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, 2023

Assets and Liabilities Measured at Fair Value on Recurring Basis

As of March 31, 2023 and December 31, 2022, 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, 2023
Assets:
Securities available for sale:
U.S. Treasury securities	$	54,926	$	—	$	—	$	54,926
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities - residential		—		464,105		—		464,105
Mortgage-backed securities - commercial		—		50,866		—		50,866
Collateralized mortgage obligations		—		100,546		—		100,546
Debt securities		—		140,368		—		140,368
Total U.S. government agency and sponsored agency obligations		—		755,885		—		755,885
Municipal bonds-tax exempt		—		67,890		—		67,890
Total securities available for sale	$	54,926	$	823,775	$	—	$	878,701
Derivative financial instruments	$	—	$	5,621	$	—	$	5,621

Liabilities:
Derivative financial instruments	$	—	$	5,617	$	—	$	5,617

December 31, 2022
Assets:
Securities available for sale:
U.S. Treasury securities	$	48,026	$	—	$	—	$	48,026
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities - residential		—		465,152		—		465,152
Mortgage-backed securities - commercial		—		51,292		—		51,292
Collateralized mortgage obligations		—		85,485		—		85,485
Debt securities		—		138,499		—		138,499
Total U.S. government agency and sponsored agency obligations		—		740,428		—		740,428
Municipal bonds-tax exempt		—		65,384		—		65,384
Total securities available for sale	$	48,026	$	805,812	$	—	$	853,838
Derivative financial instruments	$	—	$	7,507	$	—	$	7,507

Liabilities:
Derivative financial instruments	$	—	$	7,375	$	—	$	7,375

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

As of March 31, 2023 and December 31, 2022, 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, 2023
Assets:
Collateral dependent loans (1)	$	10,191	$	—	$	—	$	10,191
Other real estate owned		117		—		—		117
Repossessed personal property		629		—		—		629

December 31, 2022
Assets:
Collateral dependent loans (2)	$	2,694	$	—	$	—	$	2,694
Other real estate owned		117		—		—		117
Repossessed personal property		467		—		—		467
Servicing assets		7,176		—		—		7,176

(1)

Consisted of real estate loans of $2.6 million and commercial and industrial loans of $7.6 million, which were secured by real estate and business assets.

(2)

Consisted of real estate loans of $2.7 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, 2023 and December 31, 2022:


	Fair Value		Valuation Techniques	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
March 31, 2023
Collateral dependent loans:
Real estate loans:
Commercial property
Retail	$	1,883	Market approach	Adjustments to market data	5% to 25% / 16%	(1)
Other		259	Market approach	Adjustments to market data	(35)% to (10)% / (24)%	(1)
Residential		487	Market approach	Adjustments to market data	(13)% to 5% / (2)%	(1)
Total real estate loans		2,629
Commercial and industrial loans		7,562	Market approach	Adjustments to market data	10% to 15% / 11%	(1)
Total	$	10,191

Other real estate owned	$	117	Market approach	Adjustments to market data	(10)% to 5% / (2)%	(1)

Repossessed personal property		629	Market approach	Adjustments to market data		(2)

December 31, 2022
Collateral dependent loans:
Real estate loans:
Commercial property
Retail	$	1,930	Market approach	Adjustments to market data	5% to 25% / 16%	(1)
Other		256	Market approach	Adjustments to market data	(42)% to 3% / (24)%	(1)
Residential		508	Market approach	Adjustments to market data	(15)% to 3% / (1)%	(1)
Total real estate loans		2,694
Total	$	2,694

Other real estate owned	$	117	Market approach	Adjustments to market data	(20)% to 20% / (2)%	(1)

Repossessed personal property		467	Market approach	Adjustments to market data		(2)

Servicing assets		7,176	Market approach	Prepayment rate Discount rate	11% to 17% / 16% 22% to 25% / 22%	(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 adjustments represent decreases.

(2)

The equipment is usually too small 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.

(3)

Fair value is based on a valuation model using the present value of estimated future cash flows, prepayment speeds, default rates, and discount rates. Servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into income over the period of the estimated future net servicing income of the underlying loans.

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments were as follows:


	March 31, 2023
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	386,201	$	386,201	$	—	$	—
Securities available for sale		878,701		54,926		823,775		—
Loans held for sale		3,652		—		3,653		—
Loans receivable, net of allowance for credit losses		5,908,209		—		—		5,753,059
Accrued interest receivable		19,004		19,004		—		—
Financial liabilities:
Noninterest-bearing deposits		2,334,083		—		2,334,083		—
Interest-bearing deposits		3,866,955		—		—		3,870,056
Borrowings and subordinated debentures		479,558		—		346,689		131,791
Accrued interest payable		20,512		20,512		—		—


	December 31, 2022
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	352,421	$	352,421	$	—	$	—
Securities available for sale		853,838		48,026		805,812		—
Loans held for sale		8,043		—		8,423		—
Loans receivable, net of allowance for credit losses		5,895,610		—		—		5,808,190
Accrued interest receivable		18,537		18,537		—		—
Financial liabilities:
Noninterest-bearing deposits		2,539,602		—		2,539,602		—
Interest-bearing deposits		3,628,470		—		—		3,623,827
Borrowings and subordinated debentures		479,409		—		345,867		126,828
Accrued interest payable		7,792		7,792		—		—