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

Annual report pursuant to Section 13 and 15(d)

Loans Receivable (Tables)

Loans Receivable (Tables)

12 Months Ended

Dec. 31, 2021

Loans receivable consisted of the following as of the dates indicated:

	December 31,
	2021			2020
	(in thousands)
Real estate loans:
Commercial property
Retail	$	970,134		$	824,606
Hospitality		717,692			859,953
Other ⁽¹⁾		1,919,033			1,610,377
Total commercial property loans		3,606,859			3,294,936
Construction		95,006			58,882
Residential/consumer loans		400,546			345,831
Total real estate loans		4,102,411			3,699,649
Commercial and industrial loans		561,831			757,255
Leases receivable		487,299			423,264
Loans receivable		5,151,541			4,880,168
Allowance for credit losses		(72,557	)		(90,426	)
Loans receivable, net	$	5,078,984		$	4,789,742

⁽¹⁾	Includes, among other property types, mixed-use, gas station, apartment, office, industrial, faith-based facilities and warehouse; the remaining real estate categories represent less than one percent of the Bank's total loans receivable.

Information on SBA Loans Held for Sale

The following table details the information on SBA loans held for sale by portfolio segment for the years ended December 31, 2021 and 2020:

	Real Estate			Commercial and Industrial			Total
	(in thousands)
December 31, 2021
Balance at beginning of period	$	8,042		$	526		$	8,568
Originations and transfers		87,775			177,968			265,743
Sales		(88,858	)		(172,995	)		(261,853	)
Principal paydowns and amortization		(5	)		889			884
Balance at end of period	$	6,954		$	6,388		$	13,342

December 31, 2020
Balance at beginning of period	$	2,943		$	3,077		$	6,020
Originations and transfers		44,770			26,922			71,692
Sales		(39,666	)		(29,386	)		(69,052	)
Principal paydowns and amortization		(5	)		(87	)		(92	)
Balance at end of period	$	8,042		$	526		$	8,568

Allowance for Credit Losses

Activity in the allowance for credit losses was as follows for the periods indicated:

	As of and for the Year Ended December 31,
	2021			2020			2019
	(in thousands)
Allowance for credit losses:
Balance at beginning of period	$	90,426		$	61,408		$	31,974
Adjustment related to adoption of ASU 2016-13		—			17,433			—
Adjusted balance		90,426			78,841			31,974
Less loans receivable charged off		6,373			33,952			4,588
Recoveries on loans receivable previously charged off		(12,650	)		(3,063	)		(3,852	)
Provision (recovery) for credit losses		(24,146	)		42,474			30,170
Balance at end of period	$	72,557		$	90,426		$	61,408

Allowance for Credit Losses by Portfolio Segment

The following table details the information on the allowance for credit losses by portfolio segment for the years ended December 31, 2021, 2020 and 2019:

	Real Estate			Commercial and Industrial			Leases Receivable			Unallocated			Total
	(in thousands)
December 31, 2021
Allowance for credit losses:
Beginning balance	$	51,876		$	21,410		$	17,140		$	—		$	90,426
Less loans charged off		1,427			546			4,400			—			6,373
Recoveries on loans receivable previously charged off		(10,807	)		(897	)		(946	)		—			(12,650	)
Provision (recovery) for credit losses		(12,366	)		(9,343	)		(2,437	)		—			(24,146	)
Ending balance	$	48,890		$	12,418		$	11,249		$	—		$	72,557

December 31, 2020
Allowance for credit losses:
Beginning balance	$	36,435		$	16,206		$	8,767		$	—		$	61,408
Adjustment related to adoption of ASU 2016-13		14,028			(2,497	)		5,902			—			17,433
Adjusted balance		50,463			13,709			14,669			—			78,841
Less loans charged off		15,567			13,312			5,073			—			33,952
Recoveries on loans receivable previously charged off		(2,124	)		(336	)		(603	)		—			(3,063	)
Provision for credit losses		14,856			20,677			6,941			—			42,474
Ending balance	$	51,876		$	21,410		$	17,140		$	—		$	90,426

December 31, 2019
Allowance for credit losses:
Beginning balance	$	18,482		$	7,162		$	6,303		$	27		$	31,974
Less loans charged off		132			1,293			3,162			—			4,588
Recoveries on loans receivable previously charged off		(2,190	)		(1,241	)		(422	)		—			(3,852	)
Provision (recovery) for credit losses		15,896			9,097			5,205			(27	)		30,170
Ending balance	$	36,435		$	16,206		$	8,767		$	—		$	61,408

The table below presents the allowance for credit losses by portfolio segment as a percentage of the total allowance for credit losses and loans by portfolio segment as a percentage of the aggregate investment of loans receivable for the years ended December 31, 2021 and 2020:

	December 31, 2021										December 31, 2020
	Allowance Amount		Percentage of Total Allowance			Total Loans		Percentage of Total Loans			Allowance Amount		Percentage of Total Allowance			Total Loans		Percentage of Total Loans
	(dollars in thousands)
Real estate loans:
Commercial property
Retail	$	6,579		9.1	%	$	970,134		18.8	%	$	4,855		5.4	%	$	824,606		16.9	%
Hospitality		22,670		31.2	%		717,692		13.9	%		28,801		31.9	%		859,953		17.6	%
Other		15,065		20.8	%		1,919,033		37.3	%		13,991		15.4	%		1,610,377		33.0	%
Total commercial property loans		44,314		61.1	%		3,606,859		70.0	%		47,647		52.7	%		3,294,936		67.5	%
Construction		4,078		5.6	%		95,006		1.8	%		2,876		3.2	%		58,882		1.2	%
Residential/consumer loans		498		0.7	%		400,546		7.8	%		1,353		1.5	%		345,831		7.1	%
Total real estate loans		48,890		67.4	%		4,102,411		79.6	%		51,876		57.4	%		3,699,649		75.8	%
Commercial and industrial loans		12,418		17.1	%		561,831		10.9	%		21,410		23.6	%		757,255		15.5	%
Leases receivable		11,249		15.5	%		487,299		9.5	%		17,140		19.0	%		423,264		8.7	%
Total	$	72,557		100.0	%	$	5,151,541		100.0	%	$	90,426		100.0	%	$	4,880,168		100.0	%

Summary of Amortized Cost Basis of Collateral Dependent Loans By Class of Loans

The following table represents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2021 and 2020, for which repayment is expected to be obtained through the sale of the underlying collateral and any collateral dependent loans that are still accruing but are considered nonperforming.

	December 31,
	2021		2020
	(in thousands)
Real estate loans:
Commercial property
Retail	$	1,917	$	6,330
Hospitality		—		20,612
Other		499		8,410
Total commercial property loans		2,416		35,352
Construction		—		24,854
Residential/consumer loans		982		2,867
Total real estate loans		3,398		63,073
Commercial and industrial loans		—		41
Total ⁽¹⁾	$	3,398	$	63,114

⁽¹⁾	Includes, among other property types, hospitality, retail and other, mixed-use, gas station, apartment, office, industrial, faith-based facilities and warehouse; the remaining real estate categories represent less than one percent of the Bank's total loans receivable.

Credit Quality of Loan Portfolio

As of December 31, 2021 and 2020, the recorded investment in pass/pass-watch, special mention and classified (substandard, doubtful and loss) loans, disaggregated by loan class, were as follows:

	Pass/Pass- Watch		Special Mention		Classified		Total
	(in thousands)
December 31, 2021
Real estate loans:
Commercial property
Retail	$	952,651	$	5,949	$	11,534	$	970,134
Hospitality		662,834		36,248		18,610		717,692
Other		1,891,877		9,846		17,310		1,919,033
Total commercial property loans		3,507,362		52,043		47,454		3,606,859
Construction		74,439		20,567		—		95,006
Residential/consumer loans		396,007		3,557		982		400,546
Total real estate loans		3,977,808		76,167		48,436		4,102,411
Commercial and industrial loans		537,652		19,127		5,052		561,831
Leases receivable		480,154		—		7,145		487,299
Total loans receivable	$	4,995,614	$	95,294	$	60,633	$	5,151,541

December 31, 2020
Real estate loans:
Commercial property
Retail	$	807,348	$	3,382	$	13,876	$	824,606
Hospitality		788,369		26,086		45,498		859,953
Other		1,571,012		23,876		15,489		1,610,377
Total commercial property loans		3,166,729		53,344		74,863		3,294,936
Construction		34,028		—		24,854		58,882
Residential/consumer loans		337,549		5,078		3,204		345,831
Total real estate loans		3,538,306		58,422		102,921		3,699,649
Commercial and industrial loans		712,685		18,556		26,014		757,255
Leases receivable		412,030		—		11,234		423,264
Total loans receivable	$	4,663,021	$	76,978	$	140,169	$	4,880,168

	Term Loans
	Amortized Cost Basis by Origination Year ⁽¹⁾
	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis			Total
	(in thousands)
December 31, 2021
Real estate loans:
Commercial property
Risk Rating
Pass / Pass Watch	$	1,203,197	$	706,470	$	488,250	$	406,288	$	277,680	$	384,064	$	41,413		$	3,507,362
Special Mention		—		18,869		7,593		—		6,999		16,879		1,703			52,043
Classified		—		—		5,450		17,247		2,965		21,792		—			47,454
Total commercial property		1,203,197		725,339		501,293		423,535		287,644		422,735		43,116			3,606,859

Construction
Risk Rating
Pass / Pass Watch		73,808		631		—		—		—		—		—			74,439
Special Mention		—		—		—		—		—		20,567		—			20,567
Classified		—		—		—		—		—		—		—			—
Total construction		73,808		631		—		—		—		20,567		—			95,006

Residential/consumer loans
Risk Rating
Pass / Pass Watch		194,948		16,975		247		19,813		73,567		82,076		8,381			396,007
Special Mention		—		—		—		930		406		2,221		—			3,557
Classified		—		—		—		—		965		17		—			982
Total residential/consumer loans		194,948		16,975		247		20,743		74,938		84,314		8,381			400,546

Total real estate loans
Risk Rating
Pass / Pass Watch		1,471,953		724,076		488,497		426,101		351,247		466,140		49,794			3,977,808
Special Mention		—		18,869		7,593		930		7,405		39,667		1,703			76,167
Classified		—		—		5,450		17,247		3,930		21,809		—			48,436
Total real estate loans		1,471,953		742,945		501,540		444,278		362,582		527,616		51,497			4,102,411

Commercial and industrial loans:
Risk Rating
Pass / Pass Watch		264,762		55,135		36,937		15,780		10,874		6,016		148,148			537,652
Special Mention		—		274		13,989		—		67		4,802		(5	)		19,127
Classified		—		3		708		145		19		886		3,291			5,052
Total commercial and industrial loans		264,762		55,412		51,634		15,925		10,960		11,704		151,434			561,831

Leases receivable:
Risk Rating
Pass / Pass Watch		239,738		79,400		101,460		47,485		10,683		1,388		—			480,154
Special Mention		—		—		—		—		—		—		—			—
Classified		716		981		3,575		1,328		347		198		—			7,145
Total leases receivable		240,454		80,381		105,035		48,813		11,030		1,586		—			487,299

Total loans receivable:
Risk Rating
Pass / Pass Watch		1,976,453		858,611		626,894		489,366		372,804		473,544		197,942			4,995,614
Special Mention		—		19,143		21,582		930		7,472		44,469		1,698			95,294
Classified		716		984		9,733		18,720		4,296		22,893		3,291			60,633
Total loans receivable	$	1,977,169	$	878,738	$	658,209	$	509,016	$	384,572	$	540,906	$	202,931		$	5,151,541

⁽¹⁾	Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision

	Term Loans
	Amortized Cost Basis by Origination Year ⁽¹⁾
	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
	(in thousands)
December 31, 2020
Real estate loans:
Commercial property
Risk Rating
Pass / Pass Watch	$	920,876	$	513,962	$	479,221	$	343,659	$	418,362	$	459,366	$	31,283	$	3,166,729
Special Mention		23,429		2,484		8,630		1,672		14,971		2,158		—		53,344
Classified		20,307		4,276		9,239		3,084		18,712		19,115		130		74,863
Total commercial property		964,612		520,722		497,090		348,415		452,045		480,639		31,413		3,294,936

Construction
Risk Rating
Pass / Pass Watch		33,415		613		—		—		—		—		—		34,028
Special Mention		—		—		—		—		—		—		—		—
Classified		12,808		—		12,046		—		—		—		—		24,854
Total construction		46,223		613		12,046		—		—		—		—		58,882

Residential/consumer loans
Risk Rating
Pass / Pass Watch		27,997		962		37,122		127,987		82,124		54,004		7,353		337,549
Special Mention		—		—		930		828		1,863		1,457		—		5,078
Classified		—		—		620		2,283		301		—		—		3,204
Total residential/consumer loans		27,997		962		38,672		131,098		84,288		55,461		7,353		345,831

Total real estate loans
Risk Rating
Pass / Pass Watch		982,288		515,537		516,343		471,646		500,486		513,370		38,636		3,538,306
Special Mention		23,429		2,484		9,560		2,500		16,834		3,615		—		58,422
Classified		33,115		4,276		21,905		5,367		19,013		19,115		130		102,921
Total real estate loans		1,038,832		522,297		547,808		479,513		536,333		536,100		38,766		3,699,649

Commercial and industrial loans:
Risk Rating
Pass / Pass Watch		406,486		73,160		54,110		17,834		4,464		9,910		146,721		712,685
Special Mention		7,239		4,509		4,146		1,110		31		1,074		447		18,556
Classified		8,552		4,784		1,364		930		4,380		1,359		4,645		26,014
Total commercial and industrial loans		422,277		82,453		59,620		19,874		8,875		12,343		151,813		757,255

Leases receivable:
Risk Rating
Pass / Pass Watch		113,712		165,242		91,408		30,405		10,096		1,167		—		412,030
Special Mention		—		—		—		—		—		—		—		—
Classified		452		5,728		3,137		876		804		237		—		11,234
Total leases receivable		114,164		170,970		94,545		31,281		10,900		1,404		—		423,264

Total loans receivable:
Risk Rating
Pass / Pass Watch		1,502,486		753,939		661,861		519,885		515,046		524,447		185,357		4,663,021
Special Mention		30,668		6,993		13,706		3,610		16,865		4,689		447		76,978
Classified		42,119		14,788		26,406		7,173		24,197		20,711		4,775		140,169
Total loans receivable	$	1,575,273	$	775,720	$	701,973	$	530,668	$	556,108	$	549,847	$	190,579	$	4,880,168

⁽¹⁾	Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision

	Term Loans
	Amortized Cost Basis by Origination Year ⁽¹⁾
	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
	(in thousands)
December 31, 2021
Real estate loans:
Commercial property
Payment performance
Performing	$	1,203,197	$	725,339	$	501,293	$	423,515	$	286,935	$	419,464	$	43,116	$	3,602,859
Nonperforming		—		—		—		20		709		3,271		—		4,000
Total commercial property		1,203,197		725,339		501,293		423,535		287,644		422,735		43,116		3,606,859

Construction
Payment performance
Performing		73,808		631		—		—		—		20,567		—		95,006
Nonperforming		—		—		—		—		—		—		—		—
Total construction		73,808		631		—		—		—		20,567		—		95,006

Residential/consumer loans
Payment performance
Performing		194,948		16,975		247		20,743		73,973		84,052		8,381		399,319
Nonperforming		—		—		—		—		965		262		—		1,227
Total residential/consumer loans		194,948		16,975		247		20,743		74,938		84,314		8,381		400,546

Total real estate loans
Payment performance
Performing		1,471,953		742,945		501,540		444,258		360,908		524,083		51,497		4,097,184
Nonperforming		—		—		—		20		1,674		3,533		—		5,227
Total real estate loans		1,471,953		742,945		501,540		444,278		362,582		527,616		51,497		4,102,411

Commercial and industrial loans:
Payment performance
Performing		264,762		55,409		50,926		15,925		10,956		11,431		151,434		560,843
Nonperforming		—		3		708		—		4		273		—		988
Total commercial and industrial loans		264,762		55,412		51,634		15,925		10,960		11,704		151,434		561,831

Leases receivable:
Payment performance
Performing		239,738		79,400		101,460		47,484		10,684		1,388		—		480,154
Nonperforming		716		981		3,575		1,329		346		198		—		7,145
Total leases receivable		240,454		80,381		105,035		48,813		11,030		1,586		—		487,299

Total loans receivable:
Payment performance
Performing		1,976,453		877,754		653,926		507,667		382,548		536,902		202,931		5,138,181
Nonperforming		716		984		4,283		1,349		2,024		4,004		—		13,360
Total loans receivable	$	1,977,169	$	878,738	$	658,209	$	509,016	$	384,572	$	540,906	$	202,931	$	5,151,541

⁽¹⁾	Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision

Schedule of Amortized Cost Basis of Loans on Nonaccrual Status and Loans Past Due 90 Days and Still Accruing

The following tables represent the amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of December 31, 2021 and 2020.

	December 31, 2021
	Nonaccrual Loans With No Allowance for Credit Losses		Nonaccrual Loans With Allowance for Credit Losses		Loans Past Due 90 Days Still Accruing		Total Nonperforming Loans
	(in thousands)
Real estate loans:
Commercial property
Retail	$	1,918	$	—	$	—	$	1,918
Hospitality		—		—		—		—
Other		1,745		337		—		2,082
Total commercial property loans		3,663		337		—		4,000
Construction		—		—		—		—
Residential/consumer loans		982		245		—		1,227
Total real estate loans		4,645		582		—		5,227
Commercial and industrial loans		8		980		—		988
Leases receivable		1,172		5,973		—		7,145
Total	$	5,825	$	7,535	$	—	$	13,360

	December 31, 2020
	Nonaccrual Loans With No Allowance for Credit Losses		Nonaccrual Loans With Allowance for Credit Losses		Loans Past Due 90 Days Still Accruing		Total Nonperforming Loans
	(in thousands)
Real estate loans:
Commercial property
Retail	$	6,330	$	—	$	—	$	6,330
Hospitality		20,612		—		—		20,612
Other		2,236		909		—		3,145
Total commercial property loans		29,178		909		—		30,087
Construction		24,854		—		—		24,854
Residential/consumer loans		2,350		—		—		2,350
Total real estate loans		56,382		909		—		57,291
Commercial and industrial loans		58		14,449		—		14,507
Leases receivable		2,318		8,916		—		11,234
Total	$	58,758	$	24,274	$	—	$	83,032

Analysis of Past Due Loans, Disaggregated by Loan Class

The following is an aging analysis of loans, disaggregated by loan class, as of the dates indicated:

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total
	(in thousands)
December 31, 2021
Real estate loans:
Commercial property
Retail	$	—	$	—	$	—	$	—	$	970,134	$	970,134
Hospitality		556		—		—		556		717,136		717,692
Other		92		691		499		1,282		1,917,751		1,919,033
Total commercial property loans		648		691		499		1,838		3,605,021		3,606,859
Construction		—		—		—		—		95,006		95,006
Residential/consumer loans		570		750		556		1,876		398,670		400,546
Total real estate loans		1,218		1,441		1,055		3,714		4,098,697		4,102,411
Commercial and industrial loans		56		9		—		65		561,766		561,831
Leases receivable		3,764		1,992		1,181		6,937		480,362		487,299
Total loans receivable	$	5,038	$	3,442	$	2,236	$	10,716	$	5,140,825	$	5,151,541

December 31, 2020
Real estate loans:
Commercial property
Retail	$	—	$	—	$	—	$	—	$	824,606	$	824,606
Hospitality		—		—		11,076		11,076		848,877		859,953
Other		—		—		731		731		1,609,646		1,610,377
Total commercial property loans		—		—		11,807		11,807		3,283,129		3,294,936
Construction		—		12,807		—		12,807		46,075		58,882
Residential/consumer loans		4,693		461		564		5,718		340,113		345,831
Total real estate loans		4,693		13,268		12,371		30,332		3,669,317		3,699,649
Commercial and industrial loans		282		27		12,487		12,796		744,459		757,255
Leases receivable		4,051		1,786		4,675		10,512		412,752		423,264
Total loans receivable	$	9,026	$	15,081	$	29,533	$	53,640	$	4,826,528	$	4,880,168

Non-Accrual Loans, Disaggregated by Loan Class

The following table details nonaccrual loans, disaggregated by loan class, as of the dates indicated:

	As of December 31,
	2021		2020
	(in thousands)
Real estate loans:
Commercial property
Retail	$	1,918	$	6,330
Hospitality		—		20,612
Other		2,082		3,145
Total commercial property loans		4,000		30,087
Construction		—		24,854
Residential/consumer loans		1,227		2,350
Total real estate loans		5,227		57,291
Commercial and industrial loans		988		14,507
Leases receivable		7,145		11,234
Total nonaccrual loans	$	13,360	$	83,032

Non-Performing Assets

The following table details nonperforming assets as of the dates indicated:

	As of December 31,
	2021		2020
	(in thousands)
Nonaccrual loans	$	13,360	$	83,032
Loans receivable 90 days or more past due and still accruing		—		—
Total nonperforming loans receivable		13,360		83,032
Other real estate owned ("OREO")		675		2,360
Total nonperforming assets	$	14,035	$	85,392

Troubled Debt Restructurings, Disaggregated by Type of Concession and by Loan Type

The following table details the recorded investment in TDRs, disaggregated by concession type and by loan type, as of December 31, 2021 and 2020:

	Nonaccrual TDRs										Accrual TDRs
	Deferral of Principal		Deferral of Principal and Interest		Reduction of Principal and Interest		Extension of Maturity		Total		Deferral of Principal		Deferral of Principal and Interest		Reduction of Principal and Interest		Extension of Maturity		Total
	(in thousands)
December 31, 2021
Real estate loans	$	346	$	2,046	$	372	$	—	$	2,764	$	—	$	—	$	—	$	—	$	—
Commercial and industrial loans		—		124		—		—		124		—		—		—		—		—
Total	$	346	$	2,170	$	372	$	—	$	2,888	$	—	$	—	$	—	$	—	$	—

December 31, 2020
Real estate loans	$	1,095	$	3,334	$	12,492	$	—	$	16,921	$	513	$	—	$	67	$	7,290	$	7,870
Commercial and industrial loans		—		144		—		—		144		—		—		4		56		60
Total	$	1,095	$	3,478	$	12,492	$	—	$	17,065	$	513	$	—	$	71	$	7,346	$	7,930

Summary of Loans by Class Modified as Troubled Debt Restructurings

The following table presents the number of loans by class modified as troubled debt restructurings that occurred during the years ending December 31, 2021, 2020 and 2019 with their pre- and post-modification recorded amounts.

	December 31, 2021						December 31, 2020						December 31, 2019
	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(in thousands except for number of loans)
Real estate loans		—	$	—	$	—		5	$	4,479	$	3,676		6	$	41,292	$	42,329
Commercial and industrial loans		—		—		—		—		—		—		2		12,779		12,562
Total		—	$	—	$	—		5	$	4,479	$	3,676		8	$	54,071	$	54,892