Hanmi Financial Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Loans (Tables)

Loans (Tables)

3 Months Ended

Mar. 31, 2020

Loans consisted of the following as of the dates indicated:

	March 31, 2020			December 31, 2019
	(in thousands)
Real estate loans:
Commercial property
Retail	$	818,045			869,302
Hospitality		884,511			922,288
Other ⁽¹⁾		1,420,824			1,358,432
Total commercial property loans		3,123,380			3,150,022
Construction		63,809			76,455
Residential property		379,116			402,028
Total real estate loans		3,566,305			3,628,505
Commercial and industrial loans		472,714			484,093
Leases receivable		492,527			483,879
Consumer loans ⁽²⁾		12,090			13,670
Loans receivable		4,543,636			4,610,147
Allowance for credit losses		(66,500	)		(61,408	)
Loans receivable, net	$	4,477,136		$	4,548,739

⁽¹⁾	Includes, among other types, mixed-use, apartment, office, industrial, gas stations, faith-based facilities and warehouse; all other property types represent less than one percent of total loans receivable.

⁽²⁾	Consumer loans include home equity lines of credit of $7.5 million and $8.2 million as of March 31, 2020 and December 31, 2019, respectively.

Activity for SBA Loans Held for Sale

The following is the activity for SBA loans held for sale for the three months ended March 31, 2020 and 2019:

	Real Estate			Commercial and Industrial			Total
	(in thousands)
March 31, 2020
Balance at beginning of period	$	2,943		$	3,077		$	6,020
Originations		6,494			5,703			12,197
Sales		(9,432	)		(8,780	)		(18,212	)
Principal paydowns and amortization		(5	)		—			(5	)
Balance at end of period	$	—		$	—		$	—

March 31, 2019
Balance at beginning of period	$	5,194		$	4,196		$	9,390
Originations		9,064			4,159			13,223
Sales		(7,756	)		(7,703	)		(15,459	)
Principal paydowns and amortization		(2	)		(12	)		(14	)
Balance at end of period	$	6,500		$	640		$	7,140

Allowance for Credit Losses by Portfolio Segment

The following table details the information on the allowance for credit losses by portfolio segment as of and for the three months ended March 31, 2020 and 2019:

	Real Estate			Commercial and Industrial			Leases Receivable			Consumer			Unallocated		Total
	(in thousands)
March 31, 2020
Balance at beginning of period	$	36,355		$	16,206		$	8,767		$	80		$	—	$	61,408
Adjustment related to adoption of ASU 2016-13		13,972			(2,497	)		5,902			55			—		17,433
Adjusted balance as of January 1, 2020		50,327			13,709			14,669			135			—		78,841
Less loans charged off		14,142			12,150			1,181			—			—		27,473
Recoveries on loans receivable previously charged off		(58	)		(84	)		(74	)		—			—		(216	)
Provision for credit losses		2,740			9,945			2,218			14			—		14,916
Ending balance	$	38,983		$	11,588		$	15,780		$	149		$	—	$	66,500
Individually evaluated for impairment	$	78		$	147		$	1,671		$	3		$	—	$	1,899
Collectively evaluated for impairment	$	38,905		$	11,441		$	14,109		$	146		$	—	$	64,601

Loans receivable	$	3,566,305		$	472,714		$	492,527		$	12,090		$	—	$	4,543,636
Individually evaluated for impairment	$	34,161		$	5,444		$	6,393		$	1,298		$	—	$	47,296
Collectively evaluated for impairment	$	3,532,144		$	467,270		$	486,134		$	10,792		$	—	$	4,496,340

March 31, 2019
Balance at beginning of period	$	18,384		$	7,162		$	6,303		$	98		$	27	$	31,974
Less loans charged off		122			133			852			—			—		1,107
Recoveries on loans receivable previously charged off		(440	)		(382	)		(90	)		—			—		(912	)
Provision for credit losses		(396	)		1,300			39			(9	)		183		1,117
Ending balance	$	18,306		$	8,711		$	5,580		$	89		$	210	$	32,896
Individually evaluated for impairment	$	—		$	3,269		$	1,099		$	—		$	—	$	4,368
Collectively evaluated for impairment	$	18,306		$	5,442		$	4,481		$	89		$	210	$	28,528

Loans receivable	$	3,714,356		$	422,502		$	425,530		$	13,232		$	—	$	4,575,620
Individually evaluated for impairment	$	14,015		$	23,114		$	4,783		$	1,370		$	—	$	43,282
Collectively evaluated for impairment	$	3,700,341		$	399,388		$	420,747		$	11,862		$	—	$	4,532,338

The table below illustrates the allowance for credit losses by portfolio segment as a percentage of the recorded total allowance for credit losses and as a percentage of the aggregate recorded investment of loans receivable.

	March 31, 2020										December 31, 2019
	Allowance					Total					Allowance					Total
	Amount		Percentage			Loans		Percentage			Amount		Percentage			Loans		Percentage
	(in thousands)
Real estate loans:
Commercial property
Retail	$	6,651		10.0	%	$	818,045		18.0	%	$	4,911		8.0	%	$	869,302		18.9	%
Hospitality		12,499		18.8	%		884,511		19.5	%		6,686		10.9	%		922,288		20.0	%
Other		15,664		23.6	%		1,420,824		31.3	%		8,060		13.1	%		1,358,432		29.4	%
Total commercial property loans		34,814		52.4	%		3,123,380		68.7	%		19,657		32.0	%		3,150,022		68.3	%
Construction		2,207		3.3	%		63,809		1.4	%		15,003		24.4	%		76,455		1.7	%
Residential property		1,962		3.0	%		379,116		8.3	%		1,695		2.8	%		402,028		8.7	%
Total real estate loans		38,983		58.7	%		3,566,305		78.5	%		36,355		59.2	%		3,628,505		78.7	%
Commercial and industrial loans		11,588		17.4	%		472,714		10.4	%		16,206		26.4	%		484,093		10.5	%
Leases receivable		15,780		23.7	%		492,527		10.8	%		8,767		14.3	%		483,879		10.5	%
Consumer loans		149		0.2	%		12,090		0.3	%		80		0.1	%		13,670		0.3	%
Total	$	66,500		100.0	%	$	4,543,636		100.0	%	$	61,408		100.0	%	$	4,610,147		100.0	%

Summary of Amortized Cost Basis of Collateral Dependent Loans By Class of Loans

The following table represents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2020, for which repayment is expected to be obtained through the sale of the underlying collateral and any collateral dependent loans that are still accruing but are considered impaired.

	Amortized Cost
March 31, 2020	(in thousands)
Real estate loans:
Commercial property	$	17,600
Construction		13,228
Residential property		2,677
Total real estate loans		33,505
Commercial and industrial loans		596
Consumer loans		1,196
Total ⁽¹⁾	$	35,297

Credit Quality of Loan Portfolio

The tables below provide a comparison as of March 31, 2020 and December 31, 2019 of the pass/pass-watch, special mention and classified loans, disaggregated by loan segment:

	Pass/Pass- Watch		Special Mention		Classified		Total
	(in thousands)
March 31, 2020
Real estate loans:
Commercial property
Retail	$	812,841	$	—	$	5,204	$	818,045
Hospitality		880,567		—		3,944		884,511
Other		1,385,625		6,436		28,763		1,420,824
Total commercial property		3,079,033		6,436		37,911		3,123,380
Construction		38,617		—		25,192		63,809
Residential property		375,655		1,323		2,138		379,116
Total real estate loans		3,493,305		7,759		65,241		3,566,305
Commercial and industrial loans		444,331		12,496		15,887		472,714
Leases receivable		486,134		—		6,393		492,527
Consumer loans		10,696		690		704		12,090
Total loans receivable	$	4,434,466	$	20,945	$	88,225	$	4,543,636

December 31, 2019
Real estate loans:
Commercial property
Retail	$	859,739	$	2,835	$	6,728	$	869,302
Hospitality		915,834		939		5,515		922,288
Other		1,329,817		7,807		20,809		1,358,432
Total commercial property		3,105,390		11,580		33,052		3,150,022
Construction		36,956		1,613		37,886		76,455
Residential property		398,737		2,512		779		402,028
Total real estate loans		3,541,082		15,705		71,718		3,628,505
Commercial and industrial loans		458,184		10,222		15,687		484,093
Leases receivable		477,977		—		5,902		483,879
Consumer loans		12,247		705		718		13,670
Total loans receivable	$	4,489,491	$	26,632	$	94,025	$	4,610,147

	Term Loans
	Amortized Cost Basis by Origination Year ⁽¹⁾
	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
	(in thousands)
March 31, 2020
Commercial property
Risk Rating
Pass / Pass Watch	$	182,595	$	542,426	$	566,021	$	441,982	$	537,348	$	774,381	$	34,280	$	3,079,033
Special Mention		—		3,120		465		2,350		89		412		—		6,436
Classified		14,668		—		3,009		712		4,185		15,337		—		37,911
Total commercial property		197,263		545,546		569,495		445,044		541,621		790,129		34,280		3,123,380

Construction
Risk Rating
Pass / Pass Watch		8,207		7,936		1,640		—		20,835		—		—		38,617
Special Mention		—		—		—		—		—		—		—		—
Classified		—		11,964		13,228		—		—		—		—		25,192
Total construction		8,207		19,900		14,867		—		20,835		—		—		63,809

Residential property
Risk Rating
Pass / Pass Watch		—		956		42,842		159,941		108,940		62,976		—		375,655
Special Mention		—		—		—		540		—		784		—		1,323
Classified		—		—		—		869		1,149		120		—		2,138
Total residential property		—		956		42,842		161,350		110,090		63,879		—		379,116

Total real estate loans
Risk Rating
Pass / Pass Watch		190,802		551,318		610,502		601,924		667,124		837,356		34,280		3,493,305
Special Mention		—		3,120		465		2,890		89		1,196		—		7,759
Classified		14,668		11,964		16,237		1,581		5,334		15,456		—		65,241
Total real estate loans		205,470		566,402		627,203		606,394		672,546		854,008		34,280		3,566,305

Commercial and industrial loans:
Risk Rating
Pass / Pass Watch		40,333		151,462		64,266		25,200		5,942		18,286		138,840		444,331
Special Mention		4,036		820		540		80		1,735		1,651		3,634		12,496
Classified		8,672		4,195		851		188		176		1,807		—		15,887
Total commercial and industrial loans		53,041		156,476		65,658		25,468		7,853		21,743		142,475		472,714

Leases receivable:
Risk Rating
Pass / Pass Watch		56,055		219,118		133,700		52,086		23,055		2,119		—		486,134
Special Mention		—		—		—		—		—		—		—		—
Classified		—		2,094		2,001		617		1,257		424		—		6,393
Total leases receivable		56,055		221,212		135,701		52,704		24,313		2,542		—		492,527

Consumer loans:
Risk Rating
Pass / Pass Watch		—		27		19		102		10		2,802		7,737		10,696
Special Mention		—		—		—		—		—		690		—		690
Classified		—		—		675		28		—		—		—		704
Total commercial term loans		—		27		695		130		10		3,492		7,737		12,090

Total loans receivable:
Risk Rating
Pass / Pass Watch		287,190		921,925		808,488		679,312		696,132		860,562		180,857		4,434,466
Special Mention		4,036		3,940		1,005		2,970		1,824		3,536		3,634		20,945
Classified		23,340		18,253		19,764		2,415		6,766		17,687		—		88,225
Total loans receivable	$	314,566	$	944,118	$	829,256	$	684,697	$	704,722	$	881,785	$	184,492	$	4,543,636

⁽¹⁾	Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision.

	Term Loans
	Amortized Cost Basis by Origination Year ⁽¹⁾
	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
	(in thousands)
March 31, 2020
Real estate loans:
Commercial property
Payment performance
Performing	$	183,271	$	545,546	$	569,312	$	445,044	$	541,345	$	786,514	$	34,280	$	3,105,314
Nonperforming		13,992		—		183		—		277		3,615		—		18,066
Total commercial property		197,263		545,546		569,495		445,044		541,621		790,129		34,280		3,123,380

Construction
Payment performance
Performing		8,207		19,900		1,640		—		20,835		—		—	$	50,582
Nonperforming		—		—		13,228		—		—		—		—		13,228
Total construction		8,207		19,900		14,867		—		20,835		—		—		63,809

Residential property
Payment performance
Performing		—		956		42,842		159,941		108,940		63,725		—		376,404
Nonperforming		—		—		—		1,409		1,149		154		—		2,711
Total residential property		—		956		42,842		161,350		110,090		63,879		—		379,116

Total real estate loans
Payment performance
Performing		191,478		566,402		613,793		604,986		671,121		850,239		34,280		3,532,299
Nonperforming		13,992		—		13,410		1,409		1,426		3,769		—		34,005
Total real estate loans		205,470		566,402		627,203		606,394		672,546		854,008		34,280		3,566,305

Commercial and industrial loans:
Payment performance
Performing		53,040		146,762		64,944		25,280		7,853		21,559		142,475		461,912
Nonperforming		0		9,714		714		188		—		185		—		10,802
Total commercial and industrial loans		53,041		156,476		65,658		25,468		7,853		21,743		142,475		472,714

Leases receivable:
Payment performance
Performing		56,055		219,021		133,566		52,074		23,032		2,062		—		485,811
Nonperforming		—		2,191		2,135		629		1,280		480		—		6,716
Total leases receivable		56,055		221,212		135,701		52,704		24,313		2,542		—		492,527

Consumer loans:
Payment performance
Performing		—		27		19		102		10		3,492		7,737		11,386
Nonperforming		—		—		675		28		—		—		—		704
Total commercial term loans		—		27		695		130		10		3,492		7,737		12,090

Total loans receivable:
Payment performance
Performing		300,573		932,212		812,322		682,442		702,016		877,351		184,492		4,491,410
Nonperforming		13,992		11,906		16,934		2,255		2,706		4,434		—		52,226
Total loans receivable	$	314,566	$	944,118	$	829,256	$	684,697	$	704,722	$	881,785	$	184,492	$	4,543,636

⁽¹⁾	Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision.

Analysis of Past Due Loans, Disaggregated by Loan Class

The following is an aging analysis of loans, disaggregated by loan class, as of the dates indicated:

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total		Accruing 90 Days or More Past Due
	(in thousands)
March 31, 2020
Real estate loans:
Commercial property
Retail	$	—	$	—	$	—	$	—	$	818,045	$	818,045	$	—
Hospitality		—		—		—		—		884,511		884,511		—
Other		708		1,418		1,101		3,227		1,417,597		1,420,824		—
Total commercial property loans		708		1,418		1,101		3,227		3,120,153		3,123,380		—
Construction		—		—		—		—		63,809		63,809		—
Residential property		531		593		2,164		3,288		375,828		379,116		—
Total real estate loans		1,239		2,011		3,265		6,515		3,559,790		3,566,306		—
Commercial and industrial loans		349		318		9,484		10,151		462,563		472,714		5,520
Leases receivable		7,311		1,789		3,748		12,848		479,679		492,527		323
Consumer loans		—		28		—		28		12,062		12,090		—
Total loans receivable	$	8,899	$	4,146	$	16,497	$	29,542	$	4,514,094	$	4,543,636	$	5,843

December 31, 2019
Real estate loans:
Commercial property
Retail	$	6	$	132	$	111	$	249	$	869,053	$	869,302	$	—
Hospitality		907		—		—		907		921,381		922,288		—
Other		51		—		38		89		1,358,344		1,358,432		—
Total commercial property loans		964		132		149		1,245		3,148,778		3,150,022		—
Construction		—		—		—		—		76,455		76,455		—
Residential property		540		1,627		309		2,477		399,551		402,028		—
Total real estate loans		1,504		1,759		458		3,721		3,624,784		3,628,505		—
Commercial and industrial loans		635		133		143		911		483,183		484,093		—
Leases receivable		5,358		2,138		3,493		10,990		472,889		483,879		—
Consumer loans		—		30		—		30		13,639		13,670		—
Total loans receivable	$	7,497	$	4,060	$	4,094	$	15,652	$	4,594,496	$	4,610,147	$	—

Information on Individually Evaluated and Impaired Loans Receivable, Disaggregated by Loan Class

The following tables provide information on individually evaluated loans receivable as of March 31, 2020 and impaired loans receivable as of December 31, 2019 disaggregated by loan class, as of the dates indicated:

	Recorded Investment		Unpaid Principal Balance		With No Related Allowance Recorded		With an Allowance Recorded		Related Allowance
	(in thousands)
March 31, 2020
Real estate loans:
Commercial property
Retail	$	156	$	149	$	—	$	156	$	1
Other		18,066		19,371		16,788		1,278		77
Total commercial property loans		18,222		19,520		16,788		1,434		78
Construction		13,228		28,000		13,228		—		—
Residential property		2,711		2,713		2,677		34		—
Total real estate loans		34,161		50,233		32,693		1,468		78
Commercial and industrial loans		5,445		17,853		4,483		962		147
Leases receivable		6,393		6,472		855		5,538		1,671
Consumer loans		1,298		1,606		1,196		102		2
Total	$	47,297	$	76,164	$	39,227	$	8,070	$	1,898

December 31, 2019
Real estate loans:
Commercial property
Retail	$	434	$	459	$	111	$	323	$	19
Hospitality		244		400		22		223		24
Other		14,864		15,151		14,696		167		12
Total commercial property loans		15,542		16,010		14,829		713		55
Construction		27,201		28,000		—		27,201		13,973
Residential property		1,124		1,163		1,089		35		—
Total real estate loans		43,867		45,173		15,918		27,949		14,028
Commercial and industrial loans		13,700		14,090		143		13,557		8,885
Leases receivable		5,902		5,909		1,112		4,790		2,863
Consumer loans		1,297		1,588		1,220		77		1
Total	$	64,766	$	66,760	$	18,393	$	46,373	$	25,778

Schedule of Amortized Cost Basis of Loans on Nonaccrual Status and Loans Past Due 90 Days and Still Accruing

The following table represents the amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of March 31, 2020.

	March 31, 2020
	Nonaccrual Loans Receivable With No Allowance for Credit Losses		Nonaccrual Loans Receivable With Allowance for Credit Losses		Loans Receivable Past Due 90 Days Still Accruing		Total Nonperforming Loans Receivable
	(in thousands)
Real estate loans:
Commercial property loans		16,788		1,278		—		18,066
Construction loans		13,228		—		—		13,228
Residential property loans		2,677		34		—		2,711
Total real estate loans		32,693		1,313		—		34,005
Commercial and industrial loans		4,484		798		5,520		10,802
Leases receivable		855		5,538		323		6,716
Consumer loans		675		28		—		703
Total nonperforming loans	$	38,707	$	7,676	$	5,843	$	52,226

Summary of Interest Foregone on Non-accrual Loans

The following is a summary of interest foregone on non-accrual loans for the periods indicated:

	Three Months Ended March 31,
	2020			2019
	(in thousands)
Interest income that would have been recognized had impaired loans performed in accordance with their original terms	$	1,595		$	888
Less: Interest income recognized on impaired loans		(122	)		(682	)
Interest foregone on impaired loans	$	1,473		$	206

Non-Accrual Loans, Disaggregated by Loan Class

The following table details nonaccrual loans, disaggregated by loan class, as of the dates indicated:

	March 31, 2020		December 31, 2019
	(in thousands)
Real estate loans:
Commercial property
Retail	$	—	$	277
Hospitality		—		225
Other		18,066		14,864
Total commercial property loans		18,066		15,366
Construction		13,228		27,201
Residential property		2,711		1,124
Total real estate loans		34,005		43,691
Commercial and industrial loans		5,282		13,479
Leases receivable		6,393		5,902
Consumer loans		703		689
Total nonaccrual loans	$	46,383	$	63,761

Non-Performing Assets

The following table details nonperforming assets as of the dates indicated:

	March 31, 2020		December 31, 2019
	(in thousands)
Nonaccrual loans	$	46,383	$	63,761
Loans 90 days or more past due and still accruing		5,843		—
Total nonperforming loans		52,226		63,761
Other real estate owned (“OREO”)		63		63
Total nonperforming assets	$	52,289	$	63,824

Troubled Debt Restructurings

The following table details TDRs as of March 31, 2020 and December 31, 2019:

	Nonaccrual TDRs										Accrual TDRs
	Deferral of Principal		Deferral of Principal and/or Interest		Reduction of Principal and/or Interest		Extension of Maturity		Total		Deferral of Principal		Deferral of Principal and/or Interest		Reduction of Principal and/or Interest		Extension of Maturity		Total
March 31, 2020
Real estate loans	$	—	$	128	$	13,748	$	13,832	$	27,708	$	—	$	—	$	—	$	—	$	—
Commercial and industrial loans		—		184		525		300		1,009		—		—		63		101		164
Consumer loans		675		—		—		—		675		521		—		74		—		595
Total	$	675	$	312	$	14,273	$	14,132	$	29,392	$	521	$	—	$	137	$	101	$	758

December 31, 2019
Real estate loans	$	—	$	132	$	27,740	$	13,926	$	41,798	$	—	$	—	$	—	$	—	$	—
Commercial and industrial loans		—		153		12,527		312		12,991		—		36		71		114		222
Consumer loans		689		—		—		—		689		531		—		77		—		608
Total	$	689	$	285	$	40,266	$	14,238	$	55,478	$	531	$	36	$	148	$	114	$	830

Summary of Loans by Class Modified as Troubled Debt Restructurings

The following table presents the number of loans by class modified as troubled debt restructurings that occurred during the three months ended March 31, 2020, and the year ended December 31, 2019, with their pre- and post-modification recorded amounts.

	Three months ended						Twelve months ended
	March 31, 2020						December 31, 2019
	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(in thousands except for number of loans)
Real estate loans		—	$	—	$	—		5	$	40,743	$	41,798
Commercial and industrial loans		—		—		—		2		12,779		12,562
Consumer loans		—		—		—		1		549		531
Total		—	$	—	$	—		8	$	54,071	$	54,891