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

Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2014

Assets and Liabilities Measured at Fair Value on Recurring Basis

As of December 31, 2014 and 2013, 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)
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		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		—		22,893		—		22,893
Equity securities		—		—		414		414

Total securities available for sale	$	128,370	$	931,224	$	1,123	$	1,060,717

December 31, 2013
Assets:
Securities available for sale:
Mortgage-backed securities	$	—	$	217,059	$	—	$	217,059
Collateralized mortgage obligations		—		127,693		—		127,693
U.S. government agency securities		83,536		—		—		83,536
SBA loan pools securities		—		12,629		—		12,629
Municipal bonds-tax exempt		—		13,189		748		13,937
Municipal bonds-taxable		—		32,354		—		32,354
Corporate bonds		—		20,835		—		20,835
U.S. treasury securities		19,997		—		—		19,997
Other securities		—		2,886		—		2,886

Total securities available for sale	$	103,533	$	426,645	$	748	$	530,926

Liabilities:
Stock warrants	$	—	$	—	$	2	$	2

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 year ended December 31, 2014:


	Beginning Balance as of January 1, 2014		Purchases, Issuances and Settlement			Realized Gains or Losses in Earnings		Unrealized Gains or Losses in Other Comprehensive Income			Ending Balance as of December 31, 2014
	(In thousands)
Assets:
Municipal bonds-tax exempt ⁽¹⁾	$	748	$	—		$	—	$	(39	)	$	709
Equity securities ⁽²⁾	$	—	$	450		$	—	$	(36	)	$	414
Liabilities:
Stock warrants ⁽³⁾	$	2	$	(2	)	$	—	$	—		$	—

⁽¹⁾

Reflects a zero coupon tax credit municipal bond. As the Company was not able to obtain a price from independent external pricing service providers, the discounted cash flow method was used to determine its fair value. The bond carried a par value of $700,000 and an amortized value of $700,000 with a remaining life of 0.23 years at December 31, 2014.

⁽²⁾

Reflects two equity securities that are not actively traded. The fair value of one equity security with a fair value of $214,000 was computed using valuation multiples (price to book and price to earnings) derived from market transactions for comparable companies. The other equity security with a fair value of $200,000 was computed using valuation multiples (price to book and price to earnings) derived from 1) market transactions for comparable companies, and 2) publicly-traded comparable companies.

⁽³⁾

Reflects warrants for our common stock issued in connection with services Cappello Capital Corp. provided to us as a placement agent in connection with our best efforts public offering and as our financial adviser in connection with our completed rights offering. The warrants were immediately exercisable when issued at an exercise price of $9.60 per share of our common stock and expire on October 14, 2015. As of December 31, 2014, there were no outstanding stock warrants. See “Note 13 – Stockholders’ Equity” for more details.

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

As of December 31, 2014 and 2013, 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 Years Ended
	(In thousands)
December 31, 2014
Assets:
Impaired loans (excluding PCI loans) ⁽¹⁾	$	—	$	32,171	$	781	$	2,774
Other real estate owned ⁽²⁾		—		15,790		—		—
December 31, 2013
Assets:
Impaired loans ⁽³⁾	$	—	$	36,254	$	1,738	$	2,431
Other real estate owned ⁽⁴⁾		—		756		—		10

⁽¹⁾

Includes real estate loans of $30.0 million, commercial and industrial loans of $1.2 million, and consumer loans of $1.7 million

⁽²⁾

Includes properties from the foreclosure of commercial property loans of $13.2 million and residential property loans of $2.6 million.

⁽³⁾

Includes real estate loans of $8.6 million, commercial and industrial loans of $28.1 million, and consumer loans of $1.3 million

⁽⁴⁾

Includes properties from the foreclosure of residential property loan of $756,000.

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments were as follows:


	December 31, 2014
	Carrying Amount		Fair Value
	Carrying Amount		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	158,320	$	158,320	$	—	$	—
Securities available for sale		1,060,717		128,370		931,224		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


	December 31, 2013
	Carrying Amount		Fair Value
	Carrying Amount		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	179,357	$	179,357	$	—	$	—
Securities available for sale		530,926		103,533		426,645		748
Loans receivable, net of allowance for loan losses		2,177,498		—		—		2,204,069
Accrued interest receivable		7,055		7,055		—		—
Servicing assets		6,833		—		—		6,833
Investment in FHLB stock		14,060		14,060		—		—
Investment in FRB stock		11,196		11,196		—		—
Financial liabilities:
Noninterest-bearing deposits		819,015		—		819,015		—
Interest-bearing deposits		1,693,310		—		—		1,693,739
Borrowings		127,546		—		—		127,546
Accrued interest payable		3,366		3,366		—		—
Off-balance sheet items:
Commitments to extend credit		246,161		—		—		246,161
Standby letters of credit		8,926		—		—		8,926

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References + Details

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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