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)

3 Months Ended

Mar. 31, 2022

Assets and Liabilities Measured at Fair Value on Recurring Basis

As of March 31, 2022 and December 31, 2021, 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)
March 31, 2022
Assets:
Securities available for sale:
U.S. Treasury securities	$	18,214	$	—	$	—	$	18,214
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities		—		576,876		—		576,876
Collateralized mortgage obligations		—		87,164		—		87,164
Debt securities		—		124,624		—		124,624
Total U.S. government agency and sponsored agency obligations		—		788,664		—		788,664
Municipal bonds-tax exempt		—		70,102		—		70,102
Total securities available for sale	$	18,214	$	858,766	$	—	$	876,980
Derivative financial instruments	$	—	$	4,468	$	—	$	4,468

Liabilities:
Derivative financial instruments	$	—	$	4,395	$	—	$	4,395

December 31, 2021
Assets:
Securities available for sale:
U.S. Treasury securities	$	15,397	$	—	$	—	$	15,397
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities		—		607,505		—		607,505
Collateralized mortgage obligations		—		93,604		—		93,604
Debt securities		—		115,896		—		115,896
Total U.S. government agency and sponsored agency obligations		—		817,005		—		817,005
Municipal bonds-tax exempt		—		78,388		—		78,388
Total securities available for sale	$	15,397	$	895,393	$	—	$	910,790
Derivative financial instruments	$	—	$	1,379	$	—	$	1,379

Liabilities:
Derivative financial instruments	$	—	$	1,360	$	—	$	1,360

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

As of March 31, 2022 and December 31, 2021, 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)
March 31, 2022
Assets:
Collateral dependent loans ⁽¹⁾	$	3,141	$	—	$	—	$	3,141
Other real estate owned		675		—		—		675
Repossessed personal property		25		—		—		25

December 31, 2021
Assets:
Collateral dependent loans ⁽²⁾	$	3,398	$	—	$	—	$	3,398
Other real estate owned		675		—		—		675
Repossessed personal property		8		—		—		8

⁽¹⁾	Consisted of real estate loans of $3.1 million.

(2)	Consisted of real estate loans of $3.4 million.

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

The following table represents quantitative information about Level 3 fair value assumptions for assets measured at fair value on a non-recurring basis at March 31, 2022 and December 31, 2021:

	Fair Value		Valuation Techniques	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
March 31, 2022
Collateral dependent loans:
Real estate loans:
Commercial property
Retail	$	1,708	Market approach	Market data comparison	(25)% to 27% / 9%	⁽¹⁾
Other		482	Market approach	Market data comparison	(20)% to 0% / 0%	⁽¹⁾
Residential/consumer loans		951	Market approach	Market data comparison	(4)% to 10% / 6%	⁽¹⁾
Total real estate loans		3,141
Total	$	3,141

Other real estate owned	$	675	Market approach	Market data comparison	(10)% to 10% / (3)%

Repossessed personal property		25	Market approach	Market data comparison		⁽²⁾

December 31, 2021
Collateral dependent loans:
Real estate loans:
Commercial property
Retail	$	1,917	Market approach	Market data comparison	(28)% to 23% / (6)%	⁽¹⁾
Other		499	Market approach	Market data comparison	(20)% to 20% / 0%	⁽¹⁾
Residential/consumer loans		982	Market approach	Market data comparison	(19)% to 8% / 3%	⁽¹⁾
Total real estate loans		3,398
Total	$	3,398

Other real estate owned	$	675	Market approach	Market data comparison	(20)% to (5)% / (12)%

Repossessed personal property		8	Market approach	Market data comparison		⁽²⁾

⁽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⁾

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:

	March 31, 2022
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	312,491	$	312,491	$	—	$	—
Securities available for sale		876,980		18,214		858,766		—
Loans held for sale		15,617		—		16,948		—
Loans receivable, net of allowance for credit losses		5,265,988		—		—		5,208,194
Accrued interest receivable		12,289		12,289		—		—
Financial liabilities:
Noninterest-bearing deposits		2,678,726		—		2,678,726		—
Interest-bearing deposits		3,104,444		—		—		3,101,440
Borrowings and subordinated debentures		253,967		—		122,525		129,028
Accrued interest payable		966		966		—		—

	December 31, 2021
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	608,965	$	608,965	$	—	$	—
Securities available for sale		910,790		15,397		895,393		—
Loans held for sale		13,342		—		14,723		—
Loans receivable, net of allowance for credit losses		5,078,984		—		—		5,072,282
Accrued interest receivable		11,976		11,976		—		—
Financial liabilities:
Noninterest-bearing deposits		2,574,517		—		2,574,517		—
Interest-bearing deposits		3,211,752		—		—		3,211,708
Borrowings and subordinated debentures		352,506		—		137,198		213,179
Accrued interest payable		1,161		1,161		—		—