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, 2017

Investments, Debt and Equity Securities [Abstract]

The following is a summary of securities available for sale as of September 30, 2017 and December 31, 2016:



	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(in thousands)
September 30, 2017
Mortgage-backed securities ^{(1) (2)}	$	310,111	$	793	$	1,154	$	309,750
Collateralized mortgage obligations ⁽¹⁾	107,052		16		944		106,124
U.S. government agency securities	7,499		—		42		7,457
SBA loan pool securities	4,036		—		140		3,896
Municipal bonds-tax exempt	146,177		2,424		77		148,524
U.S. treasury securities	153		—		—		153
Mutual funds	22,916		—		380		22,536
Total securities available for sale	$	597,944	$	3,233	$	2,737	$	598,440

December 31, 2016
Mortgage-backed securities ^{(1) (2)}	$	230,489	$	598	$	1,457	$	229,630
Collateralized mortgage obligations ⁽¹⁾	77,447		6		1,002		76,451
U.S. government agency securities	7,499		—		58		7,441
SBA loan pool securities	4,356		—		210		4,146
Municipal bonds-tax exempt	159,789		236		1,995		158,030
Municipal bonds-taxable	13,391		319		9		13,701
Corporate bonds	5,010		5		—		5,015
U.S. treasury securities	156		—		—		156
Mutual funds	22,916		—		522		22,394
Total securities available for sale	$	521,053	$	1,164	$	5,253	$	516,964


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


⁽²⁾	Includes securities collateralized by home equity conversion mortgages with an estimated fair value of $8.1 million and $52.9 million as of September 30, 2017 and December 31, 2016, respectively.

The amortized cost and estimated fair value of securities as of September 30, 2017, 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	$	24,537	$	24,452
Over one year through five years	64,646		64,519
Over five years through ten years	256,367		257,279
Over ten years	252,394		252,190
Total	$	597,944	$	598,440

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, 2017 and December 31, 2016:



	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, 2017
Mortgage-backed securities	$	787	$	171,919	53	$	367	$	21,430	9	$	1,154	$	193,349	62
Collateralized mortgage obligations	320		62,309		23	624		38,940		24	944		101,249		47
U.S. government agency securities	42		7,457		3	—		—		—	42		7,457		3
SBA loan pool securities	—		—		—	140		3,896		2	140		3,896		2
Municipal bonds-tax exempt	60		3,459		3	17		1,704		4	77		5,163		7
U.S. treasury securities	—		—		—	—		—		—	—		—		—
Mutual funds	254		20,632		2	126		1,899		4	380		22,531		6
Total	$	1,463	$	265,776	84	$	1,274	$	67,869	43	$	2,737	$	333,645	127

December 31, 2016
Mortgage-backed securities	$	1,345	$	102,647	38	$	112	$	11,350	3	$	1,457	$	113,997	41
Collateralized mortgage obligations	676		60,786		27	326		10,579		7	1,002		71,365		34
U.S. government agency securities	58		7,441		3	—		—		—	58		7,441		3
SBA loan pool securities	—		—		—	210		4,146		2	210		4,146		2
Municipal bonds-tax exempt	1,995		125,004		54	—		—		—	1,995		125,004		54
Municipal bonds-taxable	9		2,904		2	—		—		—	9		2,904		2
Mutual funds	413		21,478		4	109		916		3	522		22,394		7
Total	$	4,496	$	320,260	128	$	757	$	26,991	15	$	5,253	$	347,251	143

All individual securities that have been in a continuous unrealized loss position for 12 months or longer as of September 30, 2017 and December 31, 2016 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, 2017 and December 31, 2016. 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. 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, 2017 and December 31, 2016 were not other-than-temporarily impaired, and therefore, no impairment charges as of September 30, 2017 and December 31, 2016 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,
	2017		2016			2017		2016
	(in thousands)
Gross realized gains on sales of securities	$	267	$	396		$	1,473	$	396
Gross realized losses on sales of securities	—		(350		)	—		(350		)
Net realized gains on sales of securities	$	267	$	46		$	1,473	$	46
Proceeds from sales of securities	$	17,644	$	78,282		$	70,333	$	78,282

For the three months ended September 30, 2017, there was a $267,000 net gain in earnings resulting from sales of securities. Net unrealized gains of $227,000 related to these sold securities had previously been recorded in accumulated other comprehensive income as of the beginning of the period. There was a $46,000 net gain in earnings resulting from sales of securities during the three months ended September 30, 2016, that had previously been recorded as net unrealized gains of $321,000 in comprehensive income.

For the nine months ended September 30, 2017, there was a $1.5 million net gain in earnings resulting from the sale of securities. Net unrealized gains of $971,000 related to these sold securities had previously been recorded in accumulated other comprehensive income as of the beginning of the period. There was a $46,000 net gain in earnings resulting from sales of securities during the nine months ended September 30, 2016, that had previously been recorded as net unrealized gains of $314,000 in comprehensive income.

Securities available for sale with market values of $130.7 million and $133.0 million as of September 30, 2017 and December 31, 2016, 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.

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