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Liquidity
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6 Months Ended |
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Jun. 30, 2011
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| Liquidity [Abstract] | |
| LIQUIDITY |
NOTE 12 — LIQUIDITY
Hanmi Financial
Currently, management believes that Hanmi Financial, on a stand-alone basis, has adequate
liquid assets to meet its operating cash needs through December 31, 2011. On August 29, 2008, we
elected to suspend payment of quarterly dividends on our common stock in order to preserve our
capital position. In addition, Hanmi Financial has elected to defer quarterly interest payments on
its outstanding junior subordinated debentures until further notice, beginning with the interest
payment that was due on January 15, 2009. As of June 30, 2011, Hanmi Financial’s liquid assets,
including amounts deposited with the Bank, totaled $6.3 million, down from $7.7 million at December
31, 2010.
Hanmi Bank
Management believes that the Bank, on a stand-alone basis, has adequate liquid assets to meet
its current obligations. The Bank’s primary funding source will continue to be deposits originating
from its branch platform. The Bank’s wholesale funds historically consisted of FHLB advances and
brokered deposits. As of June 30, 2011, in compliance with its regulatory restrictions, the Bank
had no brokered deposits, and had FHLB advances of $3.5 million, a decrease of $150.2 million from
$153.7 million at December 31, 2010.
The Bank’s primary source of borrowings is the FHLB, from which the Bank is eligible to borrow
up to 15 percent of its total assets. As of June 30, 2011, the total borrowing capacity available
based on pledged collateral and the remaining available borrowing capacity were $391.6 million and
$387.7 million, respectively. The Bank’s FHLB borrowings as of June 30, 2011 totaled $3.5 million,
representing 0.1 percent of total assets.
As of August 5, 2011, the Bank’s FHLB borrowing capacity available based on pledged collateral
and the remaining available borrowing capacity were $378.1 million and $374.6 million,
respectively. The amount that the FHLB is willing to advance differs based on the quality and
character of qualifying collateral pledged by the Bank, and the advance rates for qualifying
collateral may be adjusted upwards or downwards by the FHLB from time to time.
To the extent deposit renewals and deposit growth are not sufficient to fund maturing and withdrawable
deposits, repay maturing borrowings, fund existing and future loans and investment securities and
otherwise fund working capital needs and capital expenditures, the Bank may utilize the remaining
borrowing capacity from its FHLB borrowing arrangement.
As a means of augmenting its liquidity, the Bank had an available borrowing source of $150.5
million from the Federal Reserve Discount Window (the “Fed Discount Window”), to which the Bank
pledged loans with a carrying value of $321.1 million, and had no borrowings as of June 30, 2011.
The Bank is currently in the secondary program of the Borrower in Custody Program of the Fed
Discount Window, which allows the Bank to request very short-term credit (typically overnight) at a
rate that is above the primary credit rate within a specified period. In August 2010, South Street
Securities LLC extended a line of credit to the Bank for reverse repurchase agreements up to a
maximum of $100.0 million.
Current market conditions have limited the Bank’s liquidity sources principally to
interest-bearing deposits, unpledged marketable securities, and secured funding outlets such as the
FHLB and Fed Discount Window. There can be no assurance that actions by the FHLB or Federal Reserve
Bank would not reduce the Bank’s borrowing capacity or that the Bank would be able to continue to
replace deposits at competitive rates. As of June 30, 2011, in compliance with its regulatory
restrictions, the Bank did not have any brokered deposits and would consult in advance with its
regulators if it were to consider accepting brokered deposits in the future.
The Bank has Contingency Funding Plans (“CFPs”) designed to ensure that liquidity sources are
sufficient to meet its ongoing obligations and commitments, particularly in the event of a
liquidity contraction. The CFPs are designed to examine and quantify its liquidity under various
“stress” scenarios. Furthermore, the CFPs provide a framework for management and other critical
personnel to follow in the event of a liquidity contraction or in anticipation of such an event.
The CFPs address authority for activation and decision making, liquidity options and the
responsibilities of key departments in the event of a liquidity contraction.
The Bank believes that it nonetheless has adequate liquidity resources to fund its obligations
with its interest-bearing deposits, unpledged marketable securities, and secured credit lines with
the FHLB and Fed Discount Window.
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