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Section 1: 8-K (8-K)

Document
false0001128361 0001128361 2019-10-21 2019-10-21



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

October 21, 2019
Date of Report (Date of earliest event reported)

HOPE BANCORP INC
(Exact name of registrant as specified in its charter)

Delaware
000-50245
95-4849715
(State of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)

3200 Wilshire Boulevard, Suite 1400
Los Angeles, California 90010
(Address of principal executives offices, including zip code)

(213) 639-1700
(Registrant’s telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Common Stock
,
par value $0.001 per share
HOPE
NASDAQ Global Select Market
(Title of class)
(Trading Symbol)
(Name of exchange on which registered)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.






Item 2.02 Results of Operations and Financial Condition.

On October 21, 2019, Hope Bancorp, Inc. (“HOPE” or the “Company”) issued a news release concerning its results of operations and financial condition for the third quarter ended and as of September 30, 2019. A copy of the October 21, 2019 press release is attached hereto as Exhibit 99.1.

Item 7.01. Regulation FD Disclosure

The Company previously announced that it will host an investor conference call on Tuesday, October 22, 2019 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its third quarter ended September 30, 2019. A presentation to accompany the conference call, which contains certain historical and forward-looking information relating to the Company (the “Presentation Materials”), has been made available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. A copy of the Presentation Materials is attached hereto as Exhibit 99.2.

The information included in this report pursuant to Item 2.02 and Item 7.01 of Form 8-K (including Exhibit 99.1 and Exhibit 99.2) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits
Exhibit No.
 
Description of Exhibit
 
 
 
99.1
 
99.2
 







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
HOPE BANCORP, INC.
 
 
 
 
Date: October 22, 2019
By:
/s/ Kevin S. Kim
 
 
 
Kevin S. Kim
 
 
 
Chairman, President and Chief Executive Officer







EXHIBIT INDEX

Exhibit No.
 
Description of Exhibit
 
 
 
99.1
 
99.2
 




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
400540686_hopebancorp5a03.jpg
News Release


HOPE BANCORP REPORTS 2019 THIRD QUARTER FINANCIAL RESULTS


LOS ANGELES - October 21, 2019 - Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for the three and nine-month periods ended September 30, 2019. Net income for the 2019 third quarter totaled $42.6 million, or $0.34 per diluted common share. This compares with net income for the preceding 2019 second quarter of $42.7 million, or $0.34 per diluted common share and $46.4 million, or $0.36 per diluted common share, for the 2018 third quarter.

“We are pleased to deliver solid third quarter financial results, which reflect a continuation of the many positive trends from the preceding second quarter,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “Benefiting from our deposit strategies, we continued to see a favorable mix-shift to growth in core deposits, along with decreases in the higher-rate time deposits. This resulted in what we expect to be the peak in deposit costs in the current rate cycle, and total cost of deposits for the period was stable quarter-over-quarter. Driven by stronger volumes of both CRE and C&I lending, we also had our strongest quarter year-to-date in new loan originations, which resulted in a 1% increase in loans receivable from June 30, 2019. Topping off these highlights, our proactive efforts led to another quarter of considerable improvements in our credit metrics with a 35% reduction in nonaccrual loans and a 20% decrease in total criticized assets.

“Overall, our third quarter performance underscores the progress we are making with our strategic initiatives. Given our ongoing success with expense controls and a robust loan pipeline entering the fourth quarter, we expect another strong performance to close out a solid year for Bank of Hope,” said Kim.
Q3 2019 Highlights
2019 third quarter net income totaled $42.6 million, or $0.34 per diluted common share.
1% growth in total deposits quarter-over-quarter reflects a favorable shift to core deposits, with increases in noninterest bearing demand deposits, savings and money market balances, partially offset by decreases in higher-cost time deposits.
Deposit initiatives contributed to a stabilization of total deposit costs, which remained flat quarter-over-quarter.
New loan origination volumes were the highest year-to-date at $693.9 million and included a well-balanced mix of 50% commercial real estate, 41% commercial and 9% consumer loans, driving a 1% increase in loans receivable quarter-over-quarter.
Continuation of asset quality improvements across the board, most notably a 35% reduction in nonaccrual loans and 20% decrease in criticized loan balances.
Total noninterest expenses down 2% quarter-over-quarter and improved as a percentage of average assets to 1.85%.


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Financial Highlights
(dollars in thousands, except per share data) (unaudited)
At or for the Three Months Ended
 
9/30/2019
 
6/30/2019
 
9/30/2018
Net income
$
42,592

 
$
42,681

 
$
46,378

Diluted earnings per share
$
0.34

 
$
0.34

 
$
0.36

Net interest income before provision for loan losses
$
116,258

 
$
117,221

 
$
123,147

Net interest margin
 
3.25
%
 
 
3.31
%
 
 
3.47
%
Noninterest income
$
12,995

 
$
12,287

 
$
13,447

Noninterest expense
$
69,995

 
$
71,371

 
$
67,455

Net loans receivable
$
12,010,800

 
$
11,883,068

 
$
11,836,553

Deposits
$
12,234,750

 
$
12,172,384

 
$
12,045,619

Nonaccrual loans (1) (2)
$
42,235

 
$
64,934

 
$
56,299

Nonperforming loans to loans receivable (1) (2)
 
0.64
%
 
 
0.89
%
 
 
0.92
%
ALLL to loans receivable
 
0.78
%
 
 
0.79
%
 
 
0.76
%
ALLL to nonaccrual loans (1) (2)
 
222.28
%
 
 
144.86
%
 
 
160.98
%
ALLL to nonperforming assets (1) (2)
 
97.06
%
 
 
84.24
%
 
 
76.67
%
Provision for loan losses
$
2,100

 
$
1,200

 
$
7,300

Net charge offs
$
1,822

 
$
1,351

 
$
6,552

Return on average assets (“ROA”)
 
1.12
%
 
 
1.12
%
 
 
1.24
%
Return on average equity (“ROE”)
 
8.47
%
 
 
8.71
%
 
 
9.76
%
Return on average common tangible equity (“ROTCE”) (3)
 
11.11
%
 
 
11.51
%
 
 
13.06
%
Noninterest expense / average assets
 
1.85
%
 
 
1.88
%
 
 
1.80
%
Efficiency ratio
 
54.15
%
 
 
55.11
%
 
 
49.38
%

(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation
(2) Excludes purchased credit-impaired loans
(3) Return on average tangible common equity is a non-GAAP financial measure. A reconciliation of the Company’s return on average tangible common equity is provided in the accompanying financial information on Table Page 7.

Operating Results for the 2019 Third Quarter
 
Net Interest Income. Net interest income before provision for loan losses for the 2019 third quarter totaled $116.3 million, compared with $117.2 million in the 2019 second quarter and $123.1 million in the year-ago third quarter.

The net interest margin (net interest income divided by average interest earning assets) for the 2019 third quarter declined 6 basis points to 3.25% from 3.31% in the 2019 second quarter, reflecting lower weighted average yield on loans, due to the decreases in the fed funds rate on July 31 and September 18, 2019, and stable deposit costs. In addition, a $1.4 million reduction in accretion income on purchased loans reduced net interest margin by 4 basis points. The net interest margin in the prior-year third quarter was 3.47%.

The weighted average yield on loans for the 2019 third quarter was 5.27%, down 5 basis points from 5.32% in the preceding second quarter, but was up 11 basis points from 5.16% in the year-ago third quarter.

The Company continued to see benefits from its deposit initiatives, and the weighted average cost of deposits for the 2019 third quarter was flat with the preceding second quarter at 1.62%. In the 2018 third quarter, the weighted average cost of deposits was 1.24%.

Noninterest Income. Noninterest income for the 2019 third quarter increased to $13.0 million from $12.3 million in the 2019 second quarter. Management’s proactive interest rate mitigation efforts and expansion of the interest rate swap program drove higher swap fee income for the quarter versus the preceding second quarter. In addition, service fees on deposit accounts rose 6% in line with the higher core deposit balances. These increases were partially offset by lower

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gains on sales of residential mortgage loans of $804,000 in the 2019 third quarter, versus $1.1 million in the preceding second quarter, which included a bulk sale of the Company’s existing portfolio. In the 2018 third quarter, noninterest income totaled $13.4 million and included a $2.3 million gain on sales of SBA loans to the secondary market. Since the middle of the 2018 fourth quarter, the Company has discontinued its practice of regularly selling SBA loans to the secondary market.

Noninterest Expense. Noninterest expense for the 2019 third quarter declined to $70.0 million, compared with $71.4 million in the preceding second quarter. The reduction reflects a full quarter’s costs saves from the Company’s branch rationalization plan completed at the end of the preceding second quarter, lower professional fees and an FDIC assessment credit. These reductions were offset by higher compensation costs in the 2019 third quarter. In the 2018 third quarter, noninterest expense totaled $67.5 million. Noninterest expense as a percentage of average assets amounted to 1.85%, 1.88% and 1.80% for the 2019 third quarter, 2019 second quarter and 2018 third quarter, respectively.

Salaries and employee benefits expense increased to $41.6 million for the 2019 third quarter from $39.3 million for the 2019 second quarter, largely reflecting a $1.4 million quarter-over-quarter increase in self-funded group insurance costs, which fluctuates based on the volume of insurance claims in a given quarter. In the 2018 third quarter, salaries and employee benefits expense totaled $37.0 million.

Income Tax Provision. The effective tax rate for the 2019 third quarter was 25.5%, compared with 25.0% in the preceding 2019 second quarter and 25.0% in the 2018 third quarter.

Balance Sheet Summary
 
Loans receivable at September 30, 2019 increased 1% to $12.10 billion from $11.98 billion at June 30, 2019 and was stable compared with $12.10 billion at December 31, 2018.

New loan originations funded during the 2019 third quarter totaled $693.9 million and included SBA loan production of $53.8 million and residential mortgage loan originations of $58.5 million. This compares with 2019 second quarter originations of $503.9 million, including SBA loan production of $37.2 million and residential mortgage loan originations of $74.0 million. The Company attributed the quarter-over-quarter increase in new loan production to stronger volumes of C&I lending during the 2019 third quarter. In the year-ago third quarter, new loan originations funded totaled $784.1 million, including SBA loan production of $71.4 million and residential mortgage loan originations of $165.6 million.

SBA 7(a) loan originations totaled $34.4 million for the 2019 third quarter, compared with $37.2 million for the second quarter of 2019 and $52.5 million for the year-ago third quarter. In accordance with the Company’s decision to retain SBA 7(a) loans in its portfolio effective mid-fourth quarter of 2018, there were no sales to the secondary market during the 2019 third or second quarter. In contrast, the Company sold $48.5 million of its SBA 7(a) loans during the 2018 third quarter.

Total sales of mortgage loans amounted to $30.9 million in the 2019 third quarter, compared with $76.2 million in the 2019 second quarter and $45.8 million in the 2018 third quarter. The Company noted that sales of residential mortgage loans for the preceding second quarter included a bulk sale of $44.5 million from the Company’s existing portfolio.

Aggregate loan payoffs and pay downs in the 2019 third quarter remained at higher-than-usual levels at $632.7 million, compared with $598.5 million in the preceding second quarter due to higher payoff volumes. In the 2018 third quarter, aggregate loan payoffs and pay downs totaled $495.3 million. The Company attributed the higher payoff volumes in the 2019 quarters to the competitive business environment, as well as proactive identification and management of potentially problematic credits. Included in the payoff activity of the 2019 third quarter was $36.0 of loans that the Company had reported as criticized and $14.4 million of loans reported as nonaccrual as of June 30, 2019.

Total deposits at September 30, 2019 grew 1% to $12.23 billion from $12.17 billion at June 30, 2019 and increased 2% from $12.05 billion at September 30, 2018. Benefiting from the Company’s deposit initiatives, the increases predominantly reflect a favorable shift in the mix of deposits with higher money market account balances and decreases in higher-cost time deposits. Noninterest bearing demand deposits increased 1% quarter-over-quarter and accounted for

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25% of total deposits at September 30, 2019. Money market and other deposits increased 16% quarter-over-quarter and rose as a percentage of total deposits to 31% at September 30, 2019 from 27% at June 30, 2019.

The favorable mix-shift contributed to a stabilization of deposit costs, and the total cost of deposits was 1.62% for the 2019 third quarter and the preceding second quarter, versus 1.24% for the year-ago third quarter.

Credit Quality
 
Benefiting from proactive identification and management efforts, the Company reported a second consecutive quarter of considerable improvements in asset quality metrics.

The provision for loan and lease losses for the 2019 third quarter was $2.1 million, compared with $1.2 million for the preceding 2019 second quarter and $7.3 million for the year-ago third quarter.

The Company defines nonperforming loans to include loans on nonaccrual status, delinquent loans past due 90 days or more on accrual status (excluding purchased credit-impaired loans) and accruing restructured loans.

Nonaccrual loans at September 30, 2019 declined by 35% to $42.2 million from $64.9 million at June 30, 2019 and by 25% from $56.3 million at September 30, 2018. Nonaccrual loans as a percentage of loans receivable improved to 0.35% at September 30, 2019 from 0.54% at June 30, 2019 and 0.47% at September 30, 2018.

Accruing delinquent loans totaled $398,000 at September 30, 2019, compared with $353,000 at June 30, 2019 and $401,000 at September 30, 2018.  Accruing restructured loans at September 30, 2019 decreased 15% to $34.7 million from $40.7 million at June 30, 2019 and decreased 34% from $52.5 million at September 30, 2018. Total nonperforming loans decreased 27% to $77.4 million at September 30, 2019 from $106.0 million at June 30, 2019 and decreased 29% from $109.2 million at September 30, 2018. Total nonperforming loans as a percentage of loans receivable improved to 0.64% at September 30, 2019 from 0.89% at June 30, 2019 and 0.92% at September 30, 2018.

Other real estate owned increased to $19.4 million at September 30, 2019 from $5.6 million at June 30, 2019 and $9.0 million at September 30, 2018. The Company attributed the increase to proactive efforts to workout problem credits.
 
Following are the components of criticized loan balances as of September 30, 2019, June 30, 2019, and September 30, 2018:
(dollars in thousands) (unaudited)
9/30/2019
 
6/30/2019
 
9/30/2018
Special Mention (1)
$
139,848
 
$
186,485
 
$
215,586
Classified (1)
 
268,622
 
 
323,842
 
 
302,719
     Criticized
$
408,470
 
$
510,327
 
$
518,305

(1)
Balances include purchased loans which were marked to fair value on the date of acquisition.
 
The Company noted that, as part of management’s proactive strategies, $26.0 million of substandard loans, after charge offs of $599,000, were transferred to loans held for sale during the 2019 third quarter.

In aggregate, the Company recorded net charge offs of $1.8 million during the 2019 third quarter, or 0.06% of average loans receivable on an annualized basis. This compares with net charge offs of $1.4 million, or 0.05% of average loans receivable on an annualized basis, for the 2019 second quarter. In the 2018 third quarter, the Company recorded net charge offs of $6.5 million, or 0.22% of average loans receivable on an annualized basis.

The allowance for loan and lease losses (“ALLL”) was $93.9 million, $94.1 million and $90.6 million at September 30, 2019, June 30, 2019 and September 30, 2018, respectively. As a percentage of loans receivable (excluding loans held for sale), the ALLL was 0.78%, 0.79% and 0.76% at September 30, 2019, June 30, 2019 and September 30, 2018, respectively. The coverage ratio of the ALLL to nonperforming loans (excluding purchased credit-impaired loans) was 121.37% at September 30, 2019, 88.73% at June 30, 2019 and 82.98% at September 30, 2018.
 
Impaired loans (defined as loans for which it is probable that not all principal and interest payments due will be collected

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in accordance with the contractual terms) decreased to $77.3 million at September 30, 2019 from $106.0 million at June 30, 2019 and $109.2 million at September 30, 2018.

Capital
 
At September 30, 2019, the Company and the Bank continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” financial institution, as summarized in the following table:
(unaudited)
9/30/2019
 
6/30/2019
 
9/30/2018
 
Minimum Guideline for “Well-Capitalized” Bank
Common Equity Tier 1 Capital
11.89%
 
11.90%
 
11.61%
 
6.50%
Tier 1 Leverage Ratio
11.18%
 
10.94%
 
10.80%
 
5.00%
Tier 1 Risk-Based Ratio
12.65%
 
12.67%
 
12.38%
 
8.00%
Total Risk-Based Ratio
13.38%
 
13.42%
 
13.10%
 
10.00%

Tangible common equity per share and as a percentage of tangible assets are summarized in the following table:
(unaudited)
9/30/2019
 
6/30/2019
 
9/30/2018
Tangible common equity per share (1)
$12.27
 
$11.98
 
$10.96
Tangible common equity to tangible assets (2)
10.43%
 
10.21%
 
9.66%

(1) 
Tangible common equity represents common equity less goodwill and net other intangible assets. Tangible common equity per share represents tangible common equity divided by the number of shares issued and outstanding. Both tangible common equity and tangible common equity per share are non-GAAP financial measures. A reconciliation of the Company’s total stockholders’ equity to tangible common equity is provided in the accompanying financial information on Table Page 7.
(2) 
Tangible assets represent total assets less goodwill and net other intangible assets. Tangible common equity to tangible assets is the ratio of tangible common equity over tangible assets. Tangible common equity to tangible assets is a non-GAAP financial measure. A reconciliation of the Company’s total assets to tangible assets is provided in the accompanying financial information on Table Page 7.

Management reviews tangible common equity to tangible assets ratio in evaluating the Company’s and the Bank’s capital levels and has included these figures and tangible common equity per share figures in response to market participant interest in tangible common equity as a measure of capital. A reconciliation of the GAAP to non-GAAP financial measures is provided in the accompanying financial information.

Stock Repurchase Plan
 
On July 16, 2019, the Company announced a new $50 million stock repurchase program. During the 2019 third quarter, there were no stock repurchases, and the full amount of the plan remained available at September 30, 2019.

Investor Conference Call

The Company previously announced that it will host an investor conference call on Tuesday, October 22, 2019 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its third quarter ended September 30, 2019. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available in the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through October 29, 2019, replay access code 10135311.


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About Hope Bancorp, Inc.

Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $15.4 billion in total assets as of September 30, 2019. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 58 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, Georgia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.

Forward-Looking Statements

Some statements in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; and regulatory risks associated with current and future regulations. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

Contacts:
Alex Ko
EVP & Chief Financial Officer
213-427-6560


Angie Yang
SVP, Director of Investor Relations &
Corporate Communications
213-251-2219


# # #
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Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)


Assets:
9/30/2019
 
6/30/2019
 
% change
 
12/31/2018
 
% change
 
9/30/2018
 
% change
Cash and due from banks
$
549,356

 
$
609,795

 
(10
)%
 
$
459,606

 
20
 %
 
$
522,710

 
5
 %
Securities available for sale, at fair value
1,772,322

 
1,826,903

 
(3
)%
 
1,846,265

 
(4
)%
 
1,854,250

 
(4
)%
Federal Home Loan Bank (“FHLB”) stock and other investments
98,848

 
100,962

 
(2
)%
 
104,705

 
(6
)%
 
106,243

 
(7
)%
Loans held for sale, at the lower of cost or fair value
29,627

 
6,426

 
361
 %
 
25,128

 
18
 %
 
15,023

 
97
 %
Loans receivable
12,104,682

 
11,977,134

 
1
 %
 
12,098,115

 
 %
 
11,927,182

 
1
 %
Allowance for loan losses
(93,882
)
 
(94,066
)
 
 %
 
(92,557
)
 
(1
)%
 
(90,629
)
 
(4
)%
  Net loans receivable
12,010,800

 
11,883,068

 
1
 %
 
12,005,558

 
 %
 
11,836,553

 
1
 %
Accrued interest receivable
29,743

 
33,980

 
(12
)%
 
32,225

 
(8
)%
 
33,338

 
(11
)%
Premises and equipment, net
52,604

 
52,552

 
 %
 
53,794

 
(2
)%
 
55,178

 
(5
)%
Bank owned life insurance
75,968

 
75,963

 
 %
 
75,219

 
1
 %
 
76,081

 
 %
Goodwill
464,450

 
464,450

 
 %
 
464,450

 
 %
 
464,450

 
 %
Servicing assets
17,865

 
19,997

 
(11
)%
 
23,132

 
(23
)%
 
24,354

 
(27
)%
Other intangible assets, net
12,390

 
12,947

 
(4
)%
 
14,061

 
(12
)%
 
14,677

 
(16
)%
Other assets
265,905

 
251,784

 
6
 %
 
201,809

 
32
 %
 
226,638

 
17
 %
  Total assets
$
15,379,878

 
$
15,338,827

 
 %
 
$
15,305,952

 
 %
 
$
15,229,495

 
1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
$
12,234,750

 
$
12,172,384

 
1
 %
 
$
12,155,656

 
1
 %
 
$
12,045,619

 
2
 %
FHLB advances
625,000

 
695,000

 
(10
)%
 
821,280

 
(24
)%
 
836,637

 
(25
)%
Convertible notes, net
198,211

 
196,977

 
1
 %
 
194,543

 
2
 %
 
193,332

 
3
 %
Subordinated debentures
102,755

 
102,477

 
 %
 
101,929

 
1
 %
 
101,657

 
1
 %
Accrued interest payable
38,197

 
36,987

 
3
 %
 
31,374

 
22
 %
 
31,717

 
20
 %
Other liabilities
149,681

 
139,830

 
7
 %
 
97,959

 
53
 %
 
115,953

 
29
 %
  Total liabilities
$
13,348,594

 
$
13,343,655

 
 %
 
13,402,741

 
 %
 
$
13,324,915

 
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders’ Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, $0.001 par value
$
136

 
$
136

 
 %
 
$
136

 
 %
 
$
136

 
 %
Capital surplus
1,426,666

 
1,425,262

 
 %
 
1,423,405

 
 %
 
1,422,685

 
 %
Retained earnings
737,209

 
712,351

 
3
 %
 
662,375

 
11
 %
 
636,080

 
16
 %
Treasury stock, at cost
(150,000
)
 
(150,000
)
 
 %
 
(150,000
)
 
 %
 
(100,000
)
 
(50
)%
Accumulated other comprehensive gain (loss), net
17,273

 
7,423

 
133
 %
 
(32,705
)
 
N/A

 
(54,321
)
 
N/A

  Total stockholders’ equity
2,031,284

 
1,995,172

 
2
 %
 
1,903,211

 
7
 %
 
1,904,580

 
7
 %
  Total liabilities and stockholders’ equity
$
15,379,878

 
$
15,338,827

 
 %
 
$
15,305,952

 
 %
 
$
15,229,495

 
1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock shares - authorized
150,000,000

 
150,000,000

 
 
 
150,000,000

 
 
 
150,000,000

 
 
Common stock shares - outstanding
126,697,925

 
126,673,822

 
 
 
126,639,912

 
 
 
130,074,103

 
 
Treasury stock shares
9,002,453

 
9,002,453

 
 
 
9,002,453

 
 
 
5,565,696

 
 

Table Page 1

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)


 
Three Months Ended
 
Nine Months Ended
 
9/30/2019
 
6/30/2019
 
% change
 
9/30/2018
 
% change
 
9/30/2019
 
9/30/2018
 
% change
Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Interest and fees on loans
$
158,115

 
$
158,627

 
 %
 
$
153,366

 
3
 %
 
$
474,878

 
$
437,497

 
9
 %
  Interest on securities
11,373

 
11,866

 
(4
)%
 
11,957

 
(5
)%
 
35,558

 
32,957

 
8
 %
  Interest on federal funds sold and other investments
2,929

 
2,973

 
(1
)%
 
2,503

 
17
 %
 
8,577

 
7,692

 
12
 %
    Total interest income
172,417

 
173,466

 
(1
)%
 
167,826

 
3
 %
 
519,013

 
478,146

 
9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Interest on deposits
49,057

 
48,826

 
 %
 
37,022

 
33
 %
 
144,730

 
92,481

 
56
 %
  Interest on other borrowings and convertible notes
7,102

 
7,419

 
(4
)%
 
7,657

 
(7
)%
 
21,196

 
19,631

 
8
 %
    Total interest expense
56,159

 
56,245

 
 %
 
44,679

 
26
 %
 
165,926

 
112,112

 
48
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income before provision for loan losses
116,258

 
117,221

 
(1
)%
 
123,147

 
(6
)%
 
353,087

 
366,034

 
(4
)%
Provision for loan losses
2,100

 
1,200

 
75
 %
 
7,300

 
(71
)%
 
6,300

 
12,100

 
(48
)%
Net interest income after provision for loan losses
114,158

 
116,021

 
(2
)%
 
115,847

 
(1
)%
 
346,787

 
353,934

 
(2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Service fees on deposit accounts
4,690

 
4,416

 
6
 %
 
4,569

 
3
 %
 
13,423

 
13,983

 
(4
)%
  Net gains on sales of SBA loans

 

 
 %
 
2,331

 
(100
)%
 

 
9,261

 
(100
)%
  Net gains on sales of other loans
804

 
1,066

 
(25
)%
 
477

 
69
 %
 
2,611

 
2,104

 
24
 %
  Net gains on sales of securities available for sale
153

 
129

 
19
 %
 

 
100
 %
 
282

 

 
100
 %
  Other income and fees
7,348

 
6,676

 
10
 %
 
6,070

 
21
 %
 
20,388

 
23,218

 
(12
)%
    Total noninterest income
12,995

 
12,287

 
6
 %
 
13,447

 
(3
)%
 
36,704

 
48,566

 
(24
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Salaries and employee benefits
41,607

 
39,297

 
6
 %
 
36,969

 
13
 %
 
121,333

 
116,929

 
4
 %
  Occupancy
7,703

 
7,839

 
(2
)%
 
7,837

 
(2
)%
 
23,219

 
22,494

 
3
 %
  Furniture and equipment
3,851

 
4,026

 
(4
)%
 
3,710

 
4
 %
 
11,323

 
11,454

 
(1
)%
  Advertising and marketing
2,377

 
2,245

 
6
 %
 
1,986

 
20
 %
 
6,684

 
7,022

 
(5
)%
  Data processing and communications
2,821

 
2,587

 
9
 %
 
3,513

 
(20
)%
 
8,364

 
10,582

 
(21
)%
  Professional fees
5,241

 
5,959

 
(12
)%
 
3,950

 
33
 %
 
16,580

 
11,530

 
44
 %
  FDIC assessment

 
1,559

 
(100
)%
 
1,788

 
(100
)%
 
3,110

 
5,166

 
(40
)%
  Credit related expenses
1,031

 
1,549

 
(33
)%
 
658

 
57
 %
 
3,258

 
2,356

 
38
 %
  OREO (income) expense, net
(743
)
 
83

 
N/A

 
(56
)
 
1,227
 %
 
(812
)
 
(115
)
 
606
 %
  Other
6,107

 
6,227

 
(2
)%
 
7,100

 
(14
)%
 
19,140

 
20,119

 
(5
)%
    Total noninterest expense
69,995

 
71,371

 
(2
)%
 
67,455

 
4
 %
 
212,199

 
207,537

 
2
 %
Income before income taxes
57,158

 
56,937

 
 %
 
61,839

 
(8
)%
 
171,292

 
194,963

 
(12
)%
Income tax provision
14,566

 
14,256

 
2
 %
 
15,461

 
(6
)%
 
43,261

 
49,823

 
(13
)%
Net income
$
42,592

 
$
42,681

 
 %
 
$
46,378

 
(8
)%
 
$
128,031

 
$
145,140

 
(12
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Common Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Basic
$
0.34

 
$
0.34

 

 
$
0.36

 
 
 
$
1.01

 
$
1.09

 
 
  Diluted
$
0.34

 
$
0.34

 

 
$
0.36

 
 
 
$
1.01

 
$
1.09

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Shares Outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Basic
126,685,921

 
126,658,509

 
 
 
130,268,992

 
 
 
126,661,798

 
132,930,437

 
 
  Diluted
127,007,469

 
126,870,455

 
 
 
130,525,474

 
 
 
126,895,970

 
133,214,069

 
 

Table Page 2

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

 
For the Three Months Ended
(Annualized)
 
For the Nine Months Ended
(Annualized)
Profitability measures:
9/30/2019
 
6/30/2019
 
9/30/2018
 
9/30/2019
 
9/30/2018
  ROA
1.12
%
 
1.12
%
 
1.24
%
 
1.12
%
 
1.32
%
  ROE
8.47
%
 
8.71
%
 
9.76
%
 
8.69
%
 
10.09
%
  ROTCE 1
11.11
%
 
11.51
%
 
13.06
%
 
11.48
%
 
13.46
%
  Net interest margin
3.25
%
 
3.31
%
 
3.47
%
 
3.31
%
 
3.58
%
  Efficiency ratio
54.15
%
 
55.11
%
 
49.38
%
 
54.44
%
 
50.06
%
  Noninterest expense / average assets
1.85
%
 
1.88
%
 
1.80
%
 
1.86
%
 
1.89
%
 
 
 
 
 
 
 
 
 
 
1 Average tangible equity is calculated by subtracting average goodwill and average core deposit intangible assets from average stockholders’ equity. This is a non-GAAP measure that we believe
     provides investors with information that is useful in understanding our financial performance and position.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
Pre-tax acquisition accounting adjustments and merger-related expenses:
9/30/2019
 
6/30/2019
 
9/30/2018
 
9/30/2019
 
9/30/2018
Accretion on purchased non-impaired loans
$
2,046

 
$
1,799

 
$
2,969

 
$
6,011

 
$
9,355

Accretion on purchased credit-impaired loans
5,234

 
6,848

 
5,239

 
17,916

 
16,970

Amortization of premium on low income housing tax credits
(75
)
 
(76
)
 
(84
)
 
(227
)
 
(253
)
Amortization of premium on acquired FHLB borrowings

 

 
357

 
1,280

 
1,056

Accretion of discount on acquired subordinated debt
(278
)
 
(275
)
 
(271
)
 
(826
)
 
(804
)
Amortization of premium on acquired time deposits and savings

 

 

 

 
1

Amortization of core deposit intangibles
(557
)
 
(557
)
 
(615
)
 
(1,671
)
 
(1,846
)
     Total acquisition accounting adjustments
6,370

 
7,739

 
7,595

 
22,483

 
24,479

Merger-related expenses

 

 

 

 
7

          Total
$
6,370

 
$
7,739

 
$
7,595

 
$
22,483

 
$
24,486

 
 
 
 
 
 
 
 
 
 


Table Page 3

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

 
Three Months Ended
 
9/30/2019
 
6/30/2019
 
9/30/2018
 
 
 
Interest
 
Annualized
 
 
 
Interest
 
Annualized
 
 
 
Interest
 
Annualized
 
Average
 
Income/
 
Average
 
Average
 
Income/
 
Average
 
Average
 
Income/
 
 Average
 
Balance
 
Expense
 
Yield/Cost
 
Balance
 
Expense
 
Yield/Cost
 
Balance
 
Expense
 
 Yield/Cost
INTEREST EARNING ASSETS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Loans, including loans held for sale
$
11,911,658

 
$
158,115

 
5.27
%
 
$
11,959,920

 
$
158,627

 
5.32
%
 
$
11,781,091

 
$
153,366

 
5.16
%
    Securities available for sale
1,798,239

 
11,373

 
2.51
%
 
1,804,677

 
11,866

 
2.64
%
 
1,844,493

 
11,957

 
2.57
%
    FHLB stock and other investments
482,952

 
2,929

 
2.41
%
 
460,623

 
2,973

 
2.59
%
 
446,390

 
2,503

 
2.22
%
Total interest earning assets
$
14,192,849

 
$
172,417

 
4.82
%
 
$
14,225,220

 
$
173,466

 
4.89
%
 
$
14,071,974

 
$
167,826

 
4.73
%
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
INTEREST BEARING LIABILITIES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Demand, interest bearing
$
3,450,749

 
$
15,802

 
1.82
%
 
$
3,094,179

 
$
14,019

 
1.82
%
 
$
3,237,673

 
$
11,526

 
1.41
%
    Savings
252,780

 
675

 
1.06
%
 
225,978

 
608

 
1.08
%
 
228,218

 
486

 
0.84
%
    Time deposits
5,368,753

 
32,580

 
2.41
%
 
5,784,980

 
34,199

 
2.37
%
 
5,344,464

 
25,010

 
1.86
%
    Total interest bearing deposits
9,072,282

 
49,057

 
2.15
%
 
9,105,137

 
48,826

 
2.15
%
 
8,810,355

 
37,022

 
1.67
%
    FHLB advances
632,500

 
3,112

 
1.95
%
 
706,044

 
3,384

 
1.92
%
 
837,412

 
3,703

 
1.75
%
    Convertible debt
197,410

 
2,322

 
4.60
%
 
196,244

 
2,310

 
4.66
%
 
192,541

 
2,299

 
4.67
%
    Subordinated debentures
98,690

 
1,668

 
6.61
%
 
98,406

 
1,725

 
6.93
%
 
97,589

 
1,655

 
6.64
%
Total interest bearing liabilities
$
10,000,882

 
$
56,159

 
2.23
%
 
$
10,105,831

 
$
56,245

 
2.23
%
 
$
9,937,897

 
$
44,679

 
1.78
%
Noninterest bearing demand deposits
2,958,233

 
 
 
 
 
2,947,476

 
 
 
 
 
3,041,489

 
 
 
 
Total funding liabilities/cost of funds
$
12,959,115

 
 
 
1.72
%
 
$
13,053,307

 
 
 
1.73
%
 
$
12,979,386

 
 
 
1.37
%
Net interest income/net interest spread
 
 
$
116,258

 
2.59
%
 
 
 
$
117,221

 
2.66
%
 
 
 
$
123,147

 
2.95
%
Net interest margin
 
 
 
 
3.25
%
 
 
 
 
 
3.31
%
 
 
 
 
 
3.47
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Noninterest bearing demand deposits
$
2,958,233

 
$

 
%
 
$
2,947,476

 
$

 
%
 
$
3,041,489

 
$

 
%
    Interest bearing deposits
9,072,282

 
49,057

 
2.15
%
 
9,105,137

 
48,826

 
2.15
%
 
8,810,355

 
37,022

 
1.67
%
Total deposits
$
12,030,515

 
$
49,057

 
1.62
%
 
$
12,052,613

 
$
48,826

 
1.62
%
 
$
11,851,844

 
$
37,022

 
1.24
%


Table Page 4

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

 
Nine Months Ended
 
9/30/2019
 
9/30/2018
 
 
 
Interest
 
Annualized
 
 
 
Interest
 
Annualized
 
Average
 
Income/
 
Average
 
Average
 
Income/
 
Average
 
Balance
 
Expense
 
Yield/Cost
 
Balance
 
Expense
 
Yield/Cost
INTEREST EARNING ASSETS:
 
 
 
 
 
 
 
 
 
 
 
    Loans, including loans held for sale
$
11,985,936

 
$
474,878

 
5.30
%
 
$
11,416,238

 
$
437,497

 
5.12
%
    Securities available for sale
1,810,068

 
35,558

 
2.63
%
 
1,750,802

 
32,957

 
2.52
%
    FHLB stock and other investments
450,028

 
8,577

 
2.55
%
 
506,802

 
7,692

 
2.03
%
Total interest earning assets
$
14,246,032

 
$
519,013

 
4.87
%
 
$
13,673,842

 
$
478,146

 
4.68
%
 
 
 
 
 
 
 
 
 
 
 
 
INTEREST BEARING LIABILITIES:
 
 
 
 
 
 
 
 
 
 
 
  Deposits:
 
 
 
 
 
 
 
 
 
 
 
    Demand, interest bearing
$
3,197,313

 
$
42,807

 
1.79
%
 
$
3,327,101

 
$
30,828

 
1.24
%
    Savings
234,203

 
1,848

 
1.05
%
 
230,909

 
1,352

 
0.78
%
    Time deposits
5,694,778

 
100,075

 
2.35
%
 
4,932,912

 
60,301

 
1.63
%
    Total interest bearing deposits
9,126,294

 
144,730

 
2.12
%
 
8,490,922

 
92,481

 
1.46
%
    FHLB advances
715,814

 
$
9,110

 
1.70
%
 
885,332

 
11,453

 
1.73
%
    Convertible debt
196,217

 
6,930

 
4.66
%
 
99,212

 
3,498

 
4.65
%
    Subordinated debentures
98,410

 
5,156

 
6.91
%
 
97,320

 
4,680

 
6.34
%
Total interest bearing liabilities
$
10,136,735

 
$
165,926

 
2.19
%
 
$
9,572,786

 
$
112,112

 
1.57
%
Noninterest bearing demand deposits
2,931,080

 
 
 
 
 
3,012,501

 
 
 
 
Total funding liabilities/cost of funds
$
13,067,815

 
 
 
1.70
%
 
$
12,585,287

 
 
 
1.19
%
Net interest income/net interest spread
 
 
$
353,087

 
2.68
%
 
 
 
$
366,034

 
3.11
%
Net interest margin
 
 
 
 
3.31
%
 
 
 
 
 
3.58
%
 
 
 
 
 
 
 
 
 
 
 
 
Cost of deposits:
 
 
 
 
 
 
 
 
 
 
 
    Noninterest bearing demand deposits
$
2,931,080

 
$

 
%
 
$
3,012,501

 
$

 
%
    Interest bearing deposits
9,126,294

 
144,730

 
2.12
%
 
8,490,922

 
92,481

 
1.46
%
Total deposits
$
12,057,374

 
$
144,730

 
1.60
%
 
$
11,503,423

 
$
92,481

 
1.07
%

Table Page 5

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

 
 Three Months Ended
 
Nine Months Ended
AVERAGE BALANCES:
9/30/2019
 
6/30/2019
 
% change
 
9/30/2018
 
% change
 
9/30/2019
 
9/30/2018
 
% change
Loans receivable, including loans held for sale
$
11,911,658

 
$
11,959,920

 
 %
 
$
11,781,091

 
1
 %
 
$
11,985,936

 
$
11,416,238

 
5
 %
Investments
2,281,191

 
2,265,300

 
1
 %
 
2,290,883

 
 %
 
2,260,096

 
2,257,604

 
 %
Interest earning assets
14,192,849

 
14,225,220

 
 %
 
14,071,974

 
1
 %
 
14,246,032

 
13,673,842

 
4
 %
Total assets
15,154,661

 
15,185,495

 
 %
 
15,019,224

 
1
 %
 
15,209,668

 
14,613,094

 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing deposits
9,072,282

 
9,105,137

 
 %
 
8,810,355

 
3
 %
 
9,126,294

 
8,490,922

 
7
 %
Interest bearing liabilities
10,000,882

 
10,105,831

 
(1
)%
 
9,937,897

 
1
 %
 
10,136,735

 
9,572,786

 
6
 %
Noninterest bearing demand deposits
2,958,233

 
2,947,476

 
 %
 
3,041,489

 
(3
)%
 
2,931,080

 
3,012,501

 
(3
)%
Stockholders’ equity
2,010,458

 
1,960,500

 
3
 %
 
1,899,853

 
6
 %
 
1,964,146

 
1,917,696

 
2
 %
Net interest earning assets
4,191,967

 
4,119,389

 
2
 %
 
4,134,077

 
1
 %
 
4,109,297

 
4,101,056

 
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LOAN PORTFOLIO COMPOSITION:
9/30/2019
 
6/30/2019
 
% change
 
12/31/2018
 
% change
 
9/30/2018
 
% change
 
 
Commercial loans
$
2,643,836

 
$
2,432,068

 
9
 %
 
$
2,324,820

 
14
 %
 
$
2,318,213

 
14
 %
 
 
Real estate loans
8,587,943

 
8,630,852

 
 %
 
8,721,600

 
(2
)%
 
8,639,857

 
(1
)%
 
 
Consumer and other loans
870,734

 
913,087

 
(5
)%
 
1,051,486

 
(17
)%
 
969,835