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

Annual report pursuant to Section 13 and 15(d)

Securities

Securities

12 Months Ended

Dec. 31, 2015

Investments, Debt and Equity Securities [Abstract]

The following is a summary of securities available for sale as of December 31, 2015 and 2014:



	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(In thousands)
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
Other securities	22,916		—		163		22,753
Total securities available for sale	$	700,627	$	2,488	$	4,819	$	698,296
December 31, 2014
Mortgage-backed securities (1) (2)	$	571,678	$	2,811	$	1,203	$	573,286
Collateralized mortgage obligations (1)	188,704		417		1,074		188,047
U.S. government agency securities	129,857		172		1,822		128,207
SBA loan pool securities	109,983		52		588		109,447
Municipal bonds-tax exempt	4,319		71		—		4,390
Municipal bonds-taxable	16,615		398		91		16,922
Corporate bonds	17,018		2		72		16,948
U.S. treasury securities	163		—		—		163
Other securities	22,916		57		80		22,893
Equity securities	450		—		36		414
Total securities available for sale	$	1,061,703	$	3,980	$	4,966	$	1,060,717


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


(2)	A portion of the mortgage-backed securities is comprised of home mortgage-backed securities backed by home equity conversion mortgages.

The amortized cost and estimated fair value of securities as of December 31, 2015, by contractual maturity, are shown below. Although mortgage-backed securities and collateralized mortgage obligations have contractual maturities through 2064, expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Available for Sale
	Amortized Cost		Estimated Fair Value
	(In thousands)
Over one year through five years	$	14,303	$	14,222
Over five years through ten years	152,114		152,032
Over ten years	149,856		150,675
Mortgage-backed securities	286,450		284,381
Collateralized mortgage obligations	97,904		96,986
Total	$	700,627	$	698,296

FASB ASC 320, “Investments – Debt and Equity Securities,” requires us to periodically evaluate our investments for other-than-temporary impairment (“OTTI”). There was no OTTI charge during the year ended December 31, 2015.

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 December 31, 2015 and 2014:



	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)
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
Other securities	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
December 31, 2014
Mortgage-backed securities	$	288	$	102,704	21	$	915	$	50,625	19	$	1,203	$	153,329	40
Collateralized mortgage obligations	350		78,191		21	724		33,308		13	1,074		111,499		34
U.S. government agency securities	—		5,000		1	1,822		73,142		26	1,822		78,142		27
SBA loan pool securities	155		85,062		15	433		11,975		4	588		97,037		19
Municipal bonds-tax exempt	—		—		—	91		5,538		5	91		5,538		5
Corporate bonds	4		5,021		1	68		7,925		2	72		12,946		3
Other securities	—		—		—	80		1,945		4	80		1,945		4
Equity securities	36		214		1	—		—		—	36		214		1
Total	$	833	$	276,192	60	$	4,133	$	184,458	73	$	4,966	$	460,650	133

All individual securities that have been in a continuous unrealized loss position for 12 months or longer as of December 31, 2015 and December 31, 2014 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 December 31, 2015 and December 31, 2014. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated.

FASB ASC 320 requires other-than-temporarily impaired securities to be written down when fair value is below amortized cost in circumstances where: (1) an entity has the intent to sell a security; (2) it is more likely than not that an entity will be required to sell the security before recovery of its amortized cost basis; or (3) an entity does not expect to recover the entire amortized cost basis of the security. If an entity intends to sell a security or if it is more likely than not the entity will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value. If an entity does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI write-down is separated into an amount representing credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in other comprehensive income.

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 investments before the recovery of its 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 December 31, 2015 and December 31, 2014 were not other-than-temporarily impaired, and therefore, no impairment charges as of December 31, 2015 and December 31, 2014 were warranted.

Realized gains and losses on sales of securities and proceeds from sales of securities were as follows for the periods indicated:



	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Gross realized gains on sales of securities	$	6,776		$	2,012		$	1,602
Gross realized losses on sales of securities	(165		)	(1		)	(563		)
Net realized gains on sales of securities	$	6,611		$	2,011		$	1,039
Proceeds from sales of securities	$	456,098		$	169,533		$	78,473

For the year ended December 31, 2015, there was a $6.6 million net gain in earnings resulting from the redemption and sale of securities that had previously been recognized as net unrealized gains of $1.9 million in comprehensive income. For the year ended December 31, 2014, there was a $2.0 million net gain in earnings resulting from the redemption and sale of securities that had previously been recorded as net unrealized losses of $498,000 in comprehensive income.

Securities available for sale with market values of $72.0 million and $76.2 million as of December 31, 2015 and 2014, respectively, were pledged to secure FHLB advances, public deposits and for other purposes as required or permitted by law.

- Definition

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

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