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, 2014

Assets and Liabilities Measured at Fair Value on Recurring Basis

As of September 30, 2014 and December 31, 2013, 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, 2014
Assets:
Securities available for sale:
Mortgage-backed securities	$	—	$	584,157	$	—	$	584,157
Collateralized mortgage obligations		—		196,211		—		196,211
U.S. government agency securities		172,793		—		—		172,793
SBA loan pools securities		—		114,117		—		114,117
Municipal bonds-tax exempt		—		3,711		718		4,429
Municipal bonds-taxable		—		16,660		—		16,660
Corporate bonds		—		16,940		—		16,940
U.S. treasury securities		163		—		—		163
Other securities		—		22,704		—		22,704
Equity security		—		—		450		450

Total securities available for sale	$	172,956	$	954,500	$	1,168	$	1,128,624

December 31, 2013
Assets:
Securities available for sale:
Mortgage-backed securities	$	—	$	217,059	$	—	$	217,059
Collateralized mortgage obligations		—		127,693		—		127,693
U.S. government agency securities		83,536		—		—		83,536
SBA loan pools securities		—		12,629		—		12,629
Municipal bonds-tax exempt		—		13,189		748		13,937
Municipal bonds-taxable		—		32,354		—		32,354
Corporate bonds		—		20,835		—		20,835
U.S. treasury securities		19,997		—		—		19,997
Other securities		—		2,886		—		2,886

Total securities available for sale	$	103,533	$	426,645	$	748	$	530,926

Liabilities:
Stock warrants	$	—	$	—	$	2	$	2

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, 2014:


	Beginning Balance as of January 1, 2014		Purchases, Issuances and Settlement			Realized Gains or Losses in Earnings		Unrealized Gains or Losses in Other Comprehensive Income			Ending Balance as of September 30, 2014
	(In thousands)
Assets:
Municipal bonds-tax exempt ⁽¹⁾	$	748	$	—		$	—	$	(30	)	$	718
Equity securities ⁽²⁾	$	—	$	450		$	—	$	—		$	450
Liabilities:
Stock warrants ⁽³⁾	$	2	$	(2	)	$	—	$	—		$	—

⁽¹⁾

Reflects a zero coupon tax credit municipal bond. As the Company was not able to obtain a price from independent external pricing service providers, the discounted cash flow method was used to determine its fair value. The bond carried a par value of $700,000 and an amortized value of $700,000 with a remaining life of 0.48 year at September 30, 2014.

⁽²⁾

Reflects two equity securities that are not actively traded. The fair value of one equity security with a fair value of $250,000 was computed using valuation multiples (price to book and price to earnings) derived from market transactions for comparable companies. The other equity security with a fair value of $200,000 was computed using valuation multiples (price to book and price to earnings) derived from 1) market transactions for comparable companies, and 2) publicly-traded comparable companies. In addition to these approaches, the Company considered a discounted cash flow approach, which cash flows, calculated based on a redemption or liquidation policy of the equity issuer, are discounted back to the present using a 10.5% discount rate.

⁽³⁾

Reflects warrants for our common stock issued in connection with services Cappello Capital Corp. provided to us as a placement agent in connection with our best efforts public offering and as our financial adviser in connection with our completed rights offering. The warrants were immediately exercisable when issued at an exercise price of $9.60 per share of our common stock and expire on October 14, 2015. There were no outstanding stock warrants as of September 30, 2014. See “Note 9 – Stockholders’ Equity” for more details.

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

As of September 30, 2014 and December 31, 2013, 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, 2014
	(In thousands)
September 30, 2014
Assets:
Impaired loans (excluding PCI loans) ⁽¹⁾	$	—	$	34,373	$	2,199	$	2,905
Other real estate owned ⁽²⁾		—		24,781		—		—


	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, 2013
	(In thousands)
December 31, 2013
Assets:
Impaired loans ⁽³⁾	$	—	$	36,254	$	1,738	$	2,431
Other real estate owned ⁽⁴⁾		—		756		—		10

⁽¹⁾

Include real estate loans of $33.6 million, commercial and industrial loans of $1.2 million, and consumer loans of $1.8 million.

⁽²⁾

Includes properties from the foreclosure of real estate loans of $24.8 million of which $22.3 million was acquired from CBI.

⁽³⁾

Include real estate loans of $32.2 million, commercial and industrial loans of $2.8 million, and consumer loans of $1.3 million.

⁽⁴⁾

Includes properties from the foreclosure of real estate loans of $756,000.

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments were as follows:


	September 30, 2014
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	197,016	$	197,016	$	—	$	—
Securities available for sale		1,128,624		172,956		954,500		1,168
Loans receivable, net of allowance for loan losses		2,628,091		—		—		2,686,838
Loans held for sale		7,757		—		7,757		—
Accrued interest receivable		9,880		9,880		—		—
Servicing assets		7,844		—		—		7,844
Investment in federal home loan bank stock		17,579		17,579		—		—
Investment in federal reserve bank stock		12,273		12,273		—		—
Financial liabilities:
Noninterest-bearing deposits		1,029,343		—		1,029,343		—
Interest-bearing deposits		2,568,811		—		—		2,565,504
Borrowings		128,509		—		—		128,509
Accrued interest payable		3,030		3,030		—		—
Off-balance sheet items:
Commitments to extend credit		327,381		—		—		327,381
Standby letters of credit		9,140		—		—		9,140


	December 31, 2013
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	179,357	$	179,357	$	—	$	—
Securities available for sale		530,926		103,533		426,645		748
Loans receivable, net of allowance for loan losses		2,177,498		—		—		2,204,069
Loans held for sale		—		—		—		—
Accrued interest receivable		7,055		7,055		—		—
Servicing assets		6,833		—		—		6,833
Investment in federal home loan bank stock		14,060		14,060		—		—
Investment in federal reserve bank stock		11,196		11,196		—		—
Financial liabilities:
Noninterest-bearing deposits		819,015		—		819,015		—
Interest-bearing deposits		1,693,310		—		—		1,693,739
Borrowings		127,546		—		—		247,249
Accrued interest payable		3,366		3,366		—		—
Off-balance sheet items:
Commitments to extend credit		246,161		—		—		246,161
Standby letters of credit		8,926		—		—		8,926

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References + Details