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, 2016

Investments, Debt and Equity Securities [Abstract]

The following is a summary of securities available for sale as of September 30, 2016 and December 31, 2015:



	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(in thousands)
September 30, 2016
Mortgage-backed securities ^{(1) (2)}	$	239,569	$	3,778	$	102	$	243,245
Collateralized mortgage obligations ⁽¹⁾	84,277		174		238		84,213
U.S. government agency securities	7,499		20		—		7,519
SBA loan pool securities	4,585		—		40		4,545
Municipal bonds-tax exempt	160,371		6,865		—		167,236
Municipal bonds-taxable	13,434		491		—		13,925
Corporate bonds	5,012		—		1		5,011
U.S. treasury securities	157		1		—		158
Mutual funds	22,916		280		87		23,109
Total securities available for sale	$	537,820	$	11,609	$	468	$	548,961

December 31, 2015
Mortgage-backed securities ^{(1) (2)}	$	286,450	$	392	$	2,461	$	284,381
Collateralized mortgage obligations ⁽¹⁾	97,904		79		997		96,986
U.S. government agency securities	48,478		—		656		47,822
SBA loan pool securities	63,670		7		411		63,266
Municipal bonds-tax exempt	162,101		1,820		19		163,902
Municipal bonds-taxable	13,932		189		88		14,033
Corporate bonds	5,017		—		24		4,993
U.S. treasury securities	159		1		—		160
Mutual funds	22,916		—		163		22,753
Total securities available for sale	$	700,627	$	2,488	$	4,819	$	698,296


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


⁽²⁾	Include securities collateralized by home equity conversion mortgages with total estimated fair value of $54.5 million and $58.6 million as of September 30, 2016 and December 31, 2015, respectively.

The amortized cost and estimated fair value of securities as of September 30, 2016, by contractual or expected maturity, are shown below. Collateralized mortgage obligations are included in the table shown below based on their expected maturities. Mutual funds do not have contractual maturities. However, they are included in the table shown below as over ten years since the Company intends to hold these securities for at least this duration. All other securities are included based on their contractual maturities.



	Available for Sale
	Amortized Cost		Estimated Fair Value
	(in thousands)
Within one year	$	1	$	1
Over one year through five years	80,351		80,744
Over five years through ten years	215,587		221,175
Over ten years	241,881		247,041
Total	$	537,820	$	548,961

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, 2016 and December 31, 2015:



	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, 2016
Mortgage-backed securities	$	17	$	9,799	5	$	85	$	11,639	3	$	102	$	21,438	8
Collateralized mortgage obligations	110		34,898		13	127		12,721		7	237		47,619		20
U.S. government agency securities	1		3,000		1	—		—		—	1		3,000		1
SBA loan pool securities	—		—		—	40		4,545		2	40		4,545		2
Corporate bonds	1		5,010		1	—		—		—	1		5,010		1
Mutual funds	—		—		—	87		938		3	87		938		3
Total	$	129	$	52,707	20	$	339	$	29,843	15	$	468	$	82,550	35

December 31, 2015
Mortgage-backed securities	$	1,734	$	193,931	52	$	727	$	21,659	9	$	2,461	$	215,590	61
Collateralized mortgage obligations	335		48,970		18	662		32,964		13	997		81,934		31
U.S. government agency securities	201		23,289		8	455		24,533		8	656		47,822		16
SBA loan pool securities	161		50,499		12	250		7,036		3	411		57,535		15
Municipal bonds-tax exempt	19		8,922		6	—		—		—	19		8,922		6
Municipal bonds-taxable	88		7,106		4	—		—		—	88		7,106		4
Corporate bonds	24		4,994		1	—		—		—	24		4,994		1
Mutual funds	66		21,820		3	97		928		3	163		22,748		6
Total	$	2,628	$	359,531	104	$	2,191	$	87,120	36	$	4,819	$	446,651	140

All individual securities that have been in a continuous unrealized loss position for 12 months or longer as of September 30, 2016 and December 31, 2015 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, 2016 and December 31, 2015. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated.

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 securities before the recovery of their 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, 2016 and December 31, 2015 were not other-than-temporarily impaired, and therefore, no impairment charges as of September 30, 2016 and December 31, 2015 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,
	2016			2015		2016			2015
	(in thousands)
Gross realized gains on sales of securities	$	396		$	2,048	$	396		$	6,310
Gross realized losses on sales of securities	(350		)	—		(350		)	(166		)
Net realized gains on sales of securities	$	46		$	2,048	$	46		$	6,144
Proceeds from sales of securities	$	78,282		$	44,782	$	78,282		$	352,224

For the three months ended September 30, 2016, there was a $46,000 net gain in earnings resulting from the sale of securities that had previously been recorded as net unrealized gains of $321,000 in comprehensive income. 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 nine months ended September 30, 2016, there was a $46,000 net gain in earnings resulting from the sale of securities that had previously been recorded as net unrealized losses of $314,000 in comprehensive income. For the nine months ended September 30, 2015, there was a $6.1 million net gain in earnings resulting from the sale of securities that had previously been recorded as net unrealized gains of $2.0 million in comprehensive income.

Securities available for sale with market values of $108.5 million and $72.0 million as of September 30, 2016 and December 31, 2015, respectively, were pledged to secure public deposits and for other purposes as required or permitted by law.

- Definition

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

+ References + Details