5,451		—
Accrued interest receivable	9,749		9,749		—		—
Servicing assets	13,773		—		—		13,773
FHLB stock	17,580		—		17,580		—
FRB stock	12,273		—		12,273		—
Financial liabilities:
Noninterest-bearing deposits	1,022,972		—		1,022,972		—
Interest-bearing deposits	2,533,774		—		—		2,528,304
Servicing liabilities	5,971		—		—		5,971
Borrowings	168,544		—		—		149,983
Accrued interest payable	3,450		3,450		—		—
Off-balance sheet items:
Commitments to extend credit	309,584		—		—		309,584
Standby letters of credit	8,982		—		—		8,982

⁽¹⁾

Level 1 and Level 2 previously reported as $128.4 million and $931.2 million, respectively. U.S. government agency securities of $128.2 million were reclassified as Level 2 rather than Level 1 as originally classified due to significant other observable inputs other than quoted prices for identical assets in active markets. Other securities of $22.9 million were reclassified as Level 1 rather than Level 2 as originally classified due to the availability of quoted prices in active markets of the holdings.