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

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2021

Assets and Liabilities Measured at Fair Value on Recurring Basis

As of June 30, 2021 and December 31, 2020, assets and liabilities measured at fair value on a recurring basis are as follows:

	Level 1		Level 2		Level 3
			Significant
			Observable
	Quoted Prices in		Inputs with No
	Active Markets		Active Market		Significant
	for Identical		with Identical		Unobservable
	Assets		Characteristics		Inputs		Total Fair Value
	(in thousands)
June 30, 2021
Assets:
Securities available for sale:
U.S. Treasury securities	$	10,010	$	—	$	—	$	10,010
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities		—		611,203		—		611,203
Collateralized mortgage obligations		—		101,451		—		101,451
Debt securities		—		87,065		—		87,065
Total U.S. government agency and sponsored agency obligations		—		799,719		—		799,719
Municipal bonds-tax exempt		—		52,390		—		52,390
Total securities available for sale	$	10,010	$	852,109	$	—	$	862,119
Derivative financial instruments	$	—	$	586	$	—	$	586

Liabilities:
Derivative financial instruments	$	—	$	562	$	—	$	562

December 31, 2020
Assets:
Securities available for sale:
U.S. Treasury securities	$	10,132	$	—	$	—	$	10,132
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities		—		519,241		—		519,241
Collateralized mortgage obligations		—		133,601		—		133,601
Debt securities		—		90,807		—		90,807
Total U.S. government agency and sponsored agency obligations		—		743,649		—		743,649
Total securities available for sale	$	10,132	$	743,649	$	—	$	753,781
Derivative financial instruments	$	—	$	1,088	$	—	$	1,088

Liabilities:
Derivative financial instruments	$	—	$	1,149	$	—	$	1,149

Assets and Liabilities Measured at Fair Value on Non-Recurring Basis

As of June 30, 2021 and December 31, 2020, assets and liabilities measured at fair value on a non-recurring basis are as follows:

			Level 1		Level 2		Level 3
					Significant
					Observable
			Quoted Prices in		Inputs With No
			Active Markets		Active Market		Significant
			for Identical		With Identical		Unobservable
	Total		Assets		Characteristics		Inputs
	(in thousands)
June 30, 2021
Assets:
Collateral dependent loans ⁽¹⁾	$	26,728	$	—	$	—	$	26,728
Other real estate owned		712		—		—		712
Repossessed personal property		445		—		—		445

December 31, 2020
Assets:
Collateral dependent loans ⁽²⁾	$	63,114	$	—	$	—	$	63,114
Other real estate owned		2,360		—		—		2,360
Repossessed personal property		857		—		—		857

⁽¹⁾	Consisted of real estate loans of $26.7 million.

(2)	Consisted of real estate loans of $63.1 million and commercial and industrial loans of $41,000.

Quantitative Information about Level 3 Fair Value Comments for Assets Measured at Fair Value on Non-Recurring Basis

The following table represents quantitative information about Level 3 fair value comments for assets measured at fair value on a non-recurring basis at June 30, 2021 and December 31, 2020:

	Fair Value		Valuation Techniques	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
June 30, 2021
Collateral dependent loans:
Real estate loans:
Commercial property
Retail	$	6,135	Market approach	Market data comparison	(45)% to 23% / (22)%
Hospitality		8,641	Market approach	Market data comparison	⁽²⁾
Other		203	Market approach	Market data comparison	(66)% to21% / (54)%
Construction		10,046	Market approach	Market data comparison	(20)% to 10% / (10)%
Residential/consumer loans		1,703	Market approach	Market data comparison	(20)% to 8% / (15)%
Total real estate loans		26,728
Total	$	26,728

Other real estate owned	$	712	Market approach	Market data comparison	(53)% to 15% / (23)%

Repossessed personal property		445	Market approach	Market data comparison	⁽³⁾

December 31, 2020
Collateral dependent loans:
Real estate loans:
Commercial property
Retail	$	6,330	Market approach	Market data comparison	(45)% to 35% / 14%
Hospitality		20,612	Market approach	Market data comparison	⁽²⁾
Other		8,410	Market approach	Market data comparison	(55)% to 34% / 15% ⁽¹⁾
Construction		24,854	Market approach	Market data comparison	(20)% to 12% / (8)%
Residential/consumer loans		2,867	Market approach	Market data comparison	(13)% to 15% / 6% ⁽¹⁾
Total real estate loans		63,073
Commercial and industrial loans:
Commercial lines of credit		41	Market approach	Market data comparison	(9)% to 15% / 6% ⁽¹⁾
Total	$	63,114

Other real estate owned	$	2,360	Market approach	Market data comparison	(35)% to 15% / (14)%

Repossessed personal property		857	Market approach	Market data comparison	⁽³⁾

⁽¹⁾

Appraisal reports utilize a combination of valuation techniques including a market approach, where prices and other relevant information generated by market transactions involving similar or comparable properties are used to determine the appraised value. Appraisals may include an ‘as is’ and ‘upon completion’ valuation scenarios. Adjustments are routinely made in the appraisal process by third-party appraisers to adjust for differences between the comparable sales and income data. Adjustments also result from the consideration of relevant economic and demographic factors with the potential to affect property values. Also, prospective values are based on the market conditions which exist at the date of inspection combined with informed forecasts based on current trends in supply and demand for the property types under appraisal. Positive adjustments disclosed in this table represent increases to the sales comparison and negative adjustment represent decreases.

⁽²⁾	No discount weighted average range available given primary valuation methodology is via discounted cash flow analysis (DCF) for going concern properties.

⁽³⁾

The equipment is usually too low in value to use a professional appraisal service. The values are determined internally using a combination of auction values, vendor recommendations and sales comparisons depending on the equipment type. Some highly commoditized equipment, such as commercial trucks have services that provide industry values.

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments were as follows:

	June 30, 2021
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	697,789	$	697,789	$	—	$	—
Securities available for sale		862,119		10,010		852,109		—
Loans held for sale		36,030		—		39,104		—
Loans receivable, net of allowance for credit losses		4,736,720		—		—		4,724,677
Accrued interest receivable		14,397		14,397		—		—
Financial liabilities:
Noninterest-bearing deposits		2,354,671		—		2,354,671		—
Interest-bearing deposits		3,275,159		—		—		3,275,592
Borrowings and subordinated debentures		269,243		—		150,799		120,635
Accrued interest payable		1,855		1,855		—		—

	December 31, 2020
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	391,849	$	391,849	$	—	$	—
Securities available for sale		753,781		10,132		743,649		—
Loans held for sale		8,568		—		9,270		—
Loans receivable, net of allowance for credit losses		4,789,742		—		—		4,755,302
Accrued interest receivable		16,363		16,363		—		—
Financial liabilities:
Noninterest-bearing deposits		1,898,766		—		1,898,766		—
Interest-bearing deposits		3,376,242		—		—		3,380,179
Borrowings and subordinated debentures		268,972		—		151,714		118,809
Accrued interest payable		4,564		4,564		—		—