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, 2015

Assets and Liabilities Measured at Fair Value on Recurring Basis

As of June 30, 2015 and December 31, 2014, assets and liabilities measured at fair value on a recurring basis are as follows:



	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs with No Active Market with Identical Characteristics		Significant Unobservable Inputs		Balance
	(in thousands)
June 30, 2015
Assets:
Securities available for sale:
Mortgage-backed securities	$	—	$	379,568	$	—	$	379,568
Collateralized mortgage obligations	—		155,369		—		155,369
U.S. government agency securities	—		62,661		—		62,661
SBA loan pools securities	—		71,686		—		71,686
Municipal bonds-tax exempt	—		3,626		—		3,626
Municipal bonds-taxable	—		15,832		—		15,832
Corporate bonds	—		16,976		—		16,976
U.S. treasury securities	162		—		—		162
Other securities	22,803		—		—		22,803
Total securities available for sale	$	22,965	$	705,718	$	—	$	728,683
December 31, 2014
Assets:
Securities available for sale:
Mortgage-backed securities	$	—	$	573,286	$	—	$	573,286
Collateralized mortgage obligations	—		188,047		—		188,047
U.S. government agency securities ⁽¹⁾	—		128,207		—		128,207
SBA loan pools securities	—		109,447		—		109,447
Municipal bonds-tax exempt	—		3,681		709		4,390
Municipal bonds-taxable	—		16,922		—		16,922
Corporate bonds	—		16,948		—		16,948
U.S. treasury securities	163		—		—		163
Other securities ⁽²⁾	22,893		—		—		22,893
Equity securities	—		—		414		414
Total securities available for sale	$	23,056	$	1,036,538	$	1,123	$	1,060,717


⁽¹⁾	U.S. government agency securities of $128.2 million were reclassified as level 2 rather than level 1 as originally classified due to significant other observable inputs other than quoted prices for identical assets in active markets.


⁽²⁾	Other securities of $22.9 million were reclassified as level 1 rather than level 2 as originally classified due to the availability of quoted prices in active markets of the holdings.

Reconciliation and Income Statement Classification of Gains and Losses for All Assets and Liabilities

The table below presents a reconciliation and income statement classification of gains and losses for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2015:



	Beginning Balance as of January 1, 2015		Purchases, Issuances and Settlement			Realized Gains or (Losses) in Earnings			Unrealized Gains or Losses in Other Comprehensive Income		Ending Balance as of June 30, 2015
	(in thousands)
Assets:
Municipal bonds-tax exempt ⁽¹⁾	$	709	$	(709	)	$	—		$	—	$	—
Equity securities ⁽²⁾	$	414	$	(339	)	$	(75	)	$	—	$	—


⁽¹⁾	A zero coupon tax credit municipal bond matured during the first quarter of 2015.


⁽²⁾	Reflects two equity securities that were not actively traded. During the second quarter of 2015, one equity security with a book value of $200,000 with a fair value of $200,000 as of December 31, 2014 was sold at $75,000 loss and the other equity security with a book value of $250,000 with a fair value of $214,000 as of December 31, 2014 was reclassified to other assets.

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

As of June 30, 2015 and December 31, 2014, assets and liabilities measured at fair value on a non-recurring basis are as follows:



	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs With No Active Market With Identical Characteristics		Significant Unobservable Inputs		Loss During the six Months Ended June 30, 2015
	(in thousands)
June 30, 2015
Assets:
Impaired loans (excluding PCI loans) ⁽¹⁾	$	—	$	28,607	$	3,217	$	1,579
OREO ⁽²⁾	$	—	$	11,857	$	—	$	632
	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs With No Active Market With Identical Characteristics		Significant Unobservable Inputs		Loss During the Twelve Months Ended December 31, 2014
	(in thousands)
December 31, 2014
Assets:
Impaired loans (excluding PCI loans) ⁽³⁾	$	—	$	32,171	$	781	$	2,774
OREO ⁽⁴⁾	$	—	$	15,790	$	—	$	—


⁽¹⁾	Consists of real estate loans of $29.0 million, commercial and industrial loans of $1.0 million, and consumer loans of $1.8 million.


⁽²⁾	Consists of properties obtained from the foreclosure of commercial property loans of $11.7 million and residential property loans of $163,000.


⁽³⁾	Consists of real estate loans of $30.0 million, commercial and industrial loans of $1.2 million and consumer loans of $1.7 million.


⁽⁴⁾	Consists of properties obtained from the foreclosure of commercial property loans of $13.2 million and residential property loans of $2.6 million.

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments were as follows:



	June 30, 2015
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and cash equivalents	$	153,231	$	153,231	$	—	$	—
Securities available for sale	728,683		22,965		705,718		—
Loans receivable, net of allowance for loan losses	2,826,086		—		—		2,829,963
Loans held for sale	4,158		—		4,158		—
Accrued interest receivable	8,133		8,133		—		—
Servicing assets	13,125		—		—		13,125
Investment in FHLB stock	16,385		—		16,385		—
Investment in FRB stock	13,517		—		13,517		—
Financial liabilities:
Noninterest-bearing deposits	1,061,823		—		1,061,823		—
Interest-bearing deposits	2,377,958		—		—		2,361,096
Servicing liabilities	5,368		—		—		5,368
Borrowings	18,623		—		—		18,623
Accrued interest payable	3,443		3,443		—		—
Off-balance sheet items:
Commitments to extend credit	244,766		—		—		244,766
Standby letters of credit	5,426		—		—		5,426



	December 31, 2014
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and cash equivalents	$	158,320	$	158,320	$	—	$	—
Securities available for sale ⁽¹⁾	1,060,717		23,056		1,036,538		1,123
Loans receivable, net of allowance for loan losses	2,735,832		—		—		2,738,401
Loans held for sale	5,451		—		5,451		—
Accrued interest receivable	9,749		9,749		—		—
Servicing assets	13,773		—		—		13,773
Investment in FHLB stock	17,580		—		17,580		—
Investment in FRB stock	12,273		—		12,273		—
Financial liabilities:
Noninterest-bearing deposits	1,022,972		—		1,022,972		—
Interest-bearing deposits	2,533,774		—		—		2,528,304
Servicing liabilities	5,971		—		—		5,971
Borrowings	168,544		—		—		168,544
Accrued interest payable	3,450		3,450		—		—
Off-balance sheet items:
Commitments to extend credit	309,584		—		—		309,584
Standby letters of credit	8,982		—		—		8,982

⁽¹⁾

Level 1 and Level 2 previously reported as $128.4 million and $931.2 million, respectively. U.S. government agency securities of $128.2 million were reclassified as level 2 rather than level 1 as originally classified due to significant other observable inputs other than quoted prices for identical assets in active markets. Other securities of $22.9 million were reclassified as level 1 rather than level 2 as originally classified due to the availability of quoted prices in active markets of the holdings.