Hanmi Financial Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2019

Assets and Liabilities Measured at Fair Value on Recurring Basis

As of December 31, 2019 and 2018, assets and liabilities measured at fair value on a recurring basis are as follows:

	Level 1		Level 2		Level 3
	Quoted		Significant
	Prices in		Observable
	Active		Inputs with
	Markets		No Active
	for Identical		Market with Identical		Significant Unobservable		Total Fair
	Assets		Characteristics		Inputs		Value
	(in thousands)
December 31, 2019
Assets:
Securities available for sale:
U.S. Treasury securities	$	35,205	$	—	$	—	$	35,205
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities		—		410,800		—		410,800
Collateralized mortgage obligations		—		164,592		—		164,592
Debt securities		—		23,879		—		23,879
Total U.S. government agency and sponsored agency obligations		—		599,272		—		599,272
Total securities available for sale	$	35,205	$	599,272	$	—	$	634,477

December 31, 2018
Assets:
Securities available for sale:
U.S. Treasury securities	$	39,830	$	—	$	—	$	39,830
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities		—		295,034		—		295,034
Collateralized mortgage obligations		—		122,292		—		122,292
Debt securities		—		7,402		—		7,402
Total U.S. government agency and sponsored agency obligations		—		424,728		—		424,728
Municipal bonds-tax exempt		—		110,350		—		110,350
Total securities available for sale	$	39,830	$	535,078	$	—	$	574,908

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

As of December 31, 2019 and 2018, assets and liabilities measured at fair value on a non-recurring basis are as follows:

			Level 1		Level 2		Level 3
			Quoted		Significant
			Prices in		Observable
			Active		Inputs With
			Markets		No Active
			for Identical		Market With Identical		Significant Unobservable
	Total		Assets		Characteristics		Inputs
	(in thousands)
December 31, 2019
Assets:
Impaired loans and leases ⁽¹⁾	$	31,049	$	—	$	—	$	31,049
Other real estate owned		63		—		—		63
Bank-owned premises		1,900		—		—		1,900
December 31, 2018
Assets:
Impaired loans and leases ⁽²⁾	$	5,210	$	—	$	3,253	$	1,957
Other real estate owned		663		—		663		—

⁽¹⁾	Includes real estate loans of $41.4 million and commercial and industrial loans of $12.5 million.

⁽²⁾	Includes real estate loans of $3.5 million and commercial and industrial loans of $1.7 million.

Quantitative Information about Level 3 Fair Value Comments for Assets Measured at Fair Value on Non-Recurring Basis

The following table represents quantitative information about Level 3 fair value comments for assets measured at fair value on a non-recurring basis at December 31, 2019 and 2018:

	Fair Value		Valuation Techniques	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
December 31, 2019
Impaired loans and leases:
Real estate loans:
Commercial property
Other	$	13,926	Market approach	Market data comparison	⁽¹⁾
Construction		13,228	Market approach	Market data comparison	(3)% to 43% /21% ⁽²⁾
Total real estate loans		27,154
Commercial and industrial loans:
Commercial lines of credit		3,895	Market approach	Market data comparison	(8)% to 42% /18% ⁽²⁾
Total	$	31,049

Bank-owned premises		1,900	Market approach	Market data comparison	(30)% to 55% /(2)% ⁽²⁾

(1)

The values were estimated by current market data comparison, supplemented by cost information. The properties compared when possible, with others for sale and that have sold in the general time period. Adjustments are made for differences in equipment, mileage, cosmetics, conversions, originality, condition as well as sale terms and current economic conditions at time of sale.

(2)

Appraisal reports utilize a combination of valuation techniques including a market approach, where prices and other relevant information generated by market transactions involving similar or comparable properties are used to determine the appraised value. Appraisals may include an ‘as is’ and ‘upon completion’ valuation scenarios. Adjustments are routinely made in the appraisal process by third-party appraisers to adjust for differences between the comparable sales and income data. Adjustments also result from the consideration of relevant economic and demographic factors with the potential to affect property values. Also, prospective values are based on the market conditions which exist at the date of inspection combined with informed forecasts based on current trends in supply and demand for the property types under appraisal. Positive adjustments disclosed in this table represent increases to the sales comparison and negative adjustment represent decreases.

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments were as follows:

	December 31, 2019
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	121,678	$	121,678	$	—	$	—
Securities available for sale		634,477		35,205		599,272		—
Loans held for sale		6,020		—		6,382		—
Loans and leases receivable, net of allowance for loan and lease losses		4,548,739		—		—		4,520,322
Accrued interest receivable		11,742		11,742		—		—
Financial liabilities:
Noninterest-bearing deposits		1,391,624		—		1,391,624		—
Interest-bearing deposits		3,307,338		—		—		3,317,867
Borrowings and subordinated debentures		208,377		—		89,831		118,807
Accrued interest payable		11,215		11,215		—		—

	December 31, 2018
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	155,376	$	155,376	$	—	$	—
Securities available for sale		574,908		39,830		535,078		—
Loans held for sale		9,390		—		9,905		—
Loans and leases receivable, net of allowance for loan and lease losses		4,568,566		—		—		4,518,716
Accrued interest receivable		13,331		13,331		—		—
Financial liabilities:
Noninterest-bearing deposits		1,284,530		—		1,284,530		—
Interest-bearing deposits		3,462,705		—		—		3,458,523
Borrowings and subordinated debentures		172,808		—		98,020		54,939
Accrued interest payable		11,379		11,379		—		—