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, 2020

Assets and Liabilities Measured at Fair Value on Recurring Basis

As of June 30, 2020 and December 31, 2019, 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, 2020
Assets:
Securities available for sale:
U.S. Treasury securities	$	45,262	$	—	$	—	$	45,262
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities		—		413,263		—		413,263
Collateralized mortgage obligations		—		120,294		—		120,294
Debt securities		—		77,152		—		77,152
Total U.S. government agency and sponsored agency obligations		—		610,709		—		610,709
Total securities available for sale	$	45,262	$	610,709	$	—	$	655,971

December 31, 2019
Assets:
Securities available for sale:
U.S. Treasury securities	$	35,205	$	—	$	—	$	35,205
U.S. government agency and sponsored agency obligations:
Mortgage-backed securities		—		410,800		—		410,800
Collateralized mortgage obligations		—		164,592		—		164,592
Debt securities		—		23,879		—		23,879
Total U.S. government agency and sponsored agency obligations		—		599,271		—		599,271
Total securities available for sale	$	35,205	$	599,271	$	—	$	634,477

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

As of June 30, 2020 and December 31, 2019, 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, 2020
Assets:
Collateral dependent impaired loans ⁽¹⁾	$	44,120	$	—	$	—	$	44,120
Other real estate owned		148		—		—		148
Bank-owned premises		1,900		—		—		1,900

December 31, 2019
Assets:
Collateral dependent impaired loans ⁽²⁾	$	31,049	$	—	$	—	$	31,049
Other real estate owned		63		—		—		63
Bank-owned premises		1,900		—		—		1,900

⁽¹⁾	Consisted of real estate loans of $42.6 million, commercial and industrial loans of $288,000, and consumer loans of $1.2 million. $43.9 million was secured by real estate and one commercial and industrial loan for $247,000 was fully secured by cash.

(2)	Consisted of real estate loans of $27.2 million and commercial and industrial loans of $3.9 million. $27.2 million was secured by real estate and $3.9 million was secured by personal property.

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, 2020 and December 31, 2019:

	Fair Value		Valuation Techniques	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
June 30, 2020
Collateral dependent impaired loans:
Real estate loans:
Commercial property
Retail	$	1,355	Market approach	Market data comparison	(30)% to (3)% /(17%)
Other		15,441	Market approach	Market data comparison	(18)% to 42% / 18% ⁽²⁾
Construction		23,067	Market approach	Market data comparison	(18)% to 43% / 21% ⁽²⁾
Residential property		2,761	Market approach	Market data comparison	(13)% to 15% / 6% ⁽²⁾
Total real estate loans		42,624
Commercial and industrial loans:
Commercial term		288	Market approach	Market data comparison	(9)% to 11% / 1% ^{(2) (3)}
Consumer loans		1,208	Market approach	Market data comparison	(13)% to 15% / 6% ⁽²⁾
Total	$	44,120

Bank-owned premises		1,900	Market approach	Market data comparison	(30)% to 55% /(2)% ⁽²⁾

December 31, 2019
Collateral dependent impaired loans:
Real estate loans:
Commercial property
Other	$	13,926	Market approach	Market data comparison	⁽¹⁾
Construction		13,228	Market approach	Market data comparison	(3)% to 43% /21% ⁽²⁾
Total real estate loans		27,154
Commercial and industrial loans:
Commercial lines of credit		3,895	Market approach	Market data comparison	(8)% to 42% /18% ⁽²⁾
Total	$	31,049

Bank-owned premises		1,900	Market approach	Market data comparison	(30)% to 55% /(2)% ⁽²⁾

⁽¹⁾

The values were estimated by current market data comparison, supplemented by cost information. The properties compared when possible, with others for sale and that have sold in the general time period. Adjustments are made for differences in equipment, mileage, cosmetics, conversions, originality, condition as well as sale terms and current economic conditions at time of sale.

⁽²⁾

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.

⁽³⁾	Includes one loan secured by cash collateral.

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments were as follows:

	June 30, 2020
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	546,048	$	546,048	$	—	$	—
Securities available for sale		655,971		45,262		610,709		—
Loans held for sale		17,942		—		17,942		—
Loans receivable, net of allowance for credit losses		4,739,312		—		—		4,690,692
Accrued interest receivable		21,372		21,372		—		—
Financial liabilities:
Noninterest-bearing deposits		1,865,213		—		1,865,213		—
Interest-bearing deposits		3,344,568		—		—		3,353,585
Borrowings and subordinated debentures		370,478		—		254,116		120,139
Accrued interest payable		8,655		8,655		—		—

	December 31, 2019
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3
	(in thousands)
Financial assets:
Cash and due from banks	$	121,678	$	121,678	$	—	$	—
Securities available for sale		634,477		35,205		599,272		—
Loans held for sale		6,020		—		6,382		—
Loans receivable, net of allowance for credit losses		4,548,739		—		—		4,520,322
Accrued interest receivable		11,742		11,742		—		—
Financial liabilities:
Noninterest-bearing deposits		1,391,624		—		1,391,624		—
Interest-bearing deposits		3,307,338		—		—		3,317,867
Borrowings and subordinated debentures		208,377		—		89,831		118,807
Accrued interest payable		11,215		11,215		—		—