Hanmi Financial Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation

Share-Based Compensation

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation Expense

For the three months ended June 30, 2017 and 2016, share-based compensation expenses were $670,000 and $923,000, respectively, and net tax benefits recognized from stock option and restricted stock awards were $274,000 and $366,000, respectively. For the six months ended June 30, 2017 and 2016, share-based compensation expenses were $1.4 million and $1.5 million, respectively, and net tax benefits recognized from stock option exercises and restricted stock awards were $550,000 and $604,000, respectively.

The Company adopted Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation, during the three months ended March 30, 2016. Adoption of this ASU did not have a material impact on the Company's financial statements. As a result of adoption of this ASU, excess tax benefits related to the Company's share-based compensation were recognized as income tax expense in the consolidated statement of income during the six months ended June 30, 2017 and 2016.

Unrecognized Share-Based Compensation Expense

As of June 30, 2017, unrecognized share-based compensation expense was as follows:



	Unrecognized Expense		Average Expected Recognition Period
	(in thousands)
Stock option awards	$	32	0.8 years
Restricted stock awards	5,170		2.3 years
Total unrecognized share-based compensation expense	$	5,202	2.3 years

Stock Option Awards

The table below provides stock option information for the three months ended June 30, 2017:



	Number of Shares		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value of In-the- Money Options
						(in thousands)
Options outstanding at beginning of period	386,901		$	17.53	6.5 years	$	5,116	⁽¹⁾
Options exercised	(10,500	)	$	12.13	4.6 years	—
Options outstanding at end of period	376,401		$	17.68	6.3 years	$	4,168	⁽²⁾

Options exercisable at end of period	357,730		$	17.45	6.3 years	$	4,042	⁽²⁾


⁽¹⁾	Intrinsic value represents the excess of the closing stock price on the last trading day of the period, which was $30.75 as of March 31, 2017, over the exercise price, multiplied by the number of options.


⁽²⁾	Intrinsic value represents the excess of the closing stock price on the last trading day of the period, which was $28.75 as of June 30, 2017, over the exercise price, multiplied by the number of options.

The table below provides stock option information for the six months ended June 30, 2017:



	Number of Shares		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value of In-the- Money Options
						(in thousands)
Options outstanding at beginning of period	387,901		$	17.49	6.8 years	$	6,752	⁽¹⁾
Options exercised	(11,500	)	$	12.16	4.7 years	—
Options outstanding at end of period	376,401		$	17.68	6.3 years	$	4,168	⁽²⁾

Options exercisable at end of period	357,730		$	17.45	6.3 years	$	4,042	⁽²⁾


⁽¹⁾	Intrinsic value represents the excess of the closing stock price on the last trading day of the period, which was $34.90 as of December 31, 2016, over the exercise price, multiplied by the number of options.


⁽²⁾	Intrinsic value represents the excess of the closing stock price on the last trading day of the period, which was $28.75 as of June 30, 2017, over the exercise price, multiplied by the number of options.

There were 10,500 and 18,000 stock options exercised during the three months ended June 30, 2017 and 2016, respectively. There were 11,500 and 40,209 stock options exercised during the six months ended June 30, 2017 and 2016, respectively.

Restricted Stock Awards

Restricted stock awards under the Company’s 2007 and 2013 Equity Compensation Plans typically vest over three years and are subject to forfeiture if employment terminates prior to the lapse of restrictions. Hanmi Financial becomes entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted shares when the restrictions are released and the shares are issued. Forfeited shares of restricted stock become available for future grants upon forfeiture.

The table below provides information for restricted stock awards for the three and six months ended June 30, 2017:



	Three Months Ended June 30, 2017				Six Months Ended June 30, 2017
	Number of Shares		Weighted- Average Grant Date Fair Value Per Share		Number of Shares		Weighted- Average Grant Date Fair Value Per Share
Restricted stock at beginning of period	336,455		$	20.39	343,958		$	16.60
Restricted stock granted	3,761		28.91		91,006		31.36
Restricted stock vested	(30,430	)	22.62		(119,344	)	18.07
Restricted stock forfeited	(3,835	)	25.25		(9,669	)	23.26
Restricted stock at end of period	305,951		20.21		305,951		20.21

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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